This management's discussion and analysis of financial condition and results of
operations contains forward-looking statements that involve risks and
uncertainties. Please see "Forward-Looking Statements" for a discussion of the
uncertainties, risks, and assumptions that may cause our actual results to
differ materially from those discussed in the forward-looking statements.
This discussion should be read in conjunction with our historical financial
statements and related notes thereto and the other disclosures contained
elsewhere in this quarterly report on Form 10-Q, and the audited consolidated
financial statements and notes for the fiscal year ended December 31, 2019,
which were included in our annual report on Form 10-K, filed with the SEC on
February 27, 2020.
Executive Overview
MGP is one of the leading publicly traded REITs engaged in the acquisition,
ownership and leasing of large-scale destination entertainment and leisure
resorts, whose tenant generally offers diverse amenities including casino
gaming, hotel, convention, dining, entertainment and retail amenities.
MGP is a limited liability company that was formed in Delaware in October 2015.
MGP conducts its operations through the Operating Partnership, a Delaware
limited partnership formed in January 2016, which became a subsidiary of MGP in
April 2016. We elected to be treated as a real estate investment trust ("REIT")
commencing with its taxable year ended December 31, 2016.
We generate all of our revenues by leasing our real estate properties pursuant
to the MGM-MGP Master Lease which requires the tenant to pay substantially all
costs associated with each property, including real estate taxes, ground lease
rent, insurance, utilities and routine maintenance, in addition to the base rent
and the percentage rent, each as described below. The lease has an initial lease
term of ten years (other than with respect to MGM National Harbor, whose initial
lease term ends on August 31, 2024) with the potential to extend the term for
four additional five-year terms thereafter at the option of the tenant. Base
rent and percentage rent that are known at the lease commencement date will be
recorded on a straight-line basis over 30 years, which represents the initial
ten-year non-cancelable lease term and all four five-year renewal terms under
the lease, as we have determined such renewal terms to be reasonably certain.

On February 14, 2020, the Operating Partnership and MGM completed a series of
transactions (collectively the "MGP BREIT Venture Transaction") pursuant to
which the real estate assets of MGM Grand Las Vegas and Mandalay Bay (including
Mandalay Place) were contributed to a newly formed entity ("MGP BREIT Venture"),
which, following the transactions, is owned 50.1% by the Operating Partnership
and 49.9% by a subsidiary of Blackstone Real Estate Income Trust, Inc.
("BREIT"). In exchange for the contribution of the Mandalay Bay real estate
assets, the Operating Partnership received consideration of $2.1 billion, which
was comprised of $1.3 billion of the Operating Partnership's secured
indebtedness assumed by MGM BREIT Venture, the Operating Partnership's 50.1%
equity interest in the MGP BREIT Venture, and the remainder in cash. In
addition, MGM received $2.4 billion of cash distributed from the MGP BREIT
Venture as consideration for its contribution of the MGM Grand Las Vegas real
estate assets, and, additionally, the Operating Partnership issued 2.6 million
Operating Partnership units to MGM representing 5% of the equity value of the
MGP BREIT Venture. In connection with the transactions, MGM provided a shortfall
guaranty of the principal amount of indebtedness of the MGP BREIT Venture (and
any interest accrued and unpaid thereto). On the closing date, BREIT also
purchased 4.9 million Class A common shares of MGP for $150 million.

In connection with the transactions, MGP BREIT Venture entered into a lease with
a subsidiary of MGM for the real estate assets of Mandalay Bay and MGM Grand Las
Vegas. The lease provides for a term of thirty years with two ten-year renewal
options and has an initial annual base rent of $292 million, escalating annually
at a rate of 2% per annum for the first fifteen years and thereafter equal to
the greater of 2% and the CPI increase during the prior year subject to a cap of
3.0%. In addition, the lease requires the tenant to spend 3.5% of net revenues
over a rolling five-year period at the properties on capital expenditures and
for the tenant and MGM to comply with certain financial covenants, which, if not
met, would require the tenant to maintain cash security or provide one or more
letters of credit in favor of the landlord in an amount equal to the rent for
the succeeding one-year period. MGM provided a guarantee of tenant's obligations
under the lease.

In connection with the MGP BREIT Venture Transaction, the MGM-MGP Master Lease
was modified to remove the Mandalay Bay property and the annual rent under the
MGM-MGP Master Lease was reduced by $133 million.

                                       25
--------------------------------------------------------------------------------

Also, on January 14, 2020, the Operating Partnership, MGP, and MGM entered into
an agreement for the Operating Partnership to waive its right to issue MGP Class
A shares, in lieu of cash, to MGM in connection with MGM exercising its right to
require the Operating Partnership to redeem the Operating Partnership units it
holds. The waiver provides that the units will be purchased at a price per unit
equal to a 3% discount to the applicable cash amount as calculated in accordance
with the operating agreement. The waiver was effective upon closing of the
transaction on February 14, 2020 and terminates on the earlier of 24 months
following the closing of the MGP BREIT Venture Transaction and MGM receiving
cash proceeds of $1.4 billion as consideration for the redemption of its
Operating Partnership units. On May 18, 2020, the Operating Partnership redeemed
30.3 million of Operating Partnership units held by MGM for $700 million.
Additionally, we expect to grow our portfolio through acquisitions with third
parties and with MGM. In pursuing external growth initiatives, we will generally
seek to acquire properties that can generate stable rental revenue through
long-term, triple-net leases with tenants with established operating histories,
and we will consider various factors when evaluating acquisitions.
As of June 30, 2020, our portfolio, including the MGP BREIT Venture, consisted
of twelve premier destination resorts in Las Vegas and elsewhere across the
United States, MGM Northfield Park in Northfield, Ohio, Empire Resort Casino in
Yonkers, New York, as well as a retail and entertainment district, The Park in
Las Vegas.
COVID-19 Update
The COVID-19 pandemic has not had a material impact on our operations; however,
we cannot estimate the duration of the pandemic and potential impact on our
business if certain of our properties remain closed, if our re-opened properties
will be required to close again, or if the tenant is otherwise unable or
unwilling to make rental payments. For further information regarding the
potential impact of COVID-19 on our operations, refer to "Liquidity and Capital
Resources" below as well as "Risk Factors" in Part II, Item 1A of this report.

Combined Results of Operations for MGP and the Operating Partnership Overview The following table summarizes our financial results for the three and six months ended June 30, 2020 and June 30, 2019:


                                                                                                              Six Months Ended June
                                                    Three Months Ended June 30,                                        30,
                                                      2020                  2019               2020                 2019
                                                                                (in thousands)
Total Revenues                                  $     194,342           $ 225,759          $ 403,912          $   429,182
Total Expenses                                         68,348              89,731            336,875              180,996
Income (loss) from continuing operations, net
of tax                                                 97,025              67,769            (28,297)             117,917
Income from discontinued operations, net of tax             -                   -                  -               16,216
Net income (loss)                                      97,025              67,769            (28,297)             134,133
Net income (loss) attributable to Class A
shareholders                                           41,016              21,858             (8,732)              41,813


Revenues

Rental revenue. Rental revenues, including ground lease and other, for the three
months ended June 30, 2020 and 2019 were $194.3 million and $225.8 million,
respectively. Rental revenues, including ground lease and other, for the six
months ended June 30, 2020 and 2019 were $403.9 million and $429.2 million,
respectively. The $31.4 million, or 13.9%, decrease for the quarterly period and
the $25.3 million, or 5.9%, decrease for the year-to-date period were both due
primarily to a decrease in rental revenues as a result of the removal of
Mandalay Bay from the MGM-MGP Master Lease relating to the MGP BREIT Venture
Transaction in February 2020.

Expenses


Depreciation. Depreciation expense for the three months ended June 30, 2020 and
2019 was $58.4 million and $79.5 million, respectively. Depreciation expense for
the six months ended June 30, 2020 and 2019 was $120.5 million and $151.1
million, respectively. The $21.1 million, or 26.6%, decrease for the quarterly
period and the $30.7 million, or 20.3%, decrease
                                       26
--------------------------------------------------------------------------------

for the year-to-date period were both primarily due to the contribution of
Mandalay Bay to the MGP BREIT Venture in February 2020.
Property transactions, net. Property transactions, net for the three months
ended June 30, 2020 and 2019 were $(0.1) million and $0.3 million, respectively.
Property transactions, net for the six months ended June 30, 2020 and 2019 were
$195.0 million and $1.4 million, respectively. The increase is primarily due to
the loss on sale of the Mandalay Bay real estate assets of $193.1 million which
was comprised of the difference between the carrying value of the Mandalay Bay
real estate assets of $2.3 billion and the consideration received of $2.1
billion, as well as the selling costs of $10.0 million.
Ground lease expense. Ground lease expense for each of the three months ended
June 30, 2020 and 2019 was $5.9 million. Ground lease expense for each of the
six months ended June 30, 2020 and 2019 was $11.8 million.
Acquisition-related expenses. Acquisition-related expenses for the three months
ended June 30, 2020 and 2019 were $0.4 million and $0.3 million, respectively.
Acquisition-related expenses for the six months ended June 30, 2020 and 2019
were $1.0 million and $8.8 million, respectively. The $7.8 million, or 88.9%,
decrease is primarily due to expenses incurred relating to the Empire City
acquisition in 2019, slightly offset by expenses incurred relating to the MGP
BREIT Venture Transaction in February 2020.
General and administrative expenses. General and administrative expenses for
each of the three months ended June 30, 2020 and 2019 were $3.7 million. General
and administrative expenses for the six months ended June 30, 2020 and 2019 were
$8.6 million and $7.8 million, respectively. The $0.8 million, or 10.0%,
increase for the year-to-date period was primarily due to an increase in
corporate support services.

Other Expenses
Income from unconsolidated affiliate. Income from unconsolidated affiliate for
the three and six months ended June 30, 2020 was $25.5 million and $38.8
million, respectively, and is attributable to income from our investment in MGP
BREIT Venture. There was no income from unconsolidated affiliate for the three
and six months ended June 30, 2019.
Other expenses, excluding income from unconsolidated affiliate, for the three
months ended June 30, 2020 and 2019 were $51.9 million and $64.2 million,
respectively. The $12.3 million, or 19.2%, decrease for the quarterly period was
primarily due to the repayment of our term loan A and term loan B facilities in
February 2020, partially offset by our issuance of the $800 million 4.625%
senior notes due 2025 in June 2020. Other expenses, excluding income from
unconsolidated affiliate, for the six months ended June 30, 2020 and 2019 were
$130.5 million and $126.5 million, respectively. The $4.0 million, or 3.2%,
increase was primarily related to a net loss on unhedged interest rate swaps of
$10.5 million and a loss on retirement of debt of $18.1 million relating to our
repayment of the term loan A and term loan B facilities, partially offset by a
decrease in interest expense which was due to the repayment of our term loan A
and term loan B facilities in February 2020.

Discontinued Operations



Income from discontinued operations, net of tax for the six months ended June
30, 2019 was $16.2 million and is attributable to the operations of MGM
Northfield Park, which was transferred to a subsidiary of MGM in April 2019.
There was no income from discontinued operations, net of tax for the three and
six months ended June 30, 2020 or the three months ended June 30, 2019.

Provision for Income Taxes



Our effective tax rate was a provision of 2.5% on income from continuing
operations for the three months ended June 30, 2020 compared to a provision of
5.6% in the prior year quarter. Our effective tax rate was a provision of 14.7%
on loss from continuing operations for the six months ended June 30, 2020
compared to a provision of 3.1% on income from continuing operations in the
prior year period. The effective tax rate in the three and six months ended June
30, 2020 was impacted by the loss resulting from the MGP BREIT Venture
Transaction, which provides no federal or state income tax benefit due to our
REIT status, while the effective tax rate in the three and six months ended June
30, 2019 was impacted by tax consequences related to the liquidation of the
taxable REIT subsidiary that had owned MGM Northfield Park prior to transferring
the operations to MGM Resorts in April 2019. Refer to Note 2 of the accompanying
financial statements for additional discussion regarding income taxes.



                                       27
--------------------------------------------------------------------------------

Non-GAAP Measures



Unless otherwise indicated, our non-GAAP measures discussed herein are related
to our continuing operations and not our discontinued operations. Funds From
Operations ("FFO") is net income (computed in accordance with U.S. GAAP),
excluding gains and losses from sales or disposals of property (presented as
property transactions, net), plus depreciation, as defined by the National
Association of Real Estate Investment Trusts, plus our share of depreciation of
our unconsolidated affiliate.

Adjusted Funds From Operations ("AFFO") is FFO as adjusted for amortization of
financing costs and cash flow hedges; our share of amortization of financing
costs of our unconsolidated affiliate; non-cash compensation expense;
straight-line rental revenue (which is defined as the difference between
contractual rent and cash rent payments, excluding lease incentive asset
amortization); our share of straight-line rental revenues of our unconsolidated
affiliate; amortization of lease incentive asset and deferred revenue relating
to non-normal tenant improvements; acquisition-related expenses; non-cash ground
lease rent, net; other expenses; loss on unhedged interest rate swaps, net;
provision for income taxes related to the REIT; our share of provision for
income taxes of our unconsolidated affiliate; and other, net - discontinued
operations.

Adjusted EBITDA is net income (computed in accordance with U.S. GAAP) as
adjusted for gains and losses from sales or disposals of property (presented as
property transactions, net); depreciation; our share of depreciation of our
unconsolidated affiliate; amortization of financing costs and cash flow hedges;
our share of amortization of financing costs of our unconsolidated affiliate;
non-cash compensation expense; straight-line rent; our share of straight-line
rental revenues of our unconsolidated affiliate; amortization of lease incentive
asset and deferred revenue relating to non-normal tenant improvements;
acquisition-related expenses; non-cash ground lease rent, net; other expenses;
loss on unhedged interest rate swaps, net; our share of provision for income
taxes of our unconsolidated affiliate; other, net - discontinued operations;
interest income; interest expense (including amortization of financing costs and
cash flow hedges); our share of interest expense (including amortization of
financing costs) of our unconsolidated affiliate; and provision for income
taxes.

FFO, FFO per unit, AFFO, AFFO per unit and Adjusted EBITDA are supplemental
performance measures that have not been prepared in conformity with accounting
principles generally accepted in the United States ("U.S. GAAP") that management
believes are useful to investors in comparing operating and financial results
between periods. Management believes that this is especially true since these
measures exclude depreciation expense and management believes that real estate
values fluctuate based on market conditions rather than depreciating in value
ratably on a straight-line basis over time. The Company believes such a
presentation also provides investors with a meaningful measure of the Company's
operating results in comparison to the operating results of other REITs.
Adjusted EBITDA is useful to investors to further supplement AFFO and FFO and to
provide investors a performance metric which excludes interest expense. In
addition to non-cash items, the Company adjusts AFFO and Adjusted EBITDA for
acquisition-related expenses. While we do not label these expenses
as non-recurring, infrequent or unusual, management believes that it is helpful
to adjust for these expenses when they do occur to allow for comparability of
results between periods because each acquisition is (and will be) of varying
size and complexity and may involve different types of expenses depending on
the type of property being acquired and from whom.

FFO, FFO per unit, AFFO, AFFO per unit and Adjusted EBITDA do not represent cash
flow from operations as defined by U.S. GAAP, should not be considered as an
alternative to net income as defined by U.S. GAAP and are not indicative of cash
available to fund all cash flow needs. Investors are also cautioned that FFO,
FFO per unit, AFFO, AFFO per unit and Adjusted EBITDA as presented, may not be
comparable to similarly titled measures reported by other REITs due to the fact
that not all real estate companies use the same definitions.


                                       28
--------------------------------------------------------------------------------

The following table provides a reconciliation of the Company's consolidated net income to FFO, AFFO and Adjusted EBITDA:


                                                                                                                   Six Months Ended June
                                                         Three Months Ended June 30,                                        30,
                                                           2020                  2019               2020                 2019
                                                                                     (in thousands)
Net income (loss) (1)                                $      97,025

$ 67,769 $ (28,297) $ 134,133 Depreciation (2)

                                            58,405              79,543            120,452              151,105
Share of depreciation of unconsolidated affiliate           10,578                   -             15,897                    -
Property transactions, net                                     (66)                310            194,990                1,423
Funds From Operations                                      165,942             147,622            303,042              286,661

Amortization of financing costs and cash flow hedges 3,829 

      3,366              7,093                6,647
Share of amortization of financing costs of
unconsolidated affiliate                                        64                   -                 97                    -
Non-cash compensation expense                                  603                 524              1,357                1,089
Straight-line rental revenues, excluding lease
incentive asset                                             13,633              11,664             24,414               18,119
Share of straight-line rental revenues of
unconsolidated affiliate                                   (12,866)                  -            (19,218)                   -

Amortization of lease incentive asset and deferred revenue on non-normal tenant improvements

                    4,627               4,753              9,254                5,218
Acquisition-related expenses                                   358                 267                980                8,799
Non-cash ground lease rent, net                                258                 259                518                  519
Other expenses                                                 413                 363             18,781                  500
(Gain) loss on unhedged interest rate swaps, net            (1,588)                  -             10,532                    -
Provision (benefit) for income taxes - REIT                  2,499               4,021              3,632                3,792
Share of provision for income taxes of
unconsolidated affiliate                                       (47)                  -                  -                    -
Other, net - discontinued operations                             -                   -                  -                3,707
Adjusted Funds From Operations                             177,725             172,839            360,482              335,051
Interest income (1)                                         (2,279)               (102)            (3,370)              (1,948)
Interest expense (1)                                        55,377              63,977            104,575              127,925
Share of interest expense of unconsolidated
affiliate                                                   13,418                   -             19,941                    -

Amortization of financing costs and cash flow hedges (3,829) 

     (3,366)            (7,093)              (6,647)
Share of amortization of financing costs of
unconsolidated affiliate                                       (64)                  -                (97)                   -
Provision for income taxes - discontinued operations             -                   -                  -                2,890
Adjusted EBITDA                                      $     240,348           $ 233,348          $ 474,438          $   457,271


(1) Net income, interest income and interest expense are net of intercompany
interest eliminations of $5.6 million for the six months ended June 30, 2019.
(2) Includes depreciation on Mandalay Bay real estate assets for the three and
six month periods ending June 30, 2019 and for the six month period ending June
30, 2020..

Guarantor Financial Information



As of June 30, 2020, all of our indebtedness is held by the Operating
Partnership and MGP does not guarantee any of the Operating Partnership's
indebtedness. The Operating Partnership's principal debt arrangements are
guaranteed by each of its wholly owned subsidiaries except for MGP JV INVESTCO 1
LLC, the entity holding the 50.1% interest in the MGP BREIT Venture, and, with
respect to the Operating Partnership's senior notes, MGP Finance Co-Issuer,
Inc., the co-issuer of the senior notes, and certain other subsidiaries whose
guarantees are subject to gaming approval, unless and until such approval is
obtained. The guarantees provided by the subsidiary guarantors rank senior in
right of payment to any future subordinated debt of ours or such subsidiary
guarantors, junior to any secured indebtedness to the extent of the value of the
assets securing such debt and effectively subordinated to any indebtedness and
other obligations of our subsidiaries that do not guaranty the principal
indebtedness. In addition, the obligations of each subsidiary guarantor under
its guarantee is limited so as not to constitute a fraudulent conveyance under
applicable law, which may eliminate the subsidiary guarantor's obligations or
reduce such obligations to an amount that effectively makes the subsidiary
guarantee lack value.


                                       29
--------------------------------------------------------------------------------

The summarized financial information of the Operating Partnership and its guarantor subsidiaries, on a combined basis, is presented below:

© Edgar Online, source Glimpses