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MGM Growth Properties LLC (NYSE:MGP)
Q2 2018 Earnings Conference Call
August 7, 2018, 12:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the MGM Growth Properties second quarter 2018 earnings conference call. Joining the call from the company today are James Stewart, Chief Executive Officer, and Andy Chien, Chief Financial Officer. Participants are in listen-only mode. After the company's remarks, there will be a question and answer session. Please note this event is being recorded.

Now, I would like to turn the conference over to Mr. Andy Chien.

Andy H. Chien -- Chief Financial Officer

Thank you, Denise. Good morning and welcome to the MGM Growth Properties second quarter 2018 earnings call. This call is being broadcast live on the internet at mgmgrowthproperties.com and we have furnished our press release on Form 8-K to the SEC this morning. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from these forward-looking statements as contained in today's press release and in our periodic filings with the SEC. During the call, we will also discuss non-GAAP financial measures talking about a performance. We can find a reconciliation in GAAP financial measures in the press release which is also available on our website. Finally, please note that this presentation is being recorded.

I will now turn it over to James.

James C. Stewart -- Chief Executive Officer

Thank you, Andy. I'd like to welcome everyone to MGP's second quarter 2018 conference call. MGP has continued to build upon the momentum we had at the beginning of the year by executing on a long-term growth strategy. In this quarter alone, we have announced over $1.7 billion in acquisition, the highest quarterly or annual deal volume in our company's history. This represents the highest net acquisition figures among all net lease REITs.

On April 5th, we announced our agreement to acquire the Hard Rock Rocksino Northfield Park for approximately $1.06 billion. On July 6th, almost three months to the day after the announcement, we completed the transaction, closing into a taxable REIT subsidiary.

Simultaneous with the closing, we entered into a new agreement with Hard Rock to continue to serve as the manager of the property. We have received many inquiries from a number of high-quality potential operators about a partnership there. We are prudently evaluating the best long-term triple net lease structure for our shareholders for this beautiful property. In the meantime, we are very comfortable holding the property in TRS.

On May 29th, we announced the acquisition of the real estate of Empire City Casino in Yonkers, New York. This acquisition in partnership with MGM Resorts International further diversifies MGP's regional portfolio and will add $50 million of initial rental revenue, which negotiated based partially on potential synergies MGM expects to achieve.

The 97-acre Empire City Casino site sits only 15 miles from Times Square in the high-density New York City area. This financially attractive transaction is a great example of the power of our partnership with MGM Resorts to accretively acquire valuable real estate assets and deliver value for our shareholders.

Equally as important, MGP has negotiated a ROFO, right of first offer, with respect to undeveloped land adjacent to the property to the extent MGM Resorts develops additional facility which provides for additional future built-in growth opportunities for us. These acquisitions further geographically diversify our portfolio. The Las Vegas regional split now stands at approximately 50-50 versus a 70% contribution from Las Vegas at the date of our IPO.

Further demonstrating the strength of our company's position, the latest 12-month property EBITDA for our portfolio of assets today versus the date of our IPO has improved by approximately 8%. This figure includes Park MGM, formerly known as the Monte Carlo, which is currently undergoing a major $550 million renovation at this time and experiencing the disruption that comes with such a project.

If we exclude the impact of Park MGM, the LTM property EBITDA has improved by approximately 16% since our IPO. While MGP does not participate in the improvement in performance dollar-for-dollar, of course, being a triple net REIT, this improvement in results demonstrates the resiliency and growth of the underlying property performance. The continued financial performance of these properties only further strengthens the security and stability of our rent, an aspect that should not be overlooked by investors.

In addition to this activity, MGM increased its dividend for the fourth time since going public in April of 2016. This increase to $1.72 per share represents a 2.4 increase over the prior annual rate and a 20.3% overall increase from our initial annual rate of $1.43. We are looking forward to the second half of 2018 as we continue to actively pursue the opportunities in our pipeline that fit our acquisition criteria.

I will now turn it over to Andy to discuss our financial results.

Andy H. Chien -- Chief Financial Officer

Thank you, James. I'll provide highlights for a few items in our financial results. For the second quarter of 2018, we recognized $186.6 million of rental revenue on a GAAP basis or $192.6 million on a cash basis. G&A expenses were $2.8 million and acquisition-related expenses were $2.1 million for the quarter. Net income was $48.1 million for the quarter. Adjusted EBITDA was $190.4 million and AFFO was $145.6 million or $0.55 on a per unit basis for the quarter.

Our second quarter dividend increased to $0.43 per share, which represents $1.72 on an annualized basis. Our quarter end net leverage was approximately 4.8 times prior to the close of the Hard Rock Rocksino acquisition.

In June, we successfully completed an increase in extension of our Term Loan A and Revolver by amending our credit facilities. The revolving credit facility now provides an addition $750 million of capacity and now has an aggregate capacity of $1.35 billion. The maturity of our existing $270 million Term Loan A, the Revolver, and the new $200 million delayed draw Term Loan A are all now 2023.

Additionally, the Revolver and Term Loan A facilities were repriced to provide pricing step-downs based on a leverage grid that will save us 75 basis points on drawn amounts in the coming quarters. We appreciate the support of our lenders to provide this financial flexibility to fund our strategic growth through accretive real estate acquisitions.

For the Empire City Casino acquisition, we intend to finance a $625 million purchase price with the issuance of OP units and debt with a likely Q1 2019 close. Subsequent to this quarter on July 6th, as James mentioned, we close on the Hard Rock Rocksino. We funded the acquisition of Rocksino with a $200 million delayed draw Term Loan A, a $655 million borrowing under the revolving credit facility and the remainder of the purchase price paid with cash on hand.

Our net leverage is expected to be approximately 5.5 times on a pro forma basis. Given our plans for a long-term triple net lease structure, we will not be publishing guidance for the operations of the Hard Rock Rocksino at this time.

In addition to our acquisition activity during the quarter, our second annual 2% rent escalator went into effect in April. The $13.6 million increase to rental revenue is a great example of MGP's embedded contractual growth that raises AFFO and complements our acquisition strategy to achieve our goal of growing our dividends to our shareholders.

We will continue to work hard to keep our strong financial profile and improve our balance sheet to be able to add high-quality real estate assets to our portfolio, our diversified regional and Las Vegas strip properties.

With that, I'd like to turn it back over to James.

James C. Stewart -- Chief Executive Officer

Thank you, Andy. I want to thank all of our investors for their continued support and would open it up now for questions.

Questions and Answers:

Operator

Thank you, Mr. Stewart. We will now begin the question and answer session. To ask a question, you may press * then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed, you may withdraw from the queue by pressing * then 2.

Your first question will be from Robin Farley of UBS. Please go ahead.

Arpine Kocharyan -- UBS -- Analyst

Hi, thank you. This is actually Arpine for Robin. Thanks for taking my question. Could you talk about Rocksino's potential sale of operation and timing of it? You had said that you received strong interest for the operations of that asset. If you could, just update us on the timing. And then in terms of transaction activity, it seems like all indications are that there is higher volume of activity, but in your view, are these discussions or more imminent transaction that could come to fruition for the back half?

James C. Stewart -- Chief Executive Officer

Sure. So, regarding question one, we only closed this acquisition on July 6th, three months after announcement. We currently have the Hard Rock acting as our manager. Now, it isn't in the structure that we ultimately will have. So, we are going to turn that situation into a, say, roughly $50 million to $60 million rent stream to us with an expected coverage just on a four-wall basis of about 1.8x.

We have received many incomings from very highly qualified and well-respected potential partners who want to be part of that. We are taking our time. We're acting prudently. We want to do the best thing for our company, for the property, for our shareholders. I don't want to give any sharp indication on timing just because when you want to get the best deal that you can, you want to make sure that you take your time and proceed down the path thoughtfully, but I think it's very safe to say it's one of our key objectives is to shift the way that property is held now to be more consistent with the rest of our portfolio.

And then on question two about activity, it has been a very, very busy time. I challenge someone to find someone in the triple net REIT space who's cranking out $1.7 billion of acquisitions in a single quarter all accretive and it does not seem to show any sign of abating. Whether or not the transactions go from discussion to actionable and closable is impossible to predict, but it's a very busy time. There's a lot of activity.

Arpine Kocharyan -- UBS -- Analyst

Thank you. Just one quick one, if I could -- do you have a view on Vegas outlook and the underlying strength or weakness in that market? I know that quarterly performance of the operator there does not impact you as much, but over a 12 to 24-month basis it does. Do you have a Vegas outlook that you could share? Thank you.

James C. Stewart -- Chief Executive Officer

We do. I would say we have a 30-year lease. So, whether one quarter has a little bit up or one quarter is a little bit down -- I've used this example before -- if RevPAR is up 2 points or down 2 points, I think that there is a tendency for people to miss the forest for the trees. Just since IPO, which was a great time for Las Vegas, if you normalize the properties in our portfolio, we're up 16% in the underlying performance of those properties.

Living here in Las Vegas and just walking through these buildings all the time, we are bulls as it relates to Las Vegas. Again, if you look at this over the long-term, this city is a juggernaut of future potential visitation with all of the things there are to do here already and it's only getting additional things being brought to the city that will drive visitation, that will help our tenants and everybody else in the city.

So, I guess I look much, much longer-term. We have to think about things over a 30-year lease, not what's happening in any one particular quarter.

Andy H. Chien -- Chief Financial Officer

The other thing I would add to that is if you look at our rent coverage relative to any other net lease company out there, we're at the high threes as of 2017 full-year. There's not a comp out there that is in that area that has full master lease from a credit worthy tenant that's public. So, just a comparison to any other company out there, the safety and stability of our rent is one of the best in the industry.

Arpine Kocharyan -- UBS -- Analyst

Thank you very much.

Operator

The next question will be from Rich Hightower of Evercore ISI. Please go ahead.

Rich Hightower -- Evercore ISI -- Managing Director

Hey, good morning out there, guys.

James C. Stewart -- Chief Executive Officer

Hi, Rich.

Rich Hightower -- Evercore ISI -- Managing Director

I guess that just mean you'd have to recut the rent if you could, right?

James C. Stewart -- Chief Executive Officer

Well, you know...

Rich Hightower -- Evercore ISI -- Managing Director

Re-cut the contract, I mean.

James C. Stewart -- Chief Executive Officer

Yeah. We're always looking for ways to grow, grow things for our shareholders. I don't know how well that one would go over.

Rich Hightower -- Evercore ISI -- Managing Director

I get it. Okay. So, a couple questions here. So, on MGM's call the other day, they made pretty strong reference to the idea that their ownership would be below 50% in the next three years. You obviously made some comments just now on the acquisition environment. How likely do you think that prospect is, especially given the fact that ownership, I believe, is going to go up pro forma for Empire City?

James C. Stewart -- Chief Executive Officer

I will comment, but it's probably a question better directed to them. My own sense is they say what they mean generally. I think it's pretty likely. One of the things I would say is another thing they were very clear about on that call, which I think is not going to be any secret to any investor in our stock is that they have an increasing desire or strong desire to go further down the path of asset light.

So, what that means is that the assets that are wholly owned will ultimately find their way into the REIT as the natural owner of the real estate to the extent they sell those assets for cash, i.e. we're doing offerings or whatever to fund those, that will, believe me, drive down the ownership number.

I think MGM does have a goal to reduce its ownership to below 50 within three years. The most likely, the most attractive way this happens is for us to grow through acquisitions of third-party operators and through MGM selling assets to us for cash. I think just to make sure the least likely and least attractive option for MGM is to sell their OP units.

Rich Hightower -- Evercore ISI -- Managing Director

Right. They did make reference to the tax consequences, maybe not driving the equation there, but there are obviously tax consequences if they sell for cash, correct? That would limit some of the flexibility here.

James C. Stewart -- Chief Executive Officer

Yeah.

Rich Hightower -- Evercore ISI -- Managing Director

Okay. Then a quick housekeeping item -- at least as far as you can tell, pro forma for Empire City, what would their ownership go up to?

Andy H. Chien -- Chief Financial Officer

It's going to be in the zone in the 70s, Rich. It doesn't really change too dramatically there.

James C. Stewart -- Chief Executive Officer

That's about the same.

Rich Hightower -- Evercore ISI -- Managing Director

Got it. Thank you, guys.

James C. Stewart -- Chief Executive Officer

Thanks, Rich.

Operator

The next question will be from Thomas Allen of Morgan Stanley. Please go ahead.

Thomas Allen -- Morgan Stanley -- Executive Director

Hey, how's it going? Just on the Empire City deal, I know you announced this originally, but the rent estimate is 2% until 2022. I believe that lines up with your MGM leases in general, but is there -- as you think about getting into new leases, how are you thinking about the length of those contracts?

Andy H. Chien -- Chief Financial Officer

In terms of new leases, we would have those negotiations with future tenants, same way we have it with MGM. We want these to be long-term leases. There's an accounting aspect that drives initial terms and renewals. Those would be a negotiation between ourselves and them. We want them to be 30-year leases.

The longer we can get them, the better from an initial standpoint as well. With the 2022, that's not the end of the lease, that's just when the reset for the variable starts and the tests on the fixed start. So, where we structure future leases doesn't really have too much bearing on the 2022 timeframe.

Thomas Allen -- Morgan Stanley -- Executive Director

Okay. I guess that leads to my other question. As I think about your negotiations around the Rocksino deal, are you looking for -- what's the biggest priority? Is it price? Is it terms of the contract? Is it escalators? How are you thinking about it?

James C. Stewart -- Chief Executive Officer

Each one of those things is a value component in our mind, right? In terms of tenant diversification, for us, to the extent that we can somehow either -- there's really, when you come down to it, two goals that we have, ultimately. One is to grow accretively. The other is to maintain or enhance the security of our rent stream and thus dividend stream.

So, any one of the points that you mentioned along with probably 100 others could impact one of those two things. Which one is more important? What you have to do is put it all into a holistic mix and take a look at that outcome and see which one is the most attractive. Those are the two things we drive for, to either enhance or maintain our very high level of rent stability or give us future growth.

So, to the extent that someone wants a tweak to the lease that's a little different from the master lease, would we consider that? Sure. But that comes down ultimately to value, which is, of course, not just price, but all of those things mixed together. Which one is more important? Impossible to say. It really comes down to each agreement is a carefully balanced agreement. There are gives and takes for all of them.

Andy H. Chien -- Chief Financial Officer

As far as the tenant diversification, that's another one of those factors as far as what is the credit quality of that tenant and the fact that it's a different tenant or if it's MGM, that's not the issue. The issue is the credit quality of the tenant.

James C. Stewart -- Chief Executive Officer

Right.

Thomas Allen -- Morgan Stanley -- Executive Director

What kind of multiples are you getting offered for the operating contract?

James C. Stewart -- Chief Executive Officer

We're not going to discuss that, Thomas.

Thomas Allen -- Morgan Stanley -- Executive Director

I thought it was worth a shot. Okay. Thank you.

Operator

The next question will be from Shaun Kelley of Bank of America. Please go ahead.

Shaun Kelley -- Bank of America Merrill Lynch -- Managing Director

Hey, guys. Good morning out there. James, maybe to stick with the whole MGM dropping below 50% discussion point, I think you were pretty clear on the prioritization or pecking order of paths to do so. Could you just remind us -- are there any specific barriers or timeline issues around specifically dropping down some of the MGM assets that were not originally included in the REIT structure? Obviously, I'm speaking primarily about Bellagio and MGM Grand since that's where the bulk of the cashflows are.

James C. Stewart -- Chief Executive Officer

Other than you have to negotiate the terms, obviously, which is probably the biggest "barrier." There are no barriers that I see to do it. The number one thing that we have to manage is making sure that we're very thoughtful for our own shareholders around the securities pricing environment to make sure that we don't end up overwhelming the market with too big an offering, etc. But no, I don't think there are.

Shaun Kelley -- Bank of America Merrill Lynch -- Managing Director

Okay. If we were thinking about the tax consequences, specifically, that sounds like it would be much more onerous during the direct OP unit sale than it would be by doing some sort of drop down here. Is that a fair characterization?

James C. Stewart -- Chief Executive Officer

That's really a question for Dan and the team at MGM.

Shaun Kelley -- Bank of America Merrill Lynch -- Managing Director

Okay. Got it. Last thing I have but this is sort of along the same lines would be have you guys ever looked at or thought about the idea of actually going the opposite direction and possibly trying to have MGM increase the stake? I believe there's sort of a rule around you can look at a full tax-free spinoff if you were above 80% ownership, but have you guys looked at those rules and what the characterization of that might look like?

James C. Stewart -- Chief Executive Officer

Not to sound like I'm trying to deflect anything, but again, that's a pure MGM question.

Shaun Kelley -- Bank of America Merrill Lynch -- Managing Director

Okay. I figured I'd go down that road. I think we got bogged down on some other discussion points on MGM at the time of the conversation. One last thing -- you mentioned the very significant growth and I think implied coverage given the organic growth rate that happened at MGM. Could you just remind us of -- you don't have anything like right now on the rent reset features -- is there anything down the road on a rent reset that could be beneficial to you given the significant improvement in cashflows underlying what's going on with MGP?

Andy H. Chien -- Chief Financial Officer

Shaun, that will be based on the 2022 -- in 2022, we'll look back five years, look at the average revenue, multiply that by 1.4% and that will be the reset for the variable component of our rent. As a reminder, that's 10% of our rent. Thereafter, it's another five years that we'll wait to recalculate that portion of the rent. So, we're really only two years into that five-year average that we're going to calculate. So, I don't know that we can really draw a trend line off of that just yet.

James C. Stewart -- Chief Executive Officer

There are a lot of things that I see coming up potentially that could increase our rent aside from obviously some of the big deals that we're doing. Springfield opens up in a couple of weeks on which we have a right of first offer. We've negotiated the right of first offer on all the improvements on Yonkers, which sits only 15 miles away from you right now. There are all the improvements going on in Las Vegas, including the one that we mentioned, the $500 million renovation at Park MGM, etc.

So, there are a lot of different pathways for us to continue to grow alongside the deal pathway.

Shaun Kelley -- Bank of America Merrill Lynch -- Managing Director

Great. Thank you very much, guys.

James C. Stewart -- Chief Executive Officer

Thanks, Shaun.

Operator

As a reminder, if you would like to ask a question, please press * then 1. Your next question will be from Carlos Santarelli of Deutsche Bank. Please go ahead.

Carlos Santarelli -- Deutsche Bank -- Analyst

Hey, guys. Thanks. Just a quick one to start -- the 5.5 times pro forma leverage that was noted, is that number just strictly pro forma for the transaction or is that where you expect to exit 3Q?

Andy H. Chien -- Chief Financial Officer

That's strictly pro forma for the transaction as we stand today.

Carlos Santarelli -- Deutsche Bank -- Analyst

Got it. Just in terms of the Hard Rock deal -- pardon me if this was in some of the documentation and I might have missed it -- but was there a stipulation that regardless of finding an operator you had to close at a specific date?

James C. Stewart -- Chief Executive Officer

We intended to close as quickly as we could. We were more than comfortable with the existing situation with the operator. This was all part of the plan.

Carlos Santarelli -- Deutsche Bank -- Analyst

Okay. Understood. Thank you.

James C. Stewart -- Chief Executive Officer

Sure.

Operator

The next question will be from John DeCree of Union Gaming. Please go ahead.

John DeCree -- Union Gaming -- Analyst

Hey, James, Andy.

James C. Stewart -- Chief Executive Officer

Hey, John.

John DeCree -- Union Gaming -- Analyst

My question is on something you had just brought up in the prior question, James, about the redevelopment of Monte Carlo to the Park MGM and that $500+ million reinvestment that could be growth potential for you. I was wondering if you could talk a little bit how that could or would look for you in terms of folding that into the master lease and if there was kind of a wait and see to how it ramps. How should we think about what that opportunity might look like after it opens and ramps a little in terms of folding it into the lease?

James C. Stewart -- Chief Executive Officer

Well, that or any of the improvements that are done to properties that drive EBITDA above and beyond where they were at the initial rent setting time you could do just as a -- I'll just do a straw man with rough examples versus any one specific example. But say there was a project -- I'll use round numbers -- $100.00 or $100 million or whatever number you want to put at the end, and it makes $20 million. To the extent that we purchased half of that additional $20 million as a rent stream, that would be $10 million rent stream in for us.

If we bought that -- I'll throw out a price we could never get -- but a 10-cap, that would be a check coming from us for $100 million. That would be the operator -- in that case, our existing operator, MGM -- would get a check for all of the money they put in and still have $10 million of income above and beyond that rent number. Of course, I'm just throwing out round numbers for easier math, but that's the kind of thing that I think of when I look at some of these improvements and how it can be a joint win for both companies.

John DeCree -- Union Gaming -- Analyst

Got it. That's helpful as a scenario. I wanted to circle back to some of the discussions about MGM and the potential of at some point selling or monetizing some of their owned assets like the Bellagio and MGM Grand.

If you could talk a little bit about how you would balance -- I think one of the pillars of valuation for you has been strong rent coverage and some of that coming from those owned properties as well as some of the JVs and Macau at the MGM level, but would there be a scenario -- would you be interested, I guess, at a high-level in those remaining assets or would you need to think about balancing your expected rent coverage over time to the extent you could talk about that a little bit?

James C. Stewart -- Chief Executive Officer

It gets back to the growth versus security of rent stream discussion. We're lucky we're sitting with a great hand on both fronts. I guess all I would say is we always have in mind wanting to be an incredibly safe stock for anyone looking for great stability and predictability of earnings streams and that would have to go into the mix of figuring out exactly how one gets these deals done, along with the meaningful enhancements that would come from bringing reasonably large transactions into the fold.

So, it isn't lost on us that we need to balance these two things, of course. I think under any scenario, we would always want to be very, very strong versus any other triple net on the security of rent stream front.

Andy H. Chien -- Chief Financial Officer

The only thing I'd add to that, John, you mentioned it, Macau -- we're focused on domestic and that's one of the benefits of a tenant like MGM Resorts is they have international operations that we likely would not get involved in in terms of the real estate and that would add to the coverage that some of the other operators that are domestic only wouldn't have that additional coverage and credit support.

John DeCree -- Union Gaming -- Analyst

That's helpful color. I appreciate the hypothetical question there, but it's helpful to hear how you guys think about it. Thank you.

Operator

And the next question will be from John Massocca of Ladenburg Thalmann. Please go ahead.

John Massocca -- Ladenburg Thalmann -- Analyst

Good afternoon. Does having Northfield in a TRS limit you from doing a similar-type transaction where you don't have a tenant in place already when looking to buy an asset?

Andy H. Chien -- Chief Financial Officer

Hey, John. It's Andy. So, in terms of the TRS, there is a certain level that we can go up to potentially as far as how much we can have in the TRS. We still have a pretty significant cushion on that front. Do we plan to do every deal in that structure? Probably not. This was unique. This was a very attractive asset that we were very comfortable with and it had a very specific timeframe that we wanted to transact. That's how we ultimately structured this one. We're happy doing so.

Now, other transactions going forward, we'll evaluate the structure, but obviously, the long-term plan is to have the pure triple net lease structure. So, that's how we'll kind of look at each deal and whether or not it is appropriate.

John Massocca -- Ladenburg Thalmann -- Analyst

That sounds like strategically and legally another Northfield size and type transaction could essentially be done initially in a TRS.

Andy H. Chien -- Chief Financial Officer

Yes, from that standpoint.

John Massocca -- Ladenburg Thalmann -- Analyst

And then given the current position of the portfolio, where do you ultimately want to see your geographic mix with regards to regional versus Las Vegas? Empire is probably going to move you over 50% regional. Is that even something you guys care about given the nature and length of your leases?

James C. Stewart -- Chief Executive Officer

Yeah. I will tell you it is not a primary focus of ours at all. Any potential transaction that we look to underwrite, we really focus on the individual characteristics of that property and the market. We like to back-test it through the hard times we had starting ten years ago and beyond that, if we can, and then run all sorts of different scenarios thinking up what could happen if multiple different events occurred with us owning that property, the real estate of that property.

To the extent that we are very comfortable, that the property as a whole is going to be able to pay the rent through thick and thin without any of us around here missing a single wink of sleep, then that's something we want to transact on. If that's something in Las Vegas, fantastic. If it's something in a regional market, fantastic. It isn't really a fundamental driving goal to get to any kind of split and where we sit right now at 50-50 by absolutely a country mile the best assets in every region and the best assets in Las Vegas, we're very, very pleased with where we sit.

John Massocca -- Ladenburg Thalmann -- Analyst

Makes sense. That's it for me. Thank you guys very much.

James C. Stewart -- Chief Executive Officer

Thanks.

Operator

Once again, if you would like to ask a question, please press * then 1. We'll pause just a moment to gather any additional questions. In showing no additional questions, we will -- oh, we do have a question, one moment. This will be from Komal Patel of Goldman Sachs. Please go ahead.

Komal Patel -- Goldman Sachs -- Analyst

Hi, thanks for the question. I guess this is a bit similar to the rent coverage question earlier, but I wanted to ask you about your target leverage range. Over the long-term, does not having MGM as a majority owner in the future affect how you think about leverage? In other words, how do you balance the value of MGM's ownership and support versus benefits and diversification away from the concentrated tenants? Would you update leverage target potentially with these changes?

Andy H. Chien -- Chief Financial Officer

Hey, Komal. This is Andy Chien. As far as leverage, we always target 5.0 to 5.5 times debt to EBITDA. That target wouldn't change whether or not MGM Resorts has an OP unit ownership or not. Having their ownership, I think, is a benefit more from a growth standpoint as well as an alignment of interest standpoint and doesn't have much bearing on where we target our balance sheet.

Komal Patel -- Goldman Sachs -- Analyst

Okay. Fair enough. Then just a quick follow-up -- on Rocksino, can you share what the split was between cash and revolver for the funding of the deal?

Andy H. Chien -- Chief Financial Officer

The revolver is $655 million, delayed draw term loan was $200 million and the balance was in cash.

Komal Patel -- Goldman Sachs -- Analyst

Got it. Okay. Thanks so much.

Operator

And ladies and gentlemen, this will conclude our question and answer session. I would like to hand the conference back over to James Stewart for his closing remarks.

James C. Stewart -- Chief Executive Officer

I'd just like to thank everybody for your continued support and look forward to speaking soon.

Operator

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Duration: 37 minutes

Call participants:

James C. Stewart -- Chief Executive Officer

Andy H. Chien -- Chief Financial Officer

Arpine Kocharyan -- UBS -- Analyst

Rich Hightower -- Evercore ISI -- Managing Director

Thomas Allen -- Morgan Stanley -- Executive Director

Shaun Kelley -- Bank of America Merrill Lynch -- Managing Director

Carlos Santarelli -- Deutsche Bank -- Analyst

John DeCree -- Union Gaming -- Analyst

John Massocca -- Ladenburg Thalmann -- Analyst

Komal Patel -- Goldman Sachs -- Analyst

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