MGM GROWTH PROPERTIES LLC Item 8.01 Other Events.
As previously disclosed, onAugust 4, 2021 , VICI Properties Inc., aMaryland corporation ("VICI"),MGM Growth Properties LLC , aDelaware limited liability company ("MGP"),MGM Growth Properties Operating Partnership LP , aDelaware limited partnership ("MGP OP"),VICI Properties LP , aDelaware limited partnership ("Existing VICI OP"),Venus Sub LLC , aDelaware limited liability company and a wholly owned subsidiary of Existing VICI OP ("REIT Merger Sub"),VICI Properties OP LLC , aDelaware limited liability company and an indirect wholly owned subsidiary of VICI ("New VICI Operating Company "), andMGM Resorts International , aDelaware corporation ("MGM"), entered into a definitive Master Transaction Agreement (the "Master Transaction Agreement"). Upon the terms and subject to the conditions set forth in the Master Transaction Agreement, prior to or on the closing date under the Master Transaction Agreement, VICI will contribute its interest in Existing VICI OP toNew VICI Operating Company , which will serve as a new operating company for VICI. Following the contribution transaction, MGP will merge with and into REIT Merger Sub, with REIT Merger Sub surviving the merger (the "REIT Merger"). Immediately following consummation of the REIT Merger, REIT Merger Sub will distribute the interests of the general partner of MGP OP to Existing VICI OP and, immediately following such distribution, REIT Merger Sub will merge with and into MGP OP, with MGP OP surviving the merger (the "Partnership Merger" and, together with the REIT Merger, the "Mergers"). A definitive joint proxy statement/information statement/prospectus (the "joint proxy/information statement") was filed with theSecurities and Exchange Commission (the "SEC") by MGP onSeptember 23, 2021 , in connection with, among other things, the Master Transaction Agreement.
In connection with the Mergers, nine lawsuits have been filed challenging disclosures related to the Mergers, captioned: (i)
Lin v.MGM Growth Properties LLC , et al. , No.
1:21-cv-07807
(SDNY) (filed
Whitfield v.MGM Growth Properties LLC , et al. , No.
1:21-cv-08110
(SDNY) (filed
Bushansky v. VICI Properties Inc., et al. , No.
1:21-cv-18429
(DNJ) (filed
Kent v. VICI Properties, Inc., et. al.,
No.
1:21-cv-08504
(SDNY) (filed
(the "Kent Complaint"), (v)
Mintz v. VICI Properties, Inc., et. al.,
No.
1:21-cv-05788
(EDNY) (filed
Hopkins v.MGM Growth Properties LLC , et al. , No.
2:21-cv-04556
(ED Pa) (filed
Anderson v. VICI Properties Inc., et al. , No.
1:21-cv-08603
(SDNY) (filed
Brown v. VICI Properties Inc., et al. , No.
1:21-cv-08621
(SDNY) (filed
Finger v. VICI Properties Inc., et al. , No. 2:21-cv-19213 (DNJ) (filedOctober 21, 2021 ) (the "Finger Complaint"). The Lin Complaint, the Whitfield Complaint and the Hopkins Complaint were filed by purported MGP shareholders and name as defendants MGP, MGP OP,MGM , the individual members of the MGP board of directors, VICI,New VICI Operating Company , the Existing VICI OP and REIT Merger Sub. The Bushansky Complaint, the Kent Complaint, the Mintz Complaint, the Anderson Complaint, the Brown Complaint and the Finger Complaint were filed by purported stockholders of VICI and name as defendants VICI and the individual members of VICI's board of directors. The Lin Complaint alleges that theSeptember 8, 2021 registration statement on Form
S-4
regarding the proposed Mergers contains inadequate disclosures in violation of
the federal securities laws. The Whitfield Complaint, the Bushansky Complaint,
the Kent Complaint, the Mintz Complaint, the Hopkins Complaint, the Anderson
Complaint, the Brown Complaint and the Finger Complaint allege that the joint
proxy/information statement regarding the proposed Mergers contains inadequate
disclosures in violation of the federal securities laws. The plaintiffs in each
action seek, among other things, to enjoin the Mergers and the transactions
contemplated by the Master Transaction Agreement and an award of costs and
attorneys' fees. Additional lawsuits arising out of the Mergers may be filed in
the future.
MGP believes that the disclosures set forth in the joint proxy/information
statement comply fully with all applicable laws and denies the allegations in
the pending actions described above and believes they are without merit.
Nevertheless, in order to moot plaintiffs' disclosure claims, avoid nuisance and
possible expense and business delays, and provide additional information to its
stockholders, MGP has determined voluntarily to supplement certain disclosures
in the joint proxy/information statement with the supplemental disclosures set
forth below (the "Supplemental Disclosures"). Nothing in the Supplemental
Disclosures shall be deemed an admission of the legal merit of the various
litigation matters described above, or of the necessity or materiality under
applicable laws of any of the disclosures set forth herein. To the contrary, MGP
specifically denies all allegations in the various litigation matters that any
additional disclosure was or is required or material.
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SUPPLEMENTAL DISCLOSURES
The following supplemental disclosures should be read in conjunction with the
joint proxy/information statement, which should be read in its entirety. The
inclusion in this supplement to the joint proxy/information statement of certain
information should not be regarded as an indication that any of MGP or its
affiliates, officers, directors or other representatives, or any other recipient
of this information, considered, or now considers, it to be material, and such
information should not be relied upon as such. Defined terms used but not
defined herein have the meanings set forth in the joint proxy/information
statement. For clarity, new text within restated paragraphs from the joint
proxy/information statement is highlighted with
bold, underlined text
, and deleted text within restated paragraphs from the joint proxy/information
statement is highlighted with
strikethrough text
.
The disclosure in the section entitled "The Transactions-Background of the Mergers" beginning on page 55 is hereby amended by:
Amending and restating the first paragraph on page 56:
OnMay 11, 2021 ,MGM executed a non-disclosure agreement with PartyB. None of the non-disclosure agreements executed by VICI, Party A, Party B or Party C withMGM contain a standstill provision.
Amending and restating the fourth full paragraph on page 64:
BetweenJuly 27, 2021 andAugust 2, 2021 , representatives of VICI andMGM held multiple telephonic meetings to discuss accounting, finance and tax considerations in the Transaction Documents, the timing for the Transactions and open business items, including the "marketing period" for VICI's debt financing under the Master Transaction Agreement, the payment of dividends between signing and closing and certain terms of the Tax Protection Agreement and theMGM Master Lease . At no point during the parties' negotiations with respect to the Transactions did representatives of VICI and MGP (orMGM ) engage in discussions regarding post-transaction employment of any MGP employees.
The disclosure in the section entitled "The Transactions-Opinion of VICI's Financial Advisor" beginning on page 80 is hereby amended by:
Adding the following paragraphs (including the tables) before the first paragraph on page 84:
The following table reflects the metrics for each of the Comparable Companies
and MGP:
2022E 2022E P/(D)
P/AFFO AV/EBITDA to
Company Multiples Multiples NAV
Realty Income Corporation 18.9x 18.8x 31 %
W.P. Carey Inc. 15.6x 17.7x 20 %
Gaming & Leisure Properties, Inc. 13.1x 14.6x 13 %
STORE Capital, Inc. 17.4X 17.1x 38 %
National Retail Properties, Inc. 16.3x 17.3x 13 %
Spirit Realty Capital, Inc. 15.3x 15.8x 20 %
EPR Properties 12.4x 14.6x 5 %
MGP* 14.2x 15.8x 10 %
* MGP is included for reference, but was not used as a selected company for
purposes of these calculations.
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The following table reflects the metrics for each of the Comparable Companies
and VICI:
2022E 2022E P/(D)
P/AFFO AV/EBITDA to
Company Multiples Multiples NAV
Realty Income Corporation 18.9x 18.8x 31 %
W.P. Carey Inc. 15.6x 17.7x 20 %
Gaming & Leisure Properties, Inc. 13.1x 14.6x 13 %
STORE Capital, Inc. 17.4x 17.1x 38 %
National Retail Properties, Inc. 16.3x 17.3x 13 %
Spirit Realty Capital, Inc. 15.3x 15.8x 20 %
EPR Properties 12.4x 14.6x 5 %
VICI* 15.8x 17.4x 23 %
* VICI is included for reference, but was not used as a selected company for
purposes of these calculations.
Amending and restating the second full paragraph on page 86:
Morgan Stanley discounted the range of estimated terminal values derived from these calculations to forecasted present value as ofJune 30, 2021 using a range of discount rates of 5.4% to 6.7%, which was derived by taking a sensitized range of MGP's weighted average cost of capital determined utilizing the capital asset pricing model, and then added the resultant implied present values to the implied present value of net free cash flows as described above, subtracting forecasted outstanding debt and adding forecasted outstanding cash total pro rata net debt (totaling approximately$5,729,000,000 , based upon the projectedDecember 31, 2021 balance sheets of MGP and the BREIT JV ) , and dividing by the number of fully diluted shares (totaling approximately 268
million (assuming conversion of the MGP OP Units)) , all as provided by MGP's management.
Amending and restating the first full paragraph on page 87:
Morgan Stanley discounted the range of estimated terminal values derived from these calculations to forecasted present value as ofJune 30, 2021 using a range of discount rates of 5.9% to 7.3%, which was derived by taking a sensitized range of VICI's weighted average cost of capital determined utilizing the capital asset pricing model, and then added the resultant implied present values to the implied present value of net free cash flows as described above, subtracting forecasted outstanding debt and adding forecasted outstanding cash total net debt (totaling approximately$7,937,000,000 , based upon the projectedDecember 31, 2021 balance sheet of VICI) and minority interest (totaling approximately$78,000,000 ) , and dividing by the number of fully diluted shares (totaling approximately 633 million) , all as provided by VICI's management. Amending and restating the table following the fourth full paragraph on page 87: Selected Precedent Transactions Premium Paid to Transaction Unaffected Stock Announcement Date Acquiror Target Price May 2021 Equity Commonwealth Monmouth Real Estate Investment Corporation 28 % April 2021 Realty Income Corporation VEREIT, Inc. 19 % May 2018 The Blackstone Group L.P. Gramercy Property Trust 22 % October 2013 American Realty Capital Cole Real Estate Investments Properties, Inc. 19 % May 2013 American Realty Capital CapLease, Inc. Properties, Inc. 17 % September 2012 Realty Income Corp. American Realty Capital Trust 7 % November 2007 Gramercy Capital Corp. American Financial Realty Trust 23 %
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March 2007 Redford Holdco (MacquarieSpirit Finance Corp. Bank/Kaupthing) 12 % October 2006 GE Capital Trustreet Properties 35 % October 2006 Record Realty Trust (Allco Government Property Trust Finance Group) 17 % September 2005 DRA Advisors, Inc. Capital Automotive REIT 8 % July 2001 Commercial Net Lease Realty Captec Net Lease Realty, Inc. 21 % March 2001 GE Capital Franchise Finance Corporation of America 11 % The disclosure in the section entitled "The Transactions- Opinion of the MGP Conflicts Committee's Financial Advisor" beginning on page 91 is hereby amended by:
Amending and restating the third full paragraph on page 94:
Evercore calculated ranges of terminal values for MGP as of
• a perpetuity growth method - under which Evercore calculated a range of
terminal values for MGP by applying perpetuity growth rates ranging from
1.50% to 2.50%,
which were based on Evercore's professional judgment and experience
, to the estimate of 2026 unlevered free cash flow reflected in the
Forecasts, and
• a terminal multiple method (EV/EBITDA Multiple) - under which Evercorecalculated a range of terminal values for MGP by applying enterprise
value ("EV") to EBITDA multiples ranging from 14.50x to 16.50x,
which were based on Evercore's professional judgment and experience
, to the estimate of 2027 EBITDA reflected in the Forecasts.
Amending and restating the fourth full paragraph on page 94:
Evercore discounted MGP's projected, unlevered free cash flows over the period fromJanuary 1, 2022 throughDecember 31, 2026 and the ranges of terminal values for MGP it calculated under each of the methods described above to present value as ofDecember 31, 2021 , using discount rates ranging from 8.0% to 9.0% to derive ranges of implied enterprise values for MGP. The discount rates were based on Evercore's judgment of the estimated range of MGP's weighted average cost of capital. Evercore then deducted from the ranges of implied enterprise values MGP's management's estimate of MGP's pro rata net debt as ofJune 30, 2021 of$5,805 million ( based on theJune 30, 2021 balance sheets of MGP and the BREIT JV and pro forma for theSpringfield acquisition) as reflected in MGP's most recent public filings, and divided the results by the fully diluted outstanding MGP Class A Common Shares as ofAugust 2, 2021 , of 268.5 million (assuming conversion of the MGP OP Units) , calculated based on information provided to Evercore by MGP management, to derive a range of implied equity values per MGP Class A Common Share as follows, which Evercore compared to the value per MGP Class A Common Share implied by the Exchange Ratio of$41.92 (calculated by multiplying the closing price of the VICI Common Stock onAugust 2, 2021 of$30.69 by the Exchange Ratio) and to the closing price per MGP Class A Common Share onAugust 2, 2021 of$37 .33:
Amending and restating the second paragraph on page 95:
Evercore calculated ranges of terminal values for VICI as of
• a perpetuity growth method - under which Evercore calculated a range of
terminal values for VICI by applying perpetuity growth rates ranging from
1.50% to 2.50%,
which were based on Evercore's professional judgment and experience
, to the estimate of 2026 unlevered free cash flow reflected in the
Forecasts, and
--------------------------------------------------------------------------------
• a terminal multiple method (EV/EBITDA Multiple) - under which Evercore
calculated a range of terminal values for VICI by applying EV to EBITDA
multiples ranging from 16.50x to 18.50x,which were based on Evercore's professional judgment and experience
, to the estimate of 2027 EBITDA reflected in the Forecasts.
Amending and restating the third paragraph on page 95:
Evercore discounted VICI's projected, unlevered free cash flows over the period fromJanuary 1, 2022 throughDecember 31, 2026 and the ranges of terminal values for VICI it calculated under each of the methods described above to present value as ofAugust 4, 2021 , using discount rates ranging from 8.0% to 9.0% to derive ranges of implied enterprise values for VICI. The discount rates were based on Evercore's judgment of the estimated range of VICI weighted average cost of capital. Evercore then deducted from the ranges of implied enterprise values VICI's management's estimate of VICI's net debt as ofJune 30, 2021 of$8,222
million
(
based on the June
30, 2021 balance sheet of VICI and
pro forma for the Venetian Acquisition and Great
million
, and divided the results by the fully diluted outstanding shares of VICI Common Stock as ofAugust 2, 2021 of 633.5
million
, calculated based on information provided to Evercore by MGP management, to derive a range of implied equity values per share of VICI Common Stock as follows, which Evercore compared to the closing price per share of VICI Common Stock onAugust 2, 2021 of$30 .69: Amending and restating the table following the first full paragraph on page 100: Premium Paid Transactions 30 Day 1 Day 30 Day VWAP Premium Premium Premium to Share to Share to Share Announcement Price Price Price Date Acquirer Target (%) (%) (%) July 2021 Kite Realty Group Trust Retail Properties of America, Inc. 13 % 14 % 13 % June 2021 Ventas, Inc. New Senior Investment Group Inc. 32 % 37 % 14 % May 2021 % (1) Equity Commonwealth Monmouth Real Estate Investment Corporation 27 N/A N/A April 2021 Realty Income Corporation VEREIT, Inc. 17 % 25 % 17 % April 2021 Weingarten
Kimco Realty, Corp. (2) 11 % 9 % 12 %
October 2019 Prologis, Inc. Liberty Property Trust 21 % 19 % 20 %
March 2019 Cousins Properties, Inc. Tier REIT, Inc. 16 % 23 % 15 %
April 2018 Prologis, Inc. DCT Industrial Trust Inc. 16 % 18 % 20 %
August 2017 Invitation Homes, Inc. Starwood Waypoint Homes 1 % 0 % (3 %)
June 2017 Digital Realty Trust, Inc. DuPont Fabros Technology, Inc. 15 % 21 % 12 %
May 2017 Sabra Health Care REIT, Inc. Care Capital Properties, Inc. 12 % 18 % 11 %
April 2017 RLJ Lodging Trust FelCor Lodging Trust Incorporated 17 % 6 % 13 %
November 2016 Regency Centers Corporation Equity One, Inc. 13 % 3 % 9 %
August 2016 Mid-America
Apartment Communities, Inc. Post Properties, Inc. 17 % 19 % 14 %
April 2016 Cousins Properties, Inc. Parkway Properties, Inc. 13 % 15 % 11 %
October 2014 Omega Healthcare Investors, Inc. Aviv REIT, Inc. 16 % 28 % 16 %
June 2013 Mid-America
Apartment Communities, Inc. Colonial Properties Trust 11 % 6 % 4 %
Mean 16 % 16 % 12 %
Median 16 % 18 % 13 %
(1) Based on share price as of
proposal.
(2) Included approximately
shares outstanding).
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-END OF SUPPLEMENT TO JOINT PROXY/INFORMATION STATEMENT-
Forward Looking Statements
This Current Report on Form
8-K
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended, with respect to the proposed
transaction described herein, including statements regarding the anticipated
benefits of the transaction, the anticipated timing of the transaction and the
markets of each company. These forward-looking statements generally are
identified by the words "anticipates," "assumes," "believes," "estimates,"
"expects," "guidance," "intends," "plans," "projects," "strategy," "future,"
"opportunity," "plan," "may," "should," "will," "would" and similar expressions.
Forward-looking statements are predictions, projections and other statements
about future events that are based on current expectations and assumptions and,
as a result, are subject to risks and uncertainties.
Currently, one of the most significant factors that could cause actual outcomes
to differ materially from our forward-looking statements is the impact of the
COVID-19
pandemic on MGP's, VICI's and each company's respective tenants' financial
condition, results of operations, cash flows and performance. The extent to
which the
COVID-19
pandemic continues to adversely affect each company's tenants, and ultimately
impacts each company's business and financial condition, depends on future
developments which cannot be predicted with confidence. Many additional factors
could cause actual future events and results to differ materially from the
forward-looking statements, including but not limited to: (i) the possibility
that VICI stockholders do not approve the proposed transaction or that other
conditions to the closing of the proposed transaction are not satisfied or
waived at all or on the anticipated timeline, (ii) failure to realize the
anticipated benefits of the proposed transaction, including as a result of delay
in completing the proposed transaction, (iii) the risk that MGP's business will
not be integrated successfully or that such integration may be more difficult,
time-consuming or costly than expected, (iv) unexpected costs or liabilities
relating to the proposed transaction, (v) potential litigation relating to the
proposed transaction that could be instituted against MGP or VICI or their
respective directors or officers and the resulting expense or delay, (vi) the
risk that disruptions caused by or relating to the proposed transaction will
harm MGP's or VICI's business, including current plans and operations, (vii) the
ability of MGP or VICI to retain and hire key personnel, (viii) potential
adverse reactions by tenants or other business partners or changes to business
relationships, including joint ventures, resulting from the announcement or
completion of the proposed transaction, (ix) risks relating to the market value
of VICI's common stock to be issued in the proposed transaction, (x) risks
associated with third-party contracts containing consent and/or other provisions
that may be triggered by the proposed transaction, (xi) the impact of public
health crises, such as pandemics (including the
COVID-19
pandemic) and epidemics and any related company or government policies and
actions intended to protect the health and safety of individuals or government
policies or actions intended to maintain the functioning of national or global
economies and markets, (xii) general economic and market developments and
conditions, (xiii) restrictions during the pendency of the proposed transaction
or thereafter that may impact MGP's or VICI's ability to pursue certain business
opportunities or strategic transactions, (xiv) either company's ability to
maintain its status as a real estate investment trust for U.S. federal income
tax purposes, and (xv) the occurrence of any event, change or other
circumstances that could give rise to the termination of the Master Transaction
Agreement relating to the proposed transaction. The foregoing list of factors is
not exhaustive. You should carefully consider the foregoing factors and the
other risks and uncertainties that affect the businesses of MGP and VICI
described in the "Risk Factors" section of their respective Annual Reports on
Form
10-K,
Quarterly Reports on Form
10-Q
and other documents filed by either of them from time to time with the SEC .
These filings identify and address other important risks and uncertainties that
could cause actual events and results to differ materially from those contained
in the forward-looking statements. Investors are cautioned to interpret many of
the risks identified in the "Risk Factors" section of these filings as being
heightened as a result of the ongoing and numerous adverse impacts of the
COVID-19
pandemic. Forward-looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward-looking statements,
and MGP and VICI assume no obligation and do not intend to update or revise
these forward-looking statements, whether as a result of new information, future
events or otherwise. Neither MGP nor VICI gives any assurance that either
company will achieve its expectations.
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