Exhibit 99.1

Excerpts from the Preliminary Offering Memorandum of MGP Escrow Issuer, LLC, Dated April 4, 2016

 

Certain operational and non-U.S. GAAP financial measures of MGM and the Operating Partnership

In order to evaluate the business results of casino resorts, MGM Resorts International (“MGM”) monitors their net revenues and Adjusted Property EBITDA, as well as the key hotel performance indicators of occupancy rate, average daily rate (“ADR”) and revenue per available room (“REVPAR”). MGM’s calculation of ADR, which is the average price of occupied rooms per day, includes the impact of complimentary rooms. Complimentary room rates are determined based on an analysis of retail or “cash” rates for each customer segment and each type of room product to estimate complimentary rates which are consistent with retail rates. Complimentary rates are reviewed at least annually and on an interim basis if there are significant changes in market conditions. Because the mix of rooms provided on a complimentary basis, particularly to casino customers, includes a disproportionate suite component, the composite ADR including complimentary rooms is slightly higher than the ADR for cash rooms, reflecting the higher retail value of suites. REVPAR is a summary measure of hotel results, combining ADR and occupancy rate.

MGM uses Adjusted EBITDA and Adjusted Property EBITDA as the primary profit measure for its reportable segments. Adjusted EBITDA is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, and property transactions, net. Adjusted Property EBITDA is a measure defined as Adjusted EBITDA before corporate expense and stock compensation expense related to MGM’s stock option plan, not allocated to each casino resort. Adjusted EBITDA or Adjusted Property EBITDA should not be construed as an alternative to operating income or net income, as an indicator of MGM’s performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. MGM has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA or Adjusted Property EBITDA. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA or Adjusted Property EBITDA information may calculate Adjusted EBITDA or Adjusted Property EBITDA in a different manner.

Please see Annex I for a reconciliation of MGM’s Adjusted EBITDA and Adjusted Property EBITDA to net income (loss) and of MGM’s operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA, all as reported by MGM. We are unable to provide a reconciliation of estimated stabilized Adjusted Property EBITDA objectives to estimated net income or operating income for future development projects as a result of the uncertainty regarding, and the potential variability of, start-up and related expenses, depreciation and amortization expense and other expenses, that are expected to be incurred in the future.

Please see “Reconciliation of pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA to Net Income” for a reconciliation of the pro forma Further Adjusted EBITDA of MGM Growth Properties Operating Partnership LP (the “Operating Partnership”).

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Summary historical financial statements and pro forma financial information

Following the Formation Transactions (described below), which include the initial public offering (the “IPO”) of MGM Growth Properties LLC (“MGP”) (with the proceeds therefrom to be used by MGP to purchase Operating Partnership Units (as defined below)), the incurrence by the Operating Partnership of $3.4 billion principal amount of new indebtedness (the “Financing”) in the form of (1) the notes to be issued in this offering, (2) a senior secured revolving credit facility (the “Revolving Credit Facility”), (3) a senior secured term loan A facility (the “Term Loan A Facility”) and (4) a senior secured term loan B facility (the “Term Loan B Facility” and, together with the Term Loan A Facility, the “Term Loan Facilities”), and the merger of MGP Escrow Issuer, LLC with and into the Operating Partnership, and the assumption by the Operating Partnership of the Bridge Facilities (as defined below) which are to be repaid with the proceeds of the above-mentioned financings, we will be primarily engaged in the real property business. Initially, our portfolio will consist of nine premier destination resorts operated by MGM, including properties that we believe are among the world’s finest casino resorts, and The Park in Las Vegas (collectively, the “Properties”) that are owned by subsidiaries of MGM as of the date of this offering memorandum, which will be contributed to us by subsidiaries of MGM in connection with the Formation Transactions. A subsidiary of the Operating Partnership (the “Landlord”) will lease all of the Properties to a subsidiary of MGM (the “Tenant”) pursuant to a long-term triple-net master lease agreement (the “Master Lease”). We initially expect to generate revenues by leasing the Properties to the Tenant.

The following summary financial information does not reflect our financial position or results of operations for the periods indicated. The Predecessor Financial Statements presented below were prepared by combining the financial results of the Properties expected to be owned by us at the completion of the Formation Transactions. The following table should be read in conjunction with: “Operating partnership unaudited pro forma condensed consolidated financial information,” “Management’s discussion and analysis of financial condition and results of operations” and the Predecessor Financial Statements and notes thereto presented elsewhere herein.

The pro forma financial information may not be indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had we operated independent from MGM during the periods presented.

 

		(Historical)								(Pro forma)(1)
		For the year ended December 31,
(in thousands)		2014				2015				2015
										(unaudited)
Statement of Operations Data:
Revenues
Rental income		$	—			$	—			$	552,300
Property taxes reimbursed by Tenant			—				—				48,122
Total revenues			—				—				600,422
Operating expenses
Depreciation			186,262				196,816				196,816
Property transactions, net			—				6,665				6,665
Property taxes			48,346				48,122				48,122
Property insurance			11,634				10,351				—
Other general and administrative(1)			—				—				1,650
Total operating expenses			246,242				261,954				253,253
Operating income (loss)			(246,242	)			(261,954	)			347,169
Interest expense			—				—				186,563
Income (loss) before income taxes			(246,242	)			(261,954	)			160,606
Provision for income taxes			—				—				—
Net income (loss)		$	(246,242	)		$	(261,954	)		$	160,606

 

(1) See “Operating Partnership unaudited pro forma condensed consolidated financial information.”

 

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		(Historical)								(Pro forma)
		For the year ended December 31,
(in thousands)		2014				2015				2015
										(unaudited)
Balance Sheet Data:
Assets
Property and equipment, net		$	7,867,812			$	7,793,639			$	7,793,639
Total assets		$	7,867,812			$	7,793,639			$	7,793,639
Liabilities
Long term debt, net		$	—			$	—			$	3,258,575
Deferred tax liabilities			1,740,465				1,734,680				—
Total liabilities			1,740,465				1,734,680				3,258,575
Partners’ capital
Net Parent investment			6,127,347				6,058,959				—
General partner			—				—				—
Limited partners			—				—				4,535,064
Total partners’ capital			6,127,347				6,058,959				4,535,064
Total liabilities and partners’ capital		$	7,867,812			$	7,793,639			$	7,793,639

Reconciliation of pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA to Net Income

Pro forma Funds from operations (“FFO”) is a financial measure that is not prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and is considered a supplement to U.S. GAAP measures for the real estate industry. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (computed in accordance with U.S. GAAP), excluding gains and losses from sales of property (presented below as property transactions, net), plus real estate depreciation. We have defined pro forma Adjusted Funds From Operations (“AFFO”) as FFO as adjusted for pro forma amortization of financing costs, non-cash compensation expense, and the net effect of straight-line rents. We define pro forma OP Adjusted EBITDA as pro forma net income of the Operating Partnership (computed in accordance with U.S. GAAP) excluding pro forma gains and losses from sales of property (presented below as property transactions, net), plus pro forma real estate depreciation, interest expense (including amortization of financing costs), non-cash compensation expense, and the net effect of straight-line rents. We define pro forma Further Adjusted EBITDA as Adjusted EBITDA less general and administrative expenses (excluding non-cash compensation) that are not yet contractually committed.

Pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA are useful supplemental performance measures to investors in comparing operating and financial results between periods. This is especially true since these measures exclude real estate depreciation and amortization expense and the Operating Partnership believes that real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. The Operating Partnership believes such a presentation also provides investors with a more meaningful measure of the Operating Partnership’s operating results in comparison to the operating results of other REITs. Pro forma OP Adjusted EBITDA and Further Adjusted EBITDA are useful for

 

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investors to further supplement pro forma AFFO and FFO and to provide investors a performance metric which excludes interest expense and, in the case of pro forma Further Adjusted EBITDA, accounts for estimated general and administrative expenses expected to be incurred but not included in pro forma OP Adjusted EBITDA.

Pro forma FFO, AFFO, OP Adjusted EBITDA and Further 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 pro forma FFO, AFFO, OP Adjusted EBITDA and Further 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.

The following reconciles pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA to pro forma net income (in thousands):

 

		Pro forma for the year ended December 31, 2015
Net income (loss)		$	160,606
Real estate depreciation			196,816
Property transactions, net			6,665
FFO			364,087
Amortization of financing costs			12,328
Non-cash compensation expense			450
Net effect of straight-line rents			(2,300	)
AFFO			374,565
Interest expense			186,563
Amortization of financing costs			(12,328	)
OP Adjusted EBITDA			548,800
Incremental G&A expense (excluding non-cash compensation)(1)			(11,500	)
Further Adjusted EBITDA		$	537,300

 

(1) Includes the midpoint of estimated incremental general and administrative costs of approximately $10 million to $13 million that are not yet contractually committed.

 

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Operating partnership unaudited pro forma condensed consolidated financial information

We are a newly formed limited partnership formed in Delaware on January 6, 2016 through which our parent, MGP, will conduct its operations. Following the IPO, MGP will be a publicly traded, controlled REIT primarily engaged in owning, acquiring and leasing large-scale casino resort properties, which include casino gaming, hotel, convention, dining, entertainment, retail and mixed-use facilities, and other resort amenities.

In connection with MGP’s IPO, MGM will engage in the Formation Transactions in which certain subsidiaries of MGM will transfer the real estate assets that comprise our Properties to newly formed property company subsidiaries that are controlled by MGM (each a “Property Holdco”) that will be indirectly owned by MGM, with 100% of the ownership interests in the Property Holdcos subsequently transferred to us in exchange for partnership units in the Operating Partnership (the “Operating Partnership Units”). The Property Holdcos will then be contributed to a subsidiary of the Operating Partnership, and subsequently merge into a single Property Holdco, the Landlord, which is the lessor under the Master Lease. In light of the foregoing, such real estate assets and related operations are referred to as our predecessor (the “Predecessor” or “Propco”). Following the proposed Formation Transactions, a wholly owned subsidiary of MGP will be our general partner and operate and control all of our business affairs and consolidate our financial results, including those of our subsidiaries. The above Formation Transactions are considered to be between legal entities under common control under U.S. GAAP.

The following unaudited pro forma condensed consolidated financial information presents our unaudited pro forma condensed consolidated balance sheet as of December 31, 2015, as if the Formation Transactions had occurred on December 31, 2015. Our unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2015 is presented as if the Formation Transactions had occurred on January 1, 2015, and has been derived from our Predecessor Financial Statements included elsewhere in this offering memorandum. This unaudited condensed consolidated pro forma financial information and other data should be read in conjunction with our Predecessor Financial Statements and notes thereto included elsewhere in this offering memorandum.

The following unaudited pro forma condensed consolidated financial information and explanatory notes present how the financial statements may have appeared had the capital structure reflected the Formation Transactions and related transactions as of the dates noted above.

The following unaudited pro forma condensed consolidated financial information was prepared in accordance with Article 11 of Regulation S-X, using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not purport to reflect the results we may achieve in future periods or the historical results that would have been obtained had the Formation Transactions and related transactions been completed on January 1, 2015 or as of December 31, 2015, as the case may be.

 

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Unaudited pro forma condensed consolidated balance sheet

As of December 31, 2015

(in thousands)

 

		As of December 31, 2015				As of January 6, 2016				Pro forma adjustments								As of December 31, 2015
		Historical Predecessor (a)				Operating Partnership at date of inception												Pro forma Operating Partnership
Assets
Property and equipment, net		$	7,793,639			$	—			$	—							$	7,793,639
Total assets		$	7,793,639			$	—			$	—							$	7,793,639
Liabilities
Long term debt, net		$	—			$	—			$	3,258,575				(b)			$	3,258,575
Deferred tax liabilities			1,734,680				—				(1,734,680	)			(c)				—
Total liabilities			1,734,680				—				1,523,895								3,258,575
Partners’ capital
Net Parent investment			6,058,959				—				(6,058,959	)			(b)(c)				—
General partner			—				—				—								—
Limited partners			—				—				4,535,064				(b)(c)				4,535,064
Total partners’ capital			6,058,959				—				(1,523,895	)							4,535,064
Total liabilities and partners’ capital		$	7,793,639			$	—			$	—							$	7,793,639

The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.

 

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Unaudited pro forma condensed consolidated statement of operations

For the year ended December 31, 2015

(in thousands)

 

		Year ended December 31, 2015				As of January 6, 2016										Year ended December 31, 2015
		Historical Predecessor (aa)				Operating Partnership at date of inception				Pro forma adjustments						Pro forma Operating Partnership
Revenues Rental income		$	—			$	—			$	552,300			(bb)		$	552,300
Property taxes reimbursed by Tenant			—				—				48,122			(cc)			48,122
Total revenues			—				—				600,422						600,422
Operating expenses
Depreciation			196,816				—				—						196,816
Property transactions, net			6,665				—				—						6,665
Property taxes			48,122				—				—						48,122
Property insurance			10,351				—				(10,351	)		(dd)			—
Other general and administrative			—				—				1,650			(ee)			1,650
Total operating expenses			261,954				—				(8,701	)					253,253
Operating income (loss)			(261,954	)			—				609,123						347,169
Interest expense			—				—				186,563			(ff)			186,563
Income (loss) before income taxes			(261,954	)			—				422,560						160,606
Provision for income taxes			—				—				—						—
Net income (loss)		$	(261,954	)			—			$	422,560					$	160,606

The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.

 

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Pro forma condensed consolidated financial information

Note 1—Balance sheet pro forma adjustments

(a) Represents the historical amounts of our Predecessor, including the historical cost of real estate assets to be acquired by us. The assets of the Properties transferred pursuant to the Formation Transactions will be recorded at historical cost as the Formation Transactions do not result in a change in control of the assets. Following the Formation Transactions, we will consolidate the assets and liabilities of the Predecessor.

(b) Represents the net proceeds from the IPO and the indebtedness to be incurred by us described below, offset by their respective financing costs in connection with the Formation Transactions, as well as the assumption and repayment of the indebtedness under the approximately $4.0 billion of liabilities from MGM and certain subsidiaries of MGM under bridge facilities (the “Bridge Facilities”) assumed by us.

We estimate that proceeds from the IPO of approximately $800.0 million will be used to purchase Operating Partnership Units representing economic interests in the Operating Partnership. We will use the proceeds to repay a portion of the indebtedness assumed by us in connection with the Formation Transactions.

In addition, we are expected to incur approximately $3.4 billion principal amount of new indebtedness. The net proceeds of such new indebtedness will be used to refinance the Bridge Facilities. Debt issuance costs of $91.4 million incurred in connection with obtaining the Revolving Credit Facility, the Term Loan Facilities and the notes to be issued in this offering are offset against the carrying amount of the debt. In the event that the gross proceeds from the IPO are less than the $800.0 million that MGP expects to raise, we expect to incur additional indebtedness under our Revolving Credit Facility equal to the difference, but not exceeding $300.0 million of total outstanding indebtedness under the Revolving Credit Facility on the date all of the Formation Transactions are consummated (the “Transaction Consummation Date”). In addition, to the extent the underwriters in the IPO exercise their overallotment option to purchase additional shares in the IPO, we expect MGP to contribute such additional proceeds to the Operating Partnership to purchase additional Operating Partnership Units, and the Operating Partnership expects to use such additional proceeds to reduce outstanding indebtedness under the Revolving Credit Facility. No assurance can be given that the underwriters will exercise such overallotment option.

The weighted average interest rate on our indebtedness under the Revolving Credit Facility, the Term Loan Facilities and the notes to be issued in this offering is expected to be 5.2%.

For purposes of this pro forma presentation, the net issuance proceeds from the IPO, the Financing and debt issuance costs have been applied to the pro forma condensed consolidated balance sheet assuming they had occurred on December 31, 2015.

 

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Cash and cash equivalents includes the following cash inflows and cash outflows (in thousands):

 

Sources						Uses
Proceeds from MGP’s purchase of Operating Partnership Units		$	741,425			Repayment of the Bridge Facilities		$	4,000,000
Proceeds from debt issuance			3,350,000			Debt issuance costs			91,425
		$	4,091,425					$	4,091,425
Long term debt represents the following (in thousands):
Proceeds from debt issuance		$	3,350,000
Debt issuance costs			(91,425	)
Bridge Facilities assumed by us			4,000,000
Repayment of the Bridge Facilities			(4,000,000	)
		$	3,258,575

(c) Represents the reversal of the historical deferred tax liability associated with the transferred property and equipment. The deferred tax liability will be retained by MGM upon MGM’s contribution of the Properties to us. As we are organized as a partnership, we are not a taxable entity for federal and state income tax purposes.

Note 2—Statement of operations pro forma adjustments

(aa) Represents the historical amounts of our Predecessor, including the historical expenses directly associated with real estate assets to be contributed to us, comprised of depreciation, property tax, and property insurance expenses. The assets of the Properties transferred pursuant to the Formation Transactions will be recorded at the historical cost as the Formation Transactions do not result in a change in control of the assets. Following the Formation Transactions, we will consolidate the results of operations of the Predecessor.

(bb) Represents rental income associated with the rent from the Master Lease. The base rent component of rent under the Master Lease (the “Base Rent”) includes a fixed annual rent escalator of 2.0% for the second through the sixth lease years (as defined in the Master Lease). Thereafter, the annual escalator of 2.0% will be subject to the Tenant and, without duplication, the MGM operating subsidiary sublessees of our Tenant collectively, meeting an adjusted net revenue to rent ratio of 6.25:1.00 based on their adjusted net revenue from the leased properties subject to the Master Lease (excluding net revenue attributable to certain scheduled subleases). The percentage rent component of rent under the Master Lease (the “Percentage Rent”) will initially be a fixed amount for approximately the first six lease years and will then be adjusted every five years based on the average actual annual adjusted net revenues from the leased properties subject to the Master Lease at such time (excluding net revenue attributable to certain scheduled subleases) for the trailing five-calendar-year period. Base Rent and Percentage Rent that is known at the lease commencement date will be recorded on a straight-line basis over the initial non-cancelable lease term and any reasonably assured renewal terms.

For the year ended December 31, 2015, pro forma rental revenue recognized is $552.3 million compared to total lease payments due under the Master Lease of $550.0 million. The difference of $2.3 million is an adjustment to recognize fixed amounts due under the Master Lease on a straight-line basis over the lease term.

 

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(cc) Represents revenue for the property taxes paid by the Tenant under the Master Lease with an offsetting expense recorded in operating expenses, as one of our subsidiaries is the primary obligor.

(dd) Represents the elimination of property insurance expense, which will be paid directly by the Tenant under the terms of the Master Lease.

(ee) Represents expense related to the base salary and annual equity awards pursuant to the employment agreements with our Chief Executive Officer and Chief Financial Officer. Any amount related to equity awards for our Chief Executive Officer and Chief Financial Officer that are not factually supportable have been excluded.

In addition, we also expect to incur fees pursuant to a corporate services agreement (the “Corporate Services Agreement”) in connection with financial, administrative and operational support services provided by MGM, including accounting and finance support, human resources support, legal and regulatory compliance support, insurance advisory services, internal audit services, governmental affairs monitoring and reporting services, information technology support, construction services, and various other support services, which will be based on costs MGM incurs directly related to providing services under the agreement. Such amounts will be based on an allocation of costs incurred by MGM in the future. As a result, such amounts are not factually supportable and an adjustment for these amounts has been excluded.

We estimate that general and administrative costs, including costs incurred under the Corporate Services Agreement, could result in incremental general and administrative expenses of $10 million to $13 million per year (excluding non-cash compensation that is not factually supportable).

(ff) Represents interest expense related to borrowings that will be incurred by us under the Financing, including the amortization of debt issuance costs associated with the Financing. It is estimated that a one-eighth percentage change in the annual interest rates on our variable rate obligations would change annual interest expense by $2.8 million. In addition, in the event that the gross proceeds from the IPO are less than the $800.0 million that MGP expects to raise, we expect to incur additional indebtedness under our Revolving Credit Facility equal to the difference, but not exceeding $300.0 million of total outstanding indebtedness under the Revolving Credit Facility on the Transaction Consummation Date. To the extent the underwriters in the IPO exercise their overallotment option to purchase additional shares in the IPO, we expect MGP to contribute such additional proceeds to the Operating Partnership to purchase additional Operating Partnership Units, and the Operating Partnership expects to use such additional proceeds to reduce outstanding indebtedness under the Revolving Credit Facility. No assurance can be given that the underwriters in the IPO will exercise such overallotment option. It is estimated that a $100 million change in borrowings that will be incurred by us in connection with the Financing would change annual interest expense by $3.0 million. See Note 1(b).

 

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Contractual obligations and commitments

Information concerning our obligations and commitments to make future payments under contracts such as our anticipated indebtedness is included in the following table.

 

		Payments due by period
Contractual obligations		Total				Within 1 Year				1-3 Years				4-5 Years				After 5 Years
(in thousands)
Pro forma data (unaudited):
Pro forma long-term debt(1)		$	4,562,774			$	205,484			$	406,630			$	775,846			$	3,174,814
Total Pro forma contractual obligations		$	4,562,774			$	205,484			$	406,630			$	775,846			$	3,174,814

(1) Including estimated interest payments.

 

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Annex I

Unaudited reconciliation of non-U.S. GAAP measures of MGM

The following table presents a reconciliation of MGM’s Adjusted EBITDA to net income (loss), each as reported by MGM:

 

		Year ended
		December 31, 2008				December 31, 2009				December 31, 2010				December 31, 2011				December 31, 2012				December 31, 2013				December 31, 2014				December 31, 2015
		(in thousands)
Adjusted EBITDA		$	1,882,441			$	1,107,099			$	972,389			$	1,603,771			$	1,747,981			$	2,124,581			$	2,219,562			$	2,238,920
Preopening and start-up expenses			(23,059	)			(53,013	)			(4,247	)			316				(2,127	)			(13,314	)			(39,257	)			(71,327	)
Property transactions, net			(1,277,132	)			(1,328,689	)			(1,454,349	)			3,318,838				(696,806	)			(124,761	)			(41,002	)			(1,503,942	)
Depreciation and amortization			(778,236	)			(689,273	)			(633,423	)			(817,146	)			(927,697	)			(849,225	)			(815,765	)			(819,883	)
Operating income			(195,986	)			(963,876	)			(1,119,630	)			4,105,779				121,351				1,137,281				1,323,538				(156,232	)
Non-operating income (expense):
Interest expense, net of amounts capitalized			(609,286	)			(775,431	)			(1,113,580	)			(1,086,832	)			(1,116,358	)			(857,347	)			(817,061	)			(797,579	)
Other, net			69,901				(273,286	)			11,807				(181,938	)			(739,206	)			(217,744	)			(95,591	)			(92,432	)
			(539,385	)			(1,048,717	)			(1,101,773	)			(1,268,770	)			(1,855,564	)			(1,075,091	)			(912,652	)			(890,011	)
Income before income taxes			(735,371	)			(2,012,593	)			(2,221,403	)			2,837,009				(1,734,213	)			62,190				410,886				(1,046,243	)
Provision for income taxes			(186,298	)			720,911				780,825				401,116				117,301				(20,816	)			(283,708	)			6,594
Net income (loss)			(921,669	)			(1,291,682	)			(1,440,578	)			3,238,125				(1,616,912	)			41,374				127,178				(1,039,649	)
Less: Net income attributable to noncontrolling interests			—				—				—				(120,307	)			(150,779	)			(213,108	)			(277,051	)			591,929
Net income (loss) attributable to MGM Resorts International		$	(921,669	)		$	(1,291,682	)		$	(1,440,578	)		$	3,117,818			$	(1,767,691	)		$	(171,734	)		$	(149,873	)		$	(447,720	)

 

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The following tables present reconciliations of MGM’s operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA, each as reported by MGM:

 

		Year ended December 31, 2015
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	303,858			$	—			$	1,085			$	90,442			$	395,385
MGM Grand Las Vegas			206,896				—				110				73,260				280,266
Mandalay Bay			120,142				—				3,599				79,733				203,474
The Mirage			66,069				115				1,729				44,562				112,475
Luxor			49,369				(2	)			94				37,708				87,169
New York-New York			81,618				(74	)			4,931				19,982				106,457
Excalibur			67,545				—				111				14,591				82,247
Monte Carlo			55,594				—				3,219				27,149				85,962
Circus Circus Las Vegas			27,305				280				21				15,639				43,245
MGM Grand Detroit			131,016				—				(36	)			23,999				154,979
Beau Rivage			62,613				—				(5	)			26,235				88,843
Gold Strike Tunica			34,362				—				221				11,440				46,023
Other resort operations			2,975				—				—				466				3,441
Wholly owned domestic resorts			1,209,362				319				15,079				465,206				1,689,966
MGM China			(1,212,377	)			13,863				1,472,128				266,267				539,881
Unconsolidated resorts			254,408				3,475				—				—				257,883
Management and other operations			27,395				1,179				1,080				7,765				37,419
			278,788				18,836				1,488,287				739,238				2,525,149
Stock compensation			(32,125	)			—				—				—				(32,125	)
Corporate			(402,895	)			52,491				15,655				80,645				(254,104	)
		$	(156,232	)		$	71,327			$	1,503,942			$	819,883			$	2,238,920

 

A-2

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		Year ended December 31, 2014
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	304,144			$	—			$	900			$	88,658			$	393,702
MGM Grand Las Vegas			174,297				197				(667	)			81,027				254,854
Mandalay Bay			95,449				1,133				2,307				76,737				175,626
The Mirage			57,338				452				2,464				49,900				110,154
Luxor			31,801				2				432				37,849				70,084
New York-New York			75,360				732				427				18,586				95,105
Excalibur			52,915				—				500				14,804				68,219
Monte Carlo			48,937				1,507				290				21,046				71,780
Circus Circus Las Vegas			8,135				85				61				15,334				23,615
MGM Grand Detroit			118,755				—				2,728				23,315				144,798
Beau Rivage			43,152				—				1,000				26,109				70,261
Gold Strike Tunica			27,460				—				392				12,480				40,332
Other resort operations			(2,318	)			—				336				1,759				(223	)
Wholly owned domestic resorts			1,035,425				4,108				11,170				467,604				1,518,307
MGM China			547,977				9,091				1,493				291,910				850,471
Unconsolidated resorts			62,919				917				—				—				63,836
Management and other operations			26,152				359				415				9,058				35,984
			1,672,473				14,475				13,078				768,572				2,468,598
Stock compensation			(28,372	)			—				—				—				(28,372	)
Corporate			(320,563	)			24,782				27,924				47,193				(220,664	)
		$	1,323,538			$	39,257			$	41,002			$	815,765			$	2,219,562

 

A-3

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		Year ended December 31, 2013
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	261,321			$	—			$	470			$	96,968			$	358,759
MGM Grand Las Vegas			149,602				—				2,220				84,310				236,132
Mandalay Bay			78,096				1,903				2,823				84,332				167,154
The Mirage			63,090				—				4,722				49,612				117,424
Luxor			21,730				802				2,177				36,852				61,561
New York-New York			65,006				—				3,533				20,642				89,181
Excalibur			49,184				—				69				14,249				63,502
Monte Carlo			45,597				791				3,773				18,780				68,941
Circus Circus Las Vegas			(1,596	)			—				1,078				17,127				16,609
MGM Grand Detroit			135,516				—				(2,402	)			22,575				155,689
Beau Rivage			38,015				—				(260	)			29,182				66,937
Gold Strike Tunica			22,767				—				1,330				13,390				37,487
Other resort operations			(21,951	)			—				23,018				2,243				3,310
Wholly owned domestic resorts			906,377				3,496				42,551				490,262				1,442,686
MGM China			501,021				9,109				390				303,589				814,109
Unconsolidated resorts			68,322				507				—				—				68,829
Management and other operations			13,749				189				4				11,835				25,777
			1,489,469				13,301				42,945				805,686				2,351,401
Stock compensation			(26,112	)			—				—				—				(26,112	)
Corporate			(326,076	)			13				81,816				43,539				(200,708	)
		$	1,137,281			$	13,314			$	124,761			$	849,225			$	2,124,581

 

A-4

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		Year ended December 31, 2012
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	206,679			$	—			$	2,101			$	94,074			$	302,854
MGM Grand Las Vegas			94,529				—				6,271				79,926				180,726
Mandalay Bay			64,818				830				3,786				77,327				146,761
The Mirage			65,266				—				929				51,423				117,618
Luxor			20,777				—				4,794				37,689				63,260
New York-New York			68,591				—				581				21,333				90,505
Excalibur			43,978				—				5				17,805				61,788
Monte Carlo			38,418				—				1,328				18,935				58,681
Circus Circus Las Vegas			4,514				—				106				19,452				24,072
MGM Grand Detroit			130,564				641				922				33,543				165,670
Beau Rivage			40,713				—				(50	)			30,698				71,361
Gold Strike Tunica			27,420				—				(53	)			13,102				40,469
Other resort operations			(904	)			—				(14	)			2,373				1,455
Wholly owned domestic resorts			805,363				1,471				20,706				497,680				1,325,220
MGM China			302,092				—				2,307				374,946				679,345
Unconsolidated resorts			(17,456	)			656				—				—				(16,800	)
Management and other operations			(4,258	)			—				—				14,205				9,947
			1,085,741				2,127				23,013				886,831				1,997,712
Stock compensation			(33,974	)			—				—				—				(33,974	)
Corporate			(930,416	)			—				673,793				40,866				(215,757	)
		$	121,351			$	2,127			$	696,806			$	927,697			$	1,747,981

 

A-5

---

		Year ended December 31, 2011
		Operating income (loss)				Preopening and start-up expenses				Gain on MGM China transaction and Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	203,026			$	—			$	2,772			$	96,699			$	302,497
MGM Grand Las Vegas			71,762				—				232				77,142				149,136
Mandalay Bay			84,105				—				531				84,488				169,124
The Mirage			41,338				—				1,559				59,546				102,443
Luxor			39,866				—				112				38,103				78,081
New York-New York			63,824				—				(76	)			23,536				87,284
Excalibur			44,428				—				646				20,183				65,257
Monte Carlo			35,059				—				131				22,214				57,404
Circus Circus Las Vegas			4,040				—				(1	)			18,905				22,944
MGM Grand Detroit			125,235				—				1,415				39,369				166,019
Beau Rivage			30,313				—				58				39,649				70,020
Gold Strike Tunica			15,991				—				36				13,639				29,666
Other resort operations			(86,012	)			—				80,120				4,133				(1,759	)
Wholly owned domestic resorts			672,975				—				87,535				537,606				1,298,116
MGM China			137,440				—				1,120				221,126				359,686
MGM Macau (50%)			115,219				—				—				—				115,219
CityCenter (50%)			(56,291	)			—				—				—				(56,291	)
Other unconsolidated resorts			79,368				—				—				—				79,368
Management and other operations			(13,813	)			(316	)			—				14,416				287
			934,898				(316	)			88,655				773,148				1,796,385
Stock compensation			(36,528	)			—				—				—				(36,528	)
Corporate			3,207,409				—				(3,407,493	)			43,998				(156,086	)
		$	4,105,779			$	(316	)		$	(3,318,838	)		$	817,146			$	1,603,771

 

A-6

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		Year ended December 31, 2010
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	174,355			$	—			$	(17	)		$	96,290			$	270,628
MGM Grand Las Vegas			84,359				—				127				78,607				163,093
Mandalay Bay			29,859				—				2,892				91,634				124,385
The Mirage			36,189				—				(207	)			66,124				102,106
Luxor			18,822				—				257				42,117				61,196
New York-New York			41,845				—				6,880				27,529				76,254
Excalibur			39,534				—				803				22,899				63,236
Monte Carlo			5,020				185				3,923				24,427				33,555
Circus Circus Las Vegas			(5,366	)			—				230				20,741				15,605
MGM Grand Detroit			115,040				—				(327	)			40,460				155,173
Beau Rivage			21,564				—				349				39,374				61,287
Gold Strike Tunica			26,115				—				(540	)			14,278				39,853
Other resort operations			(6,391	)			—				20				5,413				(958	)
Wholly owned domestic resorts			580,945				185				14,390				569,893				1,165,413
Macau (50%)			129,575				—				—				—				129,575
CityCenter (50%)			(253,976	)			3,494				—				—				(250,482	)
Other unconsolidated resorts			84,940				—				—				—				84,940
Management and other operations			(27,084	)			568				—				14,358				(12,158	)
			514,400				4,247				14,390				584,251				1,117,288
Stock compensation			(34,988	)			—				—				—				(34,988	)
Corporate			(1,599,042	)			—				1,439,959				49,172				(109,911	)
		$	(1,119,630	)		$	4,247			$	1,454,349			$	633,423			$	972,389

 

A-7

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		Year ended December 31, 2009
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	157,079			$	—			$	2,326			$	115,267			$	274,672
MGM Grand Las Vegas			123,378				—				30				90,961				214,369
Mandalay Bay			65,841				948				(73	)			93,148				159,864
The Mirage			74,756				—				313				66,049				141,118
Luxor			37,527				(759	)			181				39,218				76,167
Treasure Island (1)			12,730				—				(1	)			—				12,729
New York-New York			45,445				—				1,631				31,479				78,555
Excalibur			47,973				—				(16	)			24,173				72,130
Monte Carlo			16,439				—				(4,740	)			24,895				36,594
Circus Circus Las Vegas			4,015				—				(9	)			23,116				27,122
MGM Grand Detroit			90,183				—				7,336				40,491				138,010
Beau Rivage			16,234				—				157				49,031				65,422
Gold Strike Tunica			29,010				—				(209	)			16,250				45,051
Other resort operations			(4,172	)			—				(57	)			5,988				1,759
Wholly owned domestic resorts			716,438				189				6,869				620,066				1,343,562
Macau (50%)			24,615				—				—				—				24,615
CityCenter (50%)			(260,643	)			52,009				—				—				(208,634	)
Other unconsolidated resorts			96,132				815				—				—				96,947
Management and other operations			7,285				—				2,473				8,564				18,322
			583,827				53,013				9,342				628,630				1,274,812
Stock compensation			(36,571	)			—				—				—				(36,571	)
Corporate			(1,511,132	)			—				1,319,347				60,643				(131,142	)
		$	(963,876	)		$	53,013			$	1,328,689			$	689,273			$	1,107,099

(1) Treasure Island was sold in March 2009.

 

A-8

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		Year ended December 31, 2008
		Operating income (loss)				Preopening and start-up expenses				Property transactions, net				Depreciation and amortization				Adjusted EBITDA
		(in thousands)
Bellagio		$	257,415			$	—			$	1,130			$	133,755			$	392,300
MGM Grand Las Vegas			170,049				443				2,639				97,661				270,792
Mandalay Bay			145,005				11				1,554				101,925				248,495
The Mirage			99,061				242				6,080				62,968				168,351
Luxor			84,948				1,116				2,999				43,110				132,173
Treasure Island (1)			63,454				—				1,828				37,729				103,011
New York-New York			74,276				726				3,627				32,830				111,459
Excalibur			83,953				—				961				25,235				110,149
Monte Carlo			46,788				—				(7,544	)			25,380				64,624
Circus Circus Las Vegas			33,745				—				5				22,401				56,151
MGM Grand Detroit			77,671				135				6,028				53,674				137,508
Beau Rivage			22,797				—				76				48,150				71,023
Gold Strike Tunica			15,093				—				2,326				13,981				31,400
Other resort operations			(5,367	)			—				2,718				6,244				3,595
Wholly owned domestic resorts			1,168,888				2,673				24,427				705,043				1,901,031
Macau (50%)			11,898				—				—				—				11,898
CityCenter (50%)			(36,821	)			17,270				—				—				(19,551	)
Other unconsolidated resorts			101,297				3,011				—				—				104,308
Management and other operations			6,609				—				—				10,285				16,894
			1,251,871				22,954				24,427				715,328				2,014,580
Stock compensation			(36,277	)			—				—				—				(36,277	)
Corporate			(1,411,580	)			105				1,252,705				62,908				(95,862	)
		$	(195,986	)		$	23,059			$	1,277,132			$	778,236			$	1,882,441

(1) Treasure Island was sold in March 2009.

 

A-9

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Annex II

Calculation of MGM historical corporate rent coverage ratio⁽¹⁾

The following table presents the formulation used to calculate MGM’s corporate rent coverage ratio.

 

		Year ended December 31,
		2008				2009				2010				2011				2012				2013				2014				2015
		(unaudited, in thousands)
Adjusted EBITDA related to:
Wholly owned domestic resorts		$	1,901,031			$	1,343,562			$	1,165,413			$	1,298,116			$	1,325,220			$	1,442,686			$	1,518,307			$	1,689,966
Management and other operations			16,894				18,322				(12,158	)			287				9,947				25,777				35,984				37,419
Corporate (excluding stock-based compensation)			(95,862	)			(131,142	)			(109,911	)			(156,086	)			(215,757	)			(200,708	)			(220,664	)			(254,104	)
		$	1,822,063			$	1,230,742			$	1,043,344			$	1,142,317			$	1,119,410			$	1,267,755			$	1,333,627			$	1,473,281
Corporate Rent Coverage Ratio excluding dividends and distributions received by MGM			3.3x				2.2x				1.9x				2.1x				2.0x				2.3x				2.4x				2.7x
Dividends and distributions received by MGM(2):
CityCenter			—				—				—				—				—				—				—				200,000
MGM China			—				—				192,355				30,513				203,886				312,225				389,739				304,159
Grand Victoria			41,125				33,750				33,500				30,000				22,000				16,275				15,450				16,850
Borgata			19,579				60,136				113,422				—				—				—				—				14,094
		$	60,704			$	93,886			$	339,277			$	60,513			$	225,886			$	328,500			$	405,189			$	535,103
		$	1,882,767			$	1,324,628			$	1,382,621			$	1,202,830			$	1,345,296			$	1,596,255			$	1,738,816			$	2,008,384
Corporate Rent Coverage Ratio			3.4x				2.4x				2.5x				2.2x				2.4x				2.9x				3.2x				3.7x

(1) MGM’s Corporate Rent Coverage Ratio is calculated by dividing (a) the sum of Adjusted EBITDA as reported by MGM related to wholly owned domestic resorts, management and other operations, and corporate (excluding stock-based compensation), plus dividends and distributions received by MGM from CityCenter, Borgata, Grand Victoria and MGM China, by (b) year one rent under the Master Lease of $550.0 million.

(2) Represents special and ordinary dividends and other cash distributions actually received by MGM from CityCenter, Borgata, Grand Victoria and MGM China for the periods indicated. Dividends and distributions are made at the discretion of each relevant entity’s board of directors or similar body, and depend on several factors, including financial position, results of operations, cash flows, capital requirements, debt covenants, and applicable law, among others. Accordingly, historical dividends and distributions may not be indicative of future dividends or distributions and should not be relied upon as an indicator of MGM’s corporate rent coverage ratio for future periods.

 

A-10