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MGM Growth Properties LLC (NYSE:MGP)
Q2 2019 Earnings Call
Aug 6, 2019, 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 2019 Earnings Call. Joining the call from the Company today are James Stewart, Chief Executive Officer; and Andy Chien, Chief Financial Officer. [Operator Instructions]

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

Andy H. Chien -- Chief Financial Officer

Thank you. Good morning and welcome to the MGM Growth Properties Second Quarter 2019 Earnings Call. This call is being broadcast live on the Internet at mgmgrowthproperties.com. 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 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 materially differ from these forward-looking statements is 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 in talking about our performance. You can find the reconciliation to 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 2019 conference call. This quarter, we continue to progress on executing our long-term business strategy. As we said in the past, we are focused on creating a stable and growing income stream that we can enhance through disciplined acquisitions of quality assets. Our priority is to sustainably grow our dividend and create long-term value for our shareholders. We actively monitor the M&A market to identify assets that meet our criteria and we are committed to being thoughtful with our allocation of resources and capital. We continue to explore opportunities both within and outside of the gaming sector.

With that in mind, here are some highlights for the second quarter. On April 1, 2019, we completed the sale of the operating assets of Northfield Park, the market leading asset and the most successful gaming property in the entire state of Ohio. Through this transaction, we added Northfield to our master lease, which increased our rental revenues by $60 million. MGM Northfield Park continues to lead the Ohio market in terms of gross gaming revenues, and we look forward to seeing what the property can do with MGM as its operator. MGM funded this acquisition of the operations with approximately $300 million in operating partnership unit that we redeemed, a structure that was not only accretive to shareholders, didn't [Phonetic] meaningfully impact our leverage, allowing us to preserve the strength of our balance sheet for future transaction.

I want to take a moment to highlight the embedded growth in our existing master lease structure. On April 1, 2019, our third consecutive annual rent escalator went into effect, which increased rent by $16 million. This escalator together with the Northfield transaction grew our annualized rent to $946 million, a 72% increase from our IPO. These fixed rent increases provide us with organic AFFO growth of about 2.5% annually. We are very pleased with the solid performance of our properties as discussed during MGM's recent earnings call. Every property in our regional portfolio, which comprises over half of our underlying properties EBITDA, continues to lead in their respective market. This is a testament to the superior quality of our real estate. On a same store basis, our regional portfolio posted 4% year-over-year EBITDA growth highlighted by MGM Detroit best second quarter revenue figures ever posted. And the second highest quarter-two EBITDA ever posted in its history. At our Mississippi properties, MGM also reported an excellent quarter, with adjusted property EBITDA up 24%. MGM National Harbor achieved its best ever quarterly slot market share in the Borgata remains the leading asset in Atlantic City.

Our tenant, MGM Resorts, had significant operational and financial strength and continues to have one of the best credit profiles. Our rent is protected by our MGM parent guarantee and the substantial cash flows from Las Vegas, regional, Macau properties and diversified revenue stream. We remain excited and encouraged by the performance in the inherent value, both in our own properties and at integrated resorts generally.

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

Andy H. Chien -- Chief Financial Officer

Thanks, James. I will now provide some highlights for few items in our second quarter financial result. We recognized $219.8 million of rental revenue on a GAAP basis or $236.5 million on cash basis. Net income was $67.8 million. AFFO was $172.8 million or $0.59 per share. Adjusted EBITDA was $233.3 million. G&A expenses for the quarter were $3.7 million.

In the quarter, as James mentioned, we completed the sale of the operations Northfield Park to MGM Resorts for a fair value consideration of approximately $303 million, reflecting a net purchase price of the real estate of approximately $766 million. This net purchase price plus the adjusted EBITDA from the TRS provides a [Phonetic] real estate multiple of 11.6 times. For the second quarter, our dividend increased to $0.4675 per share, which represents a $1.87 on annualized basis and is the eighth dividend increase since our IPO.

On balance sheet front, our net leverage for the quarter is 5.2 times. This along with our undrawn revolving credit facility at quarter end provides us with significant capacity to execute on any future transaction.

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

James C. Stewart -- Chief Executive Officer

Thank you, Andy. We'd like to thank all of our investors for their continued support and would now, operator, like to open it up for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question today comes from Joseph Greff with JP Morgan. Please go ahead.

Daniel Politzer -- JP Morgan -- Analyst

Hey, everyone. This is actually Daniel Politzer on for Joe. Thanks for taking my questions. So the first one is on Las Vegas Strip assets; obviously, you have a lot of exposure there and experience buying assets on the Strip. To what extent do you have an appetite to acquire Las Vegas Strip real estate maybe outside of MGM's current footprint?

James C. Stewart -- Chief Executive Officer

Hey, Dan. It's James. We feel like we know and have the deepest knowledge base in terms of relative performance of each of the individual assets on the Las Vegas Strip. And certainly, we started off with about 73% of our the underlying EBITDA from our properties being generated by the Strip, it's now less than half due to the regional acquisitions that we've done. But we are bullish [Phonetic] on the Las Vegas and would certainly want to take a look at each and every asset on the Strip that came up. That said, there is a very wide dispersion of relative quality, durability and earnings power from each of those. So like any acquisition that we would look at, we would want to take a very careful look at just that deal in and of itself and make sure that the property matched our high-quality focus, had the ability to pay the rent for 30 years without keeping anybody up at night and that would really be the lens under which we look at it.

Daniel Politzer -- JP Morgan -- Analyst

Thanks. Understood and that's helpful. And if I could just one follow-up related to that. In terms of Strip M&A and the activity there, have you seen any increased interest in competition for the assets? And have you seen any newer buyers come into the space, private equity or native investors or possibly Asian suppliers?

James C. Stewart -- Chief Executive Officer

I would say our own sense of things is, it isn't like the set of buyers for any one asset is always disclosed in its entirety. There really hasn't been a major change in terms of players looking. There may be, I think maybe slightly elevated interest or elevated interest mainly around sort of the operator side of the business in certain asset, but it hasn't -- I wouldn't say there has been a meaningful sea change in terms of the players there, maybe a little elevated.

Daniel Politzer -- JP Morgan -- Analyst

All right, great, thanks. That's it from me.

James C. Stewart -- Chief Executive Officer

Thank you, Dan.

Operator

The next question comes from Rich Hightower with Evercore ISI. Please go ahead.

Rich Hightower -- Evercore ISI -- Analyst

Good morning out there, guys.

James C. Stewart -- Chief Executive Officer

Hi, Rich.

Andy H. Chien -- Chief Financial Officer

Hi, Rich.

Rich Hightower -- Evercore ISI -- Analyst

So, James and Andy, just looking at my screen and obviously noticing the drawdown in equity values recently and understanding that as a REIT, naturally you're dependent on the capital markets for growth. I'm just wondering -- first of all, how willing would you be to flex on the leverage side at the margin to get that incremental deal done if need be? And then maybe separately from that, just I'm sure there is a natural symbiosis between the volume of deals in the pipeline and then where equity values are at any given time, and have you seen any degradation in the pipeline because of kind of where things are on that front? Does it move in tandems, is there a bit of a lag? How do you kind of see that playing out?

Andy H. Chien -- Chief Financial Officer

Hey, Rich, this is Andy. I'll just take first one, maybe I'll turn it over to James for the second. In terms of the balance sheet, as I mentioned in the prepared remarks that we're in a pretty good position in terms of our leverage as well as our debt capacity from revolver and cash availability standpoint. We definitely have the flexibility from an equity standpoint with an ATM that we now have, as well as smaller equity offerings -- I know you alluded to the price, but we do have the flexibility to close on a sizable transaction given where we are today from a leverage and revolver capacity standpoint. And look, the debt market still remained pretty attractive and that unsecured -- our longest dated unsecured notes are still trading very well. So debt [Phonetic] market, it's really deep as well.

James C. Stewart -- Chief Executive Officer

Yes, in terms of pricing as it relates to our own securities pricing, the increased volatility compared to I think where we were at least a few years ago in the equity market broadly speaking seems to be here to stay at least for a while and the pricing of asset lags that a little bit. I would say, people can watch their stock prices themselves on a second to second basis on their phones, so wherever they are and that there is a little bit of a lag time if you have sharp movements in the stock price that people they will may be anchor in a prior price for a period of time, but these are sophisticated, extremely knowledgeable buyers and sellers on that -- look at these assets and looking to sell these assets. So very realistic as well, understanding that for our side of the equation, the funding cost of a transaction, but it's heavily into what we can pay.

Rich Hightower -- Evercore ISI -- Analyst

Okay. That all make sense. And then maybe just a quick one. I'm wondering where -- I know that the dividend payout policy has been pretty consistent since the IPO, but where is MGP in terms of its payout relative to taxable income, which is really kind of the rule that matters in the end? And is there any flex maybe from a longer-term perspective to the possibly free up incremental cash that way? I know it's not a large amount of money at the margin, but maybe over the longer term it might be something to think about again to sort of reduce dependency on the equity markets where you can, what's the thought behind that, if any?

Andy H. Chien -- Chief Financial Officer

Rich on the payout relative taxable income, we are well through the REIT requirement on that front. As far as our flexibility on payout going forward, and I think we're right at or maybe slightly at the low end in terms of the AFFO payout ratio. And there is certainly, that's something that we certainly look at and discuss with our Board on a quarterly basis when our dividend declarations come up. And we kind of like -- we like where we are, we are under 80% payout currently and definitely have flexibility on that front to evaluate different levels.

Rich Hightower -- Evercore ISI -- Analyst

Got it. Thank you, Andy.

Operator

Your next question comes from Daniel Adam with Nomura Instinet. Please go ahead.

Daniel Adam -- Nomura Instinet -- Analyst

Hi, guys, thanks for taking my question. So first, on a question that was asked earlier regarding Las Vegas Strip transaction or potential transaction. James, I'm surprised that you would look at the individual asset level as opposed to being part of a master lease. To the extent there were in asset sale and you guys were involved and it were part of either a master lease and there were corporate guarantee, would your thoughts around to the property level performance change at all?

James C. Stewart -- Chief Executive Officer

Yeah, it's very dependent on a couple of things. One is the individual asset, its earnings power, its staying power, fit and finish, quality, customer base, all of those types of things. Then, you look at the actual lease itself. I think one of the most underappreciated things among investors that is one of our great strengths is the strength of our master lease. The fact that we have all of our properties cross-collateralized and each one has to make up for any EBITDA underperformance if any one property and that the rent is just one payments that you have to either take all the assets where we get all the asset is incredibly powerful. So it permits us when we look at an asset that will come into the master lease at much greater degree of flexibility to handle ups and downs and so on of that individual property. So that's a lease characteristic. The extent that a lease comes in that's an individual property, I think, it would take [Phonetic] a lot of sense that you would need a lot more cushion in terms of rent coverage and other protections that you would need to make sure that asset can pay the rent. So there is the property sort of that you would look at on in one dimension, then the next thing would be all of the other sort of contractual or lease-oriented protection that you would get to also make sure that you're rent gets paid every single quarter, year-in year-out for 30 years absolutely.

Daniel Adam -- Nomura Instinet -- Analyst

Okay, great. And then on its earnings call MGM briefly mentioned the opportunity to develop Empire City into a broad-based resort. I'm wondering what your role or what you would expect MGP's role would be if there were of REIT [Phonetic] development there, especially given your ROFO on the undeveloped land there?

James C. Stewart -- Chief Executive Officer

Sure, so I think that's why going to prove out to be an ingenious acquisition by them and a massive opportunity to [Indecipherable]. For any of you in New York, go on Google Maps and check the distance from wherever you are to Empire City. The last time I was there like one of the afternoon sitting in the Palace Hotel in midtown at a conference they checked, it was 30 minutes. So 100 acres, 30 minutes from Midtown, New York, that is incredibly valuable. I think, although it's very difficult to predict the future and some would say impossible to predict the future; however, the way that just played out in the past and what I would broadly assuming the past is indicative of future would be that any REIT development would occur with the tenant spending the capital expenditures to improve that facility and then once it was done in running, just like we did with Park MGM, -- in the Park MGM transaction, we would act sort as takeout financing. We don't mind missing out on some of the development for turn, given our fact that we pay a cash return to both our equity and debt holders and instead we are willing to pay, maybe a little higher price to take someone else once the property has proven out. So I think that's how I would like we were using the Park MGM transaction as they present.

Daniel Adam -- Nomura Instinet -- Analyst

That makes sense. And then just very quickly, were there any share sales under the ATM during the quarter?

Andy H. Chien -- Chief Financial Officer

Yes, there were, Dan. We'll post the exact number in our 10-Q, posted later today, but we were in the market with the ATM.

Daniel Adam -- Nomura Instinet -- Analyst

Okay, great. That's it from me guys, thanks.

Operator

The next question comes from Robin Farley with UBS. Please go ahead.

Robin Farley -- UBS -- Analyst

Great. Thanks. Just circling back to the idea of Strip assets out there that may be for sale, and I guess at least one potential buyer saying they would only be interested if they own the real estate. Do you have any thoughts on potential buying partners who would be worried about you are having a large Vegas operator already as a big time [Phonetic] for you? Is that -- do you feel like that is something that comes up in your discussion?

James C. Stewart -- Chief Executive Officer

You know, we've talked with many different operators about many different opportunities on the Strip, and to-date, although it's something people want to understand, it hasn't been a barrier even one time. The information that we receive from our tenants and need to get this really relatively limited and has nothing to do with any of the theoretical good operating characteristics than anyone might have. I would also say this business, it's rather experiential business. And so if you want to go -- another property has something that's driving a lot of revenue such as new club, a day club, a new restaurant whatever, it isn't particularly hard to make a reservation, walk over, stay there, experience a new club and see how the thing runs and copy it. So it's to say we have never even one, had anyone really give us any push back on that and I think it's just because the information that we need from our side, it's frankly pretty limited.

Robin Farley -- UBS -- Analyst

Okay. Great. That's helpful. And then I guess just when you are in those discussions and you're kind of aware of other potential buyers out there, do you think that ultimately any potential Strip asset transaction is going to evolve someone partnering with the REIT or in other words, do you think that's the most likely outcome or would there be players where it would be a buyer without [Indecipherable] in terms of your expectation?

Andy H. Chien -- Chief Financial Officer

I mean, I think both are potentials. I mean, there is certain operators that like they own the real estate and like the options that come with that, but there is also a financial benefit to entering a partnership with the real estate owner with respect to your OpCo returns. So there fires in both camps. Some have not entered into leases previously with REITs like ourselves. And so it takes time for them to get to understand that and they may buy these assets outright if they have the financial wherewithal, and then looking at the real estate at a later date. So both options are possible.

Robin Farley -- UBS -- Analyst

Okay, great. Thank you.

James C. Stewart -- Chief Executive Officer

Thanks, Robin.

Operator

Your next question comes from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley -- Bank of America -- Analyst

Hey, good morning guys. I just was wondering if you could comment on the following; one, on the big themes that we saw in one of the M&A deals that occurred in the space was sort of recutting existing lease terms and dropping down existing assets, but possibly raising the rent on just existing properties. You did a little bit of that with Park MGM. But I'm kind of curious on your views or thoughts to sort of recut things across the broader MGP portfolio. Is that an option? Do you guys sort of able to look at and how do you weigh that against maybe you're sort of theory around four-wall rent coverage, that would be great?

James C. Stewart -- Chief Executive Officer

Sure. So we're sitting today with the coverage above six times and to the extent that both parties want to do it, it's certainly an option that we've. It's reasonably straightforward I think in terms of you effectively lease [Indecipherable] such that you give someone some cash and they give you more rent and we always have the option to use that to, right size our rent coverage any one period of time. We did Park MGM effectively really almost the acquisition of a brand new property, but did have similar characteristics. So the answer is, it's absolutely available to us; two willing parties obviously have to be party to that, but something that we thought about and can do really I think anytime that that I think it's opportunity as long as we have a will against partner -- willing partner who wants to [Indecipherable].

Shaun Kelley -- Bank of America -- Analyst

Great. And I apologize if this came up earlier. I don't think I caught it, but sort of any update, we're about just lapping sort of a year at Springfield. So just sort of latest thoughts on the opportunity there, the ROFO and what you kind of make it a stabilization that'd would be helpful.

James C. Stewart -- Chief Executive Officer

Well, as I think you know, we should know we have a right of first offer on Springfield. We want to be -- it would be part of, so we envision as part of the master lease. So we are subject to sort of the same commentary I gave before in terms of anytime we buy away property that goes into the master lease, isn't really an analysis of that individual property, it is a reunderwriting every property within the master lease, because once the property is in the side that, it contribute to the overall rent payments, but in no way does it have its own rent component to it. So the extent that we bring that in and it outperforms, that's great, but the rent payment would already have been set. If it underperforms, the other properties would have to kick in that much more. So we analyze everything under that lens. In terms of timing, I think we're basically still on the same time frame more or less, and we're watching all the time and talking with MGM and you know what is the write down transact will bring in it.

Shaun Kelley -- Bank of America -- Analyst

Thank you.

James C. Stewart -- Chief Executive Officer

Thanks, Shaun.

Operator

The next question comes from Thomas Allen with Morgan Stanley. Please go ahead.

Thomas Allen -- Morgan Stanley -- Analyst

Hey. So can we talk about kind of the breadth and depth of the transaction market right now outside of MGM and what you're seeing and then on the pricing side, any changes there?

Andy H. Chien -- Chief Financial Officer

Sure. In terms of the transactions that are out there and available, we'll say it's about the same as where we were prior these transactions as we've talked about in the past. Have a very long time frame from start to finish and given where certain -- given where different parties are looking at it, given how you have to pair up Op-Cos and Prop-Cos as we discussed a little bit ago, it does take more time to kind of create those partnerships and get to the finish line on these transaction. The deals that we've been looking at since the end of the year, we're still looking at today. There's nothing that's really dropped away and there have been a few announcements, but there is still pretty deep pipeline of transactions we're looking at, just both gaming, as well as outside gaming with being look in both arenas and think that there are still type [Phonetic] of acquisitions that can be announced.

Thomas Allen -- Morgan Stanley -- Analyst

And then some of the articles discussing the MGM real estate committee suggested that the transaction could go outside of MGP. What do you see is that -- do you see that as a risk and kind of what do you think it would imply?

James C. Stewart -- Chief Executive Officer

Well, Thomas. As you know, MGM is a separate public company. They have their own Board of Directors and the real estate committee is part of that Board. And I guess that I have to say, we refer you over to MGM's commentary on this topic. That said, MGM is the largest investor in MGP and as a result as a very significant interest, preserving the value of investment in MGP and as the investors that own us. No, we are the owner of the largest agglomeration of Class A gaming real estate versus any company, and we recognized I think more than any inherent value of these properties.

Now, I am not surprised that there is rumors etc. describing and talking about how some of these things are very valuable because we think it's totally true, and we think that there is a major opportunity for all investors to just to own our stock today and as the inexorably result of tightening cap rate of our own real estate versus other Class A asset classes in office, malls, etc., as well as -- versus our retail oriented triple net [Indecipherable] I think there is huge upside in the stock. It just comes from that. So can't comment, but if anyone is the beneficiary of someone recognizing a differentiation between the values of our real estate and sort of the apparent value, I think it's that.

Thomas Allen -- Morgan Stanley -- Analyst

Thank you.

James C. Stewart -- Chief Executive Officer

Thanks, Thomas.

Operator

[Operator Instructions] The next question comes from Nick Talarico [Phonetic] with Deutsche Bank. Please go ahead.

Nick Talarico -- Deutsche Bank -- Analyst

Thanks. I just wanted to ask a question about kind of your broader thinking on the acquisitions market and as we think about when you're looking at deals and whether it's the future potential MGM deals or others, how much are you focused on creating a lot of only doing a deal if you get a lot of AFFO accretion on day one versus I think we've seen this in other parts of the REIT sector where you have larger acquisitions that aren't super accretive day one, but they have an attractive growth profile and so it would force you to I guess have maybe restructure a master lease or create a new master lease for separate assets that had higher lease escalators. So I'm kind of wondering how you view that trade-off.

Andy H. Chien -- Chief Financial Officer

Hi, Nick, this is Andy. As far as the acquisition market and AFFO accretion and so that is a hallmark of how we look at transactions. Out of the box, it over time, all of this factors into our underwriting criteria as far as for many -- few transaction, we look at many elements in terms of how to price the deal, whether it's the IRR, the return over time, the stability of dividend, our optionality when it comes to renewal time, the longevity of the lease, our opportunities with that operator or that tenant for additional transactions. All of those things factor into how we look at transactions. Accretive out of the box, that is important; accretive in the next two, three, four, five years, that is also extremely important as that continues to drive our escalator. As James mentioned in his prepared remarks that built-in escalator drive significant growth, right, 2.5% AFFO growth just from a base escalator. That's something I think a lot of the traditional net lease REIT would love to have. Given that they have explorations that need to backfill during transactions and there is properties going dark, etc., we don't have any of that. Our growth is growth and sticky. So those escalators are important to us in addition to being accretive out of the box.

Nick Talarico -- Deutsche Bank -- Analyst

And is there a chance that you would do a deal in the future that, let's say, with MGM as a partner where you get deals outside the master lease to create a higher escalator for those assets?

Andy H. Chien -- Chief Financial Officer

I think there's ways to accomplish that without having to go outside the master lease. There is definitely different ways to structure lease streams within a master lease such that if you look at our existing lease where we have a fixed and a variable component and we could have a super fixed component, for example, and have a higher escalator on that component, it would still be cross-collateralized and within the same mater lease. So I think there is definitely ways to do that without losing the benefit of the master lease.

Nick Talarico -- Deutsche Bank -- Analyst

Okay. That's helpful. And then just last question is, I mean, as you think about some of the larger potential acquisitions out there, what are your thoughts about pursuing JV capital, would you ever considered that attractive and so would only do it if it creates a sort of an additional fee stream that can make the assets even more accretive?

Andy H. Chien -- Chief Financial Officer

Well, when we look at transactions and we look at financing those transactions, we look at every financing avenue whether it's debt markets, the equity markets, JV capital, every avenue potential capital funding transaction we evaluate. If there is attractive JV capital, we will certainly look at that and evaluate that and see if it makes sense for the Company, for our shareholders and for our long-term growth pipeline, and if it creates the partnership with somebody that validate our real estate, that's something that we can evaluate, but if it's not beneficial for our shareholders then we'll approach more traditional avenues of financing.

Nick Talarico -- Deutsche Bank -- Analyst

Okay. Thank you, Andy.

Andy H. Chien -- Chief Financial Officer

Thanks, Nick, and welcome to our coverage group.

James C. Stewart -- Chief Executive Officer

Thanks, Nick.

Operator

The next question comes from John Massocca with Ladenburg Thalmann. Please go ahead.

John Massocca -- Ladenburg -- Analyst

Good afternoon. So it seems like one of the major themes on MGM's call was kind of proving out the value of the real estate. As we think about strategies for that particularly on -- your guys maybe moving up the value of your real estate, how do you do that without stumping the upside, I guess from the additional NOI and AFFO per share growth you get from structuring the most kind of accretive acquisitions possible either with MGM or with another third party?

Andy H. Chien -- Chief Financial Officer

Hi, John, it's Andy. In terms of proving out the value of the real estate, I think we've continue to demonstrate to the market that our net lease rental streams are more valuable than traditional net streams in the mission critical nature of these assets, the partnership with the local governments that it create the importance of this real estate of the fact that this real estate is irreplaceable. All factors into that, in addition, as you probably seen Green Street that a piece on all the gaming area we posted to our website and they also believe that it also discussed the value of the gaming real estate within the gaming REITs. So there is the value gap in the market today. This companies have only been around for less than five years us -- know about three years. And so it takes time, right. We're building that track record. We're showing the market that there is resilient in these rental stream and we prefer not to have recession and prove out that these are safe. We think we can demonstrate that through the facts that has been shown by yourselves as well as, what Green Street is done at the gaming revenue over the last cycle was less volatile than even the traditional real estate class. So there is -- I think there is reluctance from traditional investors to try to get into a new space, but I think that Green Street piece as well as ourselves as well as our peers continue to drive home that this real estate is safer, that our structures are better and the corporate coverage that all of us demonstrate is a better mechanism than the existing traditional net lease out there.

John Massocca -- Ladenburg -- Analyst

Is there any, maybe potential thought about bringing in third party capital just to kind of prove the value of the underlying real estate, I mean, comparable assets to what you have in your existing portfolio if you would buy something like that?

James C. Stewart -- Chief Executive Officer

One of the things that I think we have are very, very adept at and are very good at analyzing quickly is the relative benefit to our shareholders of doing a number of different transaction structures. There is -- that could theoretically bring some benefit and that could be interesting, on the other hand, you're may be sharing some upside with a different partner. All of those things that to put to the mix as we think about any specific deal. So I guess it's -- at end of the day, our own touchstone is, does any one transaction or transaction structure derive sustainable long-term enhancement to our after tax -- our AFFO line and our dividend line, as well as our shareholder value, and under that lens, is that we sort of analyze every transaction.

John Massocca -- Ladenburg -- Analyst

Okay. And then with maybe MGM specifically, is there kind of a -- I know, we talked about how comfortable you guys with adding additional rent and such, but is there a level specifically you'd like to keep that corporate coverage at over the long term knowing that kind of unless it's an additional transaction for them, right, every time you do more deals, you're bringing down that coverage.

Andy H. Chien -- Chief Financial Officer

There is no absolute level and I think given the way that we're able to structure transactions, we don't have to determine that today, but we can determine that over time. If you're six times today, you do a transaction, you go to [Indecipherable] like that and then thereafter we can go to 4.5, 4 [Phonetic] if it is a market like that, there will be a breaking point and we can look at how the competitors are structured to see if there is a value degradation from a multiple standpoint. So those are things that we can look at incrementally and we don't decide on today.

John Massocca -- Ladenburg -- Analyst

Okay, that's it for me. Thank you very much.

Operator

Your next question comes from Barry Jonas with SunTrust. Please go ahead.

Barry Jonas -- SunTrust -- Analyst

Thanks. Hey, maybe just taking that last question and asking another way, is there an optimal or floor level of coverage as you think about new potential tenants?

James C. Stewart -- Chief Executive Officer

Each transaction is subject to too many variables that [Indecipherable] say there's an absolute number. It depends on the strength of the property addition in the market. If current status in terms of fit and finish, you know, if it has a lot of deferred capex or [Indecipherable], as well as the strength of the tenant; critical we [Indecipherable] that tenant. Our own view is to whether or not what their relative lovingness to let it go in a downturn, as well as the inherent structure of the lease. Do we have guarantees out of them, is it cross-collateralized to anything else. There are so many other components that go into it. To say there is that number would be [Indecipherable] all dependent on the property, the lease and the tenant and how those three things interact together.

Barry Jonas -- SunTrust -- Analyst

Okay. Sure. So next one, in the past you guys have explored mergers with other gaming REIT. Is that something you still could see merit in here whether it's another gaming REIT or one not currently in the space?

James C. Stewart -- Chief Executive Officer

We are looking at anything that could, as I say, our job is to enhance the long-term sustainable AFFO stream and thus dividend stream [Indecipherable] of the values, that's something like that contributes to all of those factors, that's something we've wanted to. If it does not, well, then we would not.

Barry Jonas -- SunTrust -- Analyst

Got it. Then last one for me. Just a clarification, before, when you're talking about sort of new faces in the space. Was that limited to operators? Where I'm driving at is, our discussion in the last earnings call about maybe some new REITs not in gaming who are starting to kick the tires on the gaming asset class?

James C. Stewart -- Chief Executive Officer

I was really referring I suppose to both although thinking more along the operator line. I think there has been one entity, which has expressed interest in this space. Look, I'm not surprised, I think that the inherent value of our real estate, as I've mentioned before is significantly higher than the current value attributes to hit the market. I think that some people have recognized that and thus are holding the stock right now. Other people are still in an education phase, but when you have an asset class attractive business, they're going to join new entrants. So I think it's in inevitable outcome of having a very attractive space with a few players.

Barry Jonas -- SunTrust -- Analyst

Great. Thanks, James. Thanks, Andy.

James C. Stewart -- Chief Executive Officer

Thanks.

Operator

The next question comes from John DeCree with Union Gaming. Please go ahead.

John DeCree -- Union Gaming -- Analyst

Hi, James. Hi, Andy. Thanks for taking my question. Wanted to maybe ask you guys to put your economist pad on for a minute and talk high level. A lot of headline news, lot of macro trends that the team to have the market capitulating. Probably short term focus interest rates obviously a big topic of discussion. I was wondering if you guys kind of look at the headlines, see everything that we see. If there is any adjustments to how you approach your balance sheet or M&A in the near term and maybe in that kind of high level comments that you might be able to provide, how you think about kind of optimizing transaction using maybe a little bit more leverage given where interest rate to come and if that could maybe [Indecipherable] be a little bit more aggressive with some acquisitions or attempt to maybe getting stuff done sooner than later as we kind of have that prolonged low interest rate environment.

Andy H. Chien -- Chief Financial Officer

Yes. And as far as the -- I will attempt to tackle that. But as far as the balance sheet side, we intend to remain consistent with what we communicated in the past, as we -- our leverage, we anticipate between 5 to 5.5 times as long as we see a path back to that range in a relatively short-term, we're comfortable going on other side of that, in the current interest rate environment, our unsecured bonds and [Indecipherable] market remains attractive and is attractive. So that will continue to be likely high probability funding source for us. As far as how we look at transactions, most of the operators that we discussed transactions with we're discussing domestic opportunity. International opportunities are further on down the priority spectrum and the domestic opportunities with those corporate paying tenants, they may have international operations that provide the corporate guarantee. So we look at that from just the overall tenant strength and that's something that we would look at on any transaction regardless. So we monitor it. I don't think it's really changed our underwriting criteria to date. As far as the things we look at and tenants that we look to transact.

John DeCree -- Union Gaming -- Analyst

Thanks, Andy. Tough question. I appreciate your comment. That's helpful.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to James Stewart for any closing remarks.

James C. Stewart -- Chief Executive Officer

Thank you. I would like to thank everyone for all of their continued support and look forward to speaking to you in the next call.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Andy H. Chien -- Chief Financial Officer

James C. Stewart -- Chief Executive Officer

Daniel Politzer -- JP Morgan -- Analyst

Rich Hightower -- Evercore ISI -- Analyst

Daniel Adam -- Nomura Instinet -- Analyst

Robin Farley -- UBS -- Analyst

Shaun Kelley -- Bank of America -- Analyst

Thomas Allen -- Morgan Stanley -- Analyst

Nick Talarico -- Deutsche Bank -- Analyst

John Massocca -- Ladenburg -- Analyst

Barry Jonas -- SunTrust -- Analyst

John DeCree -- Union Gaming -- Analyst

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