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MGM Growth Properties LLC (NYSE:MGP)
Q3 2020 Earnings Call
Nov 2, 2020, 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 Third Quarter 2020 Earnings Conference 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 call over to Mr. Andy Chien. Please go ahead.

Andy H. Chien -- Chief Financial Officer

Thank you. Good morning and welcome to MGM Growth Properties third quarter 2020 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 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 when talking about our performance. You can find the reconciliation to GAAP financial measures in the press release and Investor Presentation which are 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 third quarter 2020 earnings call. We're excited to report that every one of our properties across the country are currently open to the public with social distancing and safety protocols in place. We are pleased by our tenants' commitment to the health and safety of both the employees and guests. During the quarter and through October, we continued to receive 100% of our rent on time. Despite the economic challenges brought on by the pandemic, our perfect rent collection record demonstrates the durability of our master lease and the liquidity position of our tenant. We are encouraged by the improvement in ramp-up of operations across our portfolio and we're also pleased to see occupancies in the weekends in Las Vegas recovering. We look forward to the return of conventions and believe that the recently announced entertainment offerings coming back will enhance the customer experience and bolster weekday occupancies. We're long term believers in Las Vegas. That is one of the premier destinations for business and leisure travel in the world. Our regional portfolio, in particular our drive to properties are seeing significant benefits through margin expansion, which is driving equivalent or higher EBITDAR compared to last year's performance, even at lower revenue levels. Gold Strike Tunica, MGM Northfield Park and MGM National Harbor all achieved all-time record quarterly adjusted property EBITDARs. The gaming industry has faced many challenges in the past and has become more resilient with each obstacle. Our prudent capital allocation, portfolio construction and strong leases have helped protect MGP for many of the challenges facing the broader REIT industry today. This unique combination of downside protection, rent stability and for MGP, rental growth in this environment has demonstrated that our business model should translate to a premium multiple. MGM Springfield, on which we have a right of first offer also achieved a record third quarter adjusted property EBITDAR, despite only being open a partial quarter. Our tenant, MGM Resorts has approximately $5.2 billion in liquidity at its domestic operations, adjusted for MGM's October issuance of $750 million of notes, providing ample access to cash to predict and grow their business for the foreseeable future. Their successful capital raises this year have further bolstered their liquidity and position them for future growth in the increasingly dynamic and growing gaming industry. In addition, MGM can elect for us to redeem $700 million of their operating partnership units in cash through February of 2022, which if completed in full at current prices would be AFFO accretive to us, further strengthen MGM's liquidity position and reduce their ownership position in us to around 50%. We remain focused on continuing to execute our business strategy of sustainably growing our AFFO and dividend. We continue to communicate frequently with various gaming operators and explore real estate transactions that would help them generate immediate liquidity and provide them with an opportunity to replace financial debt with predictable long-term leases. While these unique times sometimes require an alternative and creative underwriting approach, MGP is especially well positioned given our strong financial profile and flexibility to creatively structure leases to find mutually beneficial solutions for both MGP and our potential tenants in the gaming and broader hospitality and leisure industries. I'll now turn it over to Andy to discuss our financial results.

Andy H. Chien -- Chief Financial Officer

Thanks, James. I'll start with providing some highlights for few items in our third quarter financial results. We recognized $188.3 million of rental revenue on a GAAP basis. Cash rental payments received by MGP in our pro rata share of the JV was $243.5 million, which consisted of $206.9 million from the MGM master lease and $36.6 million from our share of the joint venture master lease. Our share of cash flow generated by the JV was $29 million, solid net income was $97.4 million, AFFO was $173.5 million or $0.57 per diluted operating partnership unit, adjusted EBITDA was $240.6 million, G&A expenses for the quarter $3.5 million, which represents one of the lowest G&A as a percent of rents in our space. Our dividend was $0.4875 per share, which represents $1.95 on an annualized basis. MGP is well positioned for future growth with one of the strongest balance sheets in the industry. No debt maturities until 2023 and maintain adequate liquidity to meet our financial commitments. Liquidity currently stands at approximately $2 billion, consisting of $655 million of cash and cash equivalence and $1.25 billion on our revolver at quarter end. Our pro rata net leverage is 4.6 times and it's below our long-term target of 5 times to 5.5 times, driving funding flexibility for future accretive opportunities. This includes the flexibility for the redemption of $700 million operating partnership units from MGM for cash. Now, maintaining a strong balance sheet with significant access to capital has proven to be necessary in this uncertain environment, and we continue to position MGP to be able to execute our long-term business strategy by sustainably growing our dividend. With that, I'll turn it back over to James.

James C. Stewart -- Chief Executive Officer

Thank you, Andy. Chuck, we'd now like to open it up for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session.

[Operator Instructions]

And our first question will come from Rich Hightower with Evercore. Please go ahead.

Rich Hightower -- Evercore -- Analyst

Hey, good morning out there guys.

James C. Stewart -- Chief Executive Officer

Hi Rich.

Andy H. Chien -- Chief Financial Officer

Good morning.

Rich Hightower -- Evercore -- Analyst

So I wanted to take your pulse on elsewhere around the States, we've seen a competitor or two do mortgage loans as a potential toehold into another investment outside of gaming. And I'm wondering if you guys have looked at similar deals, what's your view of the opportunity set as far as that goes, just the wisdom of that sort of investment versus a traditional sale leaseback?

James C. Stewart -- Chief Executive Officer

It's interesting. We have looked at structuring transactions in that manner. And I guess I would say overall, we will consider all transactions irrespective of their complexity or structure. But our preference is to have long-term leases that are more or less permanent like we have with our master lease and the joint venture lease we have with Blackstone. We think that that gives us the capability of sustainably increasing our dividend off of the AFFO accretion that comes from that type of transaction. That said, I think we're pretty creative in terms of our structuring capability here to the extent that a situation was attractive to call for that kind of structure, we would not dismiss it out of hand. However, on the margin, we would rather one, own the real estate as opposed to just having a mortgage up against it and two, have long-term cash flow stream that we can then allocate long-term capital against and earn the differential. We're sitting on almost $2 billion of liquidity. So I think we're in a pretty good situation flexibility wise to be able to generate some accretive deals here.

Rich Hightower -- Evercore -- Analyst

Okay, got it. And maybe just with respect to the next tranche of the LP buyback from MGM and you referenced it in the earnings release and in the prepared comments. We can assume that it's accretive to whatever extent when it happens, but is there a level of accretion that we're all sort of targeting or solving for or how should we think about the potential for that next slug of the buyback? Thanks.

James C. Stewart -- Chief Executive Officer

It's -- so it's really -- it's 100% up to MGM to put to us the equity. They have until Valentine's Day 2022 to do so. Given the combination of reduction in our own interest cost across our entire debt stack, we are -- almost all our debt is trading either in the 3s or our longest bond occasionally touches up to 4%, but frequently is in the 3s. And our equity is yielding about 7%. So on a yield basis, you're saving say, rough zone 3.5% or 4% on that $700 million. So it's pretty nicely accretive to us. When they do it, as I say, it's totally up to them and I think they were pretty clear on their earnings call, so I'm not telling any tales out of school that they plan on doing it, but when exactly that's going to happen, we'll have to wait and see. The good news is our balance sheet has been carefully prepared and set up to be able to handle this. So for us, we can fund it just by writing a check off of our cash on hand and revolver [Phonetic] draw.

Andy H. Chien -- Chief Financial Officer

And just as a reminder, Rich, too, that's -- when that request is put forth, it's a 3% discount off the 10-day average. So that's a preset price that obviously moves every day.

Rich Hightower -- Evercore -- Analyst

Got it. Thanks guys.

James C. Stewart -- Chief Executive Officer

Thanks Rich.

Operator

Our next question will come from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley -- Bank of America -- Analyst

Good morning James and Andy. I just wanted to ask about the possible interaction with IAC. Obviously, at the MGM level, that was a very large transaction that occurred in the third quarter. Curious if you've had any direct interaction with the IAC team and how they might envision any interaction with MGP or the future of MGP?

James C. Stewart -- Chief Executive Officer

We have not had any direct interaction with IAC, but couldn't be happier to see them come into the MGM stock in size, $1 billion and have two members join the Board, including Barry Diller. So I don't think we don't have -- we have not had any interaction with them. And I think that their focus, not surprisingly, is really on the online opportunity. Bet MGM is already a Top 3 operator in every market where it's live. And I think they're doing absolutely fantastically in that area. And I think IAC is only going to help. But we don't have any -- or have not had to-date any interaction with them, unless Andy, you have.

Andy H. Chien -- Chief Financial Officer

No, same as you, James.

Shaun Kelley -- Bank of America -- Analyst

Great. Thanks. And then the other question I would have is just I wanted to ask around Springfield, right? So obviously, what we've seen is some pretty interesting and compelling changes in the regional market structure, particularly around margins. Springfield and Massachusetts have some pretty strict operating restrictions, I believe. But could you just talk a little bit about how you might underwrite an opportunity there in Springfield, just given, again, what we're seeing out of some of these regional markets and how you guys are thinking about the ROFR there, that would be great?

James C. Stewart -- Chief Executive Officer

Sure. So Springfield is doing unbelievably well. Record quarter EBITDARs I mentioned in the prepared remarks, which is great to see. I think with Springfield and with any property, it really comes down to, well, a combination of things. For a property like Springfield, it will almost certainly, we would -- when we ultimately exercise the right of first offer, both by MGM and us, and bring that into the fold, it will be a component of a master lease, our master lease as opposed to a property type lease. So what that generates, the advantage of it is, is cross-collateralized and cross defaulted with all the other properties within the master lease. So it's not so much an individual underwriting of that property as it is a reunderwriting of the whole master lease. If any one property within that pool of properties isn't pulling its fair share of rent, the others just have to make up for it or else MGM would not be -- no longer be able to operate all of the properties in the pool. So we don't really view it so much as an individual property underwriting as a overall master lease underwriting.

That said, it's doing absolutely great. We think that the shutdown and then reopening of every property is the most well-defined case study of zero-based budgeting that certainly I've ever seen. And MGM already has their savings plan in place to say $400 million, $450 million of EBITDAR going on, and that this really gave them the ability to highlight some additional potential savings in these property properties that they have such as Springfield. So I think our confidence level in the EBITDAR generation being higher than it was on a more or less permanent basis is pretty high, but it isn't so much an individual property underwriting, as I mentioned, is a whole master lease underwriting.

Shaun Kelley -- Bank of America -- Analyst

Thank you very much.

James C. Stewart -- Chief Executive Officer

Thanks Shaun.

Operator

Our next question will come from Joe Greff with JP Morgan. Please go ahead.

Joe Greff -- JP Morgan -- Analyst

Good morning James, good morning Andy. Most of my questions have been answered. Just the one topic I'd like for you to maybe give us an update on is just on corporate structure. And I guess where are you guys, and importantly, the Board in terms of evaluating changing from an LLC to a C-Corp? And I know we've had conversations, basically since the end of last year that it was a focus of the Board, is it sort of much secondary or tertiary priority? I know there's a lot of stuff going on.

James C. Stewart -- Chief Executive Officer

Yes, it's interesting that it's -- we've had a turnover of various Board members, including our Chairman and three other Board members. So we've had a number of new Board members join the Board this year. And like anything, that's -- the conversion is an education process for all the Board members, and they need to make sure that they understand it. And I think that given the overlay of COVID-19, inability to get together in person, doing things on conference calls and a very significant focus on the nuts and bolts of the business, really the basics of the business, ensuring that the properties were initially shut down appropriately, and it had to happen very quickly. And then as they opened up, they did that carefully as well. It just hasn't been a priority that's gotten to the level of any kind of real action step now, just given all the other stuff that's going on.

Joe Greff -- JP Morgan -- Analyst

Thank you.

James C. Stewart -- Chief Executive Officer

Thanks Joe.

Operator

Our next question will come from John DeCree with Union Gaming. Please go ahead.

John DeCree -- Union Gaming -- Analyst

Hey, good morning guys. Thanks for taking my question. I wanted to ask about your propensity or willingness to maybe transact in a Las Vegas strip asset, and not specifically the headlines about Venetian and Palazzo, but a market that might take a bit longer to recover with the group mix. What are your views? Could a transaction on the strip get done now in this environment? And would it be something that MGP would be willing to look at up and down the strip at this point?

James C. Stewart -- Chief Executive Officer

We think that it could get done. Particularly from our perspective, a sale leaseback transaction. We are, as I -- I think of all of the -- I mean any REIT, period, I think we are the most alerted to and aware of sort of the trends on the strip, given that we live in Las Vegas and have the 50% of our portfolio exists in the Las Vegas strip. And I think that the city, in particular, those properties are going to be set up for some very, very significant growth once we get to the other side of COVID. I think on the convention front on the group business front, which is obviously basically zero right now, as you look at the competitive offerings, not property-to-property on the strip, but what the Las Vegas strip offers versus Florida versus New York versus Chicago versus other convention locations, I think the attractiveness of Vegas and our venues here is going to only increase compared to those other cities given space, ability to creatively sort of structure that space and weather and so on versus sort of a more urban environment in the form of many of those other cities. So the answer is, yes, we think a deal could get done on the strip. We would definitely be interested.

That said, we'd want to have something that obviously has the fit and finish that is comparable to the rest of our high-quality portfolio. And the other component of this is the tenant has to be one who has some real skin in the game, so to speak, and a great incentive to keep on paying the rent because there could be some bumpy times here in the next little while. That -- but if we are -- if we can go to bed at night without having anything keep us up over worrying about is the rent going to get paid, it's absolutely a deal that we should do.

John DeCree -- Union Gaming -- Analyst

That's good context, James. I appreciate that. And just a follow-up slightly, different topic, outside of Las Vegas. Most of your assets that you've just mentioned are higher quality and bit larger in scale. They generally sit in a little bit more destination markets. Given the trends we've seen in the new world where the drive-to businesses are doing quite well and really resilient, do you have still kind of an outline of criteria that you look at for assets perhaps outside of the Las Vegas strip? Are you still looking for that kind of best-in-class asset? Or would you be willing to look at more drive-to markets that maybe don't have the same amenities as your -- rest of your portfolio, but really good cash flow generation that's been kind of proven out here the last couple of months?

James C. Stewart -- Chief Executive Officer

We'll, anything where we are very confident that a property can generate enough cash flow to keep the operator successful, reinvesting in the building and happy and pay the rent without any concern is something that we would want to take a very hard look at. We are really players over in the long-term business, right? We have 30-year leases, that's a long time, and we want to make sure that anything that we buy can pay the rent and be something that if we ended up taking it back or at the end of the lease, an operator or existing one or a new one reupped on the lease that it's a property that will continue to have those characteristics.

So on the margin, I think the buildings with more amenities and the ones where people really want to be in will be the long-term winners still. That said, if something can grow our AFFO without the need for leverage going through our traditional targets and pay the rent consistently for its 30 years and have the enduring value to the fit and finish of the building that if we ended up taking it back to whatever reason, it's something that's either -- people are lining up to come and run it, that's something we want to take a hard look at.

Andy H. Chien -- Chief Financial Officer

And John, I would just add that it's not necessarily that the type of assets we're looking at are only destination and variety. There are regional type assets that fit that criteria. And historically, we've talked about a certain level of EBITDAR, roughly around $40 million. But there's a lot of properties that fit that profile that aren't on the destination, a variety. You look at some of our existing properties, even down to the Tunica or Northfield, they generate significant EBITDA, but on an amenities compared to Las Vegas, doesn't have hotel rooms, et cetera, Northfield Park, for example can still hold its own in those markets.

John DeCree -- Union Gaming -- Analyst

Thanks Andy, that's helpful. That $40 million of EBITDAR was one of the metrics I was thinking of. So I appreciate the context, guys. Thanks for taking my questions.

Operator

Our next question will come from Jared Shojaian with Wolfe Research. Please go ahead.

Jared Shojaian -- Wolfe Research -- Analyst

Maybe first, just one housekeeping item. Andy, interest expense was a little higher than we expected. Was there anything unique or one-time in the quarter? And maybe how are you thinking about the quarterly run rate going forward?

James C. Stewart -- Chief Executive Officer

Nothing unique other than coming from Q2 to Q3. Obviously, we had the bond deal for a full quarter. But everything else is -- has been stable, is stable from prior quarters, all the existing bonds. The revolver was paid down, but we still have to pay a commitment fee on the balance of undrawn, $1.25 billion that's undrawn, and then the existing swap portfolio. So all that should factor into Q2 and Q3. The only difference being the full quarter of the bond deal.

Jared Shojaian -- Wolfe Research -- Analyst

Okay. Thank you. And then I realize this is a ways away, but in 2022, the rent begins to reset on the percentage rent side, and then there's also some qualifications that must be met for the fixed escalators. Do you have a sense for what run rate rent could look like in 2022 if the environment doesn't improve much from current levels?

James C. Stewart -- Chief Executive Officer

Andy, do you want to take it?

Andy H. Chien -- Chief Financial Officer

Sure. So yes, the percentage rent component that resets April 2022, that's a five-year look back on the revenue of the properties in the portfolio. So 2017, 2018, 2019, those are set in stone. So those three numbers because MGM provided previously property level revenue and EBITDA, you can get pretty close there. It's not perfect, but it's very close. And obviously, 2020 and this year and 2021 will also factor into the average. So you can kind of lay that next to your own models and see where that percentage rent component would fall out. It's $78 million out of our total $960 million pro rata rent. So it's a smaller component. And I think it could go up, it could go down, and it's going to depend on what's going to happen over the next 15 months here to finalize that calculation. We don't have a view yet. We don't have a good calculation for that. As far as the fixed component on the 2% escalator, for the April 2022 number, whether or not we get 2% or it stays flat, that's going to depend on next year's numbers, right? And so it needs to exceed the 6.25 times rent, take it to 2% escalator. And 2021, it's an unknown for all of us. And I know people are trying to project it, but a lot of it's going to depend on the convention calendar, what's coming back from a meeting standpoint for Vegas results, but obviously, the regions are doing quite well. So it's a matter of how the portfolio balances itself out and giving a 50-50. I think we're in a nice position there, but it's still to be seen. But obviously, the next escalator, April 2021, that does not have a hurdle and that's automatic.

Jared Shojaian -- Wolfe Research -- Analyst

Okay. If I could just follow-up on that for a second. Will any of the online sports betting or iGaming revenue since you have, obviously, the skins are tethered to the properties that you own. Will any of that online sports betting in iGaming revenue be factored into the revenue when the rent resets?

Andy H. Chien -- Chief Financial Officer

If it runs through the property from an accounting standpoint at MGM Resorts and then into our metrics, it would. If it runs through different entities, then it's likely not captured, but it would come through to the extent it's cash flow to the entity to MGM to improve their balance sheet, so it be captured from a credit enhancement standpoint. So either way, I think we benefit, and obviously, our tenant benefits with a stronger, more robust and diverse business.

Operator

Our next question will come from Barry Jonas with Truist Securities.

Barry Jonas -- Truist Securities -- Analyst

Maybe just to start, can you give some color on what the current M&A pipeline looks like? And as a follow-up, wondering if you looked at the Tropicana Evansville transaction, I believe EBITDAR would have met your size requirement.

James C. Stewart -- Chief Executive Officer

The pipeline is strong. I think that as we are making our way through this unprecedented business climate, there has been a lot of attention that has come at the operator -- owner-operator level on the attractiveness of this model versus a leverage model. The long-term nature of the lease, very, very predictable quarterly payments, fewer covenants in the lease and effectively never ever having a refinance risk where the market could be shut or significantly the debt market at the time, backed up for you, has caused a lot of people to take notice that this model is pretty attractive. So the pipeline looks strong, actually. The -- as it relates to Trop Evansville, it's a rather unique situation where GLPI had the lease against the property and where they did a property switch, Caesars did and put in the too old Isle boats in exchange for that property, then Twin River bought it, then they released it. So in that situation, we did not look -- not that it wasn't an attractive asset that we wouldn't have wanted to take a look at potentially. But just given the incumbency nature of it, it was something that never came our way.

Barry Jonas -- Truist Securities -- Analyst

Understood. And then just real quickly, just following up on Rich's question at the start. Any more color on what non-gaming looks like within that pipeline? I mean, I guess we're sort of curious if we should expect a non-gaming deal before maybe a new tenant on the gaming side?

James C. Stewart -- Chief Executive Officer

There -- the interesting thing is many of those businesses have not fared as well. The non-gaming sort of land-based leisure business has not fared as well through this as the gaming business has. And the moves by the Fed to ensure the liquidity in the market continued unabated or even was enhanced, really had a great impact on those entities' ability to finance their way through what would have this difficult business time for them. So whereas maybe at the onset of this, I would have thought we had to -- you'd see much more real distress in some of those -- in some properties. You haven't seen it to the degree that I thought you -- that one might, given the liquidity pump.

So I would say, at the end of the day, where -- look, there's a lot -- we've been approached on many things. Some of it is somewhat interesting. But I think the more likely use of capital at this time is still within the gaming business because there appears to be a continued dislocation between, I think, what we assess as the potential risk in some of these gaming properties where the tenants have continued to pay 100% of the rents on time, no problem, versus these other industries, which we just -- I think they're not out of the woods yet. So on the margin, I think we would prefer still the gaming side. That's where the best risk reward is for us.

That said, if there's a non-gaming opportunity where we're confident that pays the rent over the long-term and it's accretive, it's something that we definitely want to look at. But I think right now, the better deals remain in the gaming business.

Operator

Our next question will come from John Massocca with Ladenburg Thalmann.

John Massocca -- Ladenburg Thalmann -- Analyst

So maybe building on that last question a little bit and just kind of parsing through your commentary, is it fair to say in understanding that in your acquisition sandbox, every transaction is pretty bespoke, but then you would need to see higher cap rates on kind of non-gaming transactions in order for them to be attractive versus maybe what you would be willing to do on the gaming side?

James C. Stewart -- Chief Executive Officer

I'll start and then Andy, please chime in. It's not so much -- it's not as clear-cut as that. It really is very, very dependent given the bespoke nature of the type of property we look at on the specifics of that property. One, the fit finish size, development expansion opportunity, et cetera that one represents the location of it, the regulatory overlay on top of it, so on and so forth. It really becomes a very tailored underwriting process to a specific property. So I wouldn't say it's just so cut and dried as that, although clearly, the value that you receive is an important part. Andy?

Andy H. Chien -- Chief Financial Officer

Yes. And I would just add to that, just overall credit quality of tenant on the other side or in terms of their ability to pay, what does their balance sheet look like compared to a gaming business? And as we've seen through this environment, the gaming businesses have had significant access to capital and at rates that aren't too dissimilar from where they were financing a year ago in a great market. And so with that profile versus any other non-gaming entity, do they have a similar profile and access to capital? I mean, I think there's a -- it becomes a more comparable investment from a cap rate standpoint, if that's the case.

John Massocca -- Ladenburg Thalmann -- Analyst

Understood. And then maybe back on gaming, if you think about the outlook for kind of regional assets and potential transactions there outside of the MGM Springfield ROFO, how do you look at rent coverage when considering potential deals, especially given the sustainability of some of the post reopening margins, some of these regional assets might be somewhat uncertain?

James C. Stewart -- Chief Executive Officer

Yes. It's -- it does get back to the prior point of each property really has its own unique characteristics, I mean, just using the ones in our own portfolio that we already own. If you look at MGM Northfield Park in Ohio, biggest property in Ohio from an EBITDAR perspective, record quarter, and yet that has no hotel. And would -- if I just looked at the amenity list, although it has a number -- probably more than many of its competitors, it wouldn't have as many as some of the other properties you operate, yet that one, I think we worked and always have been extremely confident in its ability to continue to perform at a very high level. I won't pick on any other one. But if you look at ones in very competitive markets, where they're generating significantly enhanced margins because of the lack of marketing spend that they need to do along with their competitors, I'm not as confident that, that stays -- that the margin expansions will endure at these kind of levels into the future for the -- as far as the eye can see, just because in a competitive environment, if you're going to want to generate increased traffic and customer spend into your facility, there's a reason why they were on marketing spend, and I think that, that will ultimately make its way back into the business. So it's very property and market specific, and you have to make a judgment call that usually is done very much in conjunction with the operator. And you'd be surprised. I don't think very -- really, I cannot think of any scenarios where -- and we've had many discussions with many operators where the two groups have a really significantly different view of the longer-term cash flow generating power of that facility. I think we pretty much have the same view in almost every case, maybe every case that I can think of. So it's not so much that someone comes and wants to either have some coverage we think is too low or something like that. It's much more collaborative and it really gets to the specific nature of the property, how competitive the market is.

John Massocca -- Ladenburg Thalmann -- Analyst

Very helpful color. That's it from me. Thank you very much.

Operator

Our next question will come from Thomas Allen with Morgan Stanley. Please go ahead.

Thomas Allen -- Morgan Stanley -- Analyst

So you're sitting on a good amount of capital yourselves, and you obviously have the JV with Blackstone, too. As you look forward, which entity do you think is more likely to transact next? And kind of what are the key considerations for transacting to one entity versus the other?

James C. Stewart -- Chief Executive Officer

I think it's more likely that it would be in the wholly owned master lease as opposed to the JV master lease, only because -- well, it depends on the property. But to the extent that it's a property that we intend on not partnering with someone and just own the real estate outright and if the other side of the operator equation is MGM, I think it's the easiest to do just given three parties, the table is a little higher than two. That said, to the extent that something fits, to the extent that our friends at Blackstone want to do something within that entity and everyone kind of agrees, that's no problem either.

Andy H. Chien -- Chief Financial Officer

And I think just from a financing standpoint, Thomas, we look at them all, right? To the extent it's the best return inside a JV, we'll look at that or if it's better in the wholly owned structure, we'll look at that as well. And obviously, from a financing standpoint, James talked about earlier, from a bank bond, it's pretty attractive out there. And then in JV with CMBS, it's -- we'll have to see what that market looks like if such a deal comes along. So that's kind of some of the determining factors for the structure as well.

Thomas Allen -- Morgan Stanley -- Analyst

And then just on VICI's Chelsea Piers deal last week. I appreciate the comments you made on like the structure of the deal and your views of gaming versus non-gaming right now. But just that type of transaction -- so that type of asset, what do you think are kind of the pros and cons of that kind of asset for you potentially doing a deal in the future?

James C. Stewart -- Chief Executive Officer

Well, we have no information beyond sort of the brief amount that they put out. So it's a little hard for me to comment, but I think it's a great deal for them. I think in general, on the margin, we would -- something would have -- something has to be accretive. We have to be able to -- we have to be absolutely positive that the rent gets paid over the duration of the lease. We like longer-term as opposed to shorter-term, I think that was seven years. And I think we also would prefer something if we can of a larger size that really moves the needle. Because getting a deal done, whether it be a big deal or a small deal, it frequently takes the same amount of time and resources. And if you have one that you like, you'd rather have a bigger one because that generates increased benefit from that transaction. So on the margin, we prefer those things, although I think that it is -- very pleased to see that they did it. I think it's a great deal for them, I think that it was creative and thoughtful. But that's kind of my own assessment on a very, very surface level of it. And I think it's going to be great for them.

Andy H. Chien -- Chief Financial Officer

And I think, Thomas, just to add to that, it's obviously an industry that -- a sector that we know well, we're comfortable with and have spent a lot of time in. So from an asset class, it's an interesting one. Certainly, each property has its own challenges in this environment. So it's a matter of getting through it and seeing the upside from there. Obviously, not owning the real estate, that upside isn't to be had other than the relationship that you've created. But we've seen mortgage loans done in other REIT industries. In healthcare, I know entertainment REITs out there, has a pretty significant mortgage loan portfolio. And there's different structures, right? Where you could have some kind of option at the end and things like that, that give you that real estate benefit as well. So there's a lot of ways that, that structure can be done, that could be just as, if not more exciting and interesting for the REIT.

Operator

Our next question will come from Jay Kornreich with SMBC. Please go ahead.

Jay Kornreich -- SMBC -- Analyst

Hey, thanks guys. As the environment for commercial casinos remains quite competitive with limited demand in certain regions like Vegas, do you foresee any opportunities for you to fund MGM repositioning or renovation efforts similar to what you did for the Park MGM?

James C. Stewart -- Chief Executive Officer

To the extent that they have something like that, I think it would be an opportunity, although I can't think of anything where it's going to be anything in the next very near term. I think there's opportunities for expansion, particularly in New York, where there's a lot of room, and they could do something else there if tables come into the casinos, which we expect in about a year. I think Ohio, also to the extent that there were tables allowed at our facility there, that might be a candidate for something like that. But those are just my speculative kind of outlook on what could happen. There's nothing that I see in the near term, although anything that would be sort of a project capex concept that they undertook, we would certainly be trying to see if there was an angle for us to play in that field.

Jay Kornreich -- SMBC -- Analyst

Got it. That's helpful. And then just one follow-up. Despite the ongoing headwinds of some of the MGM international casinos, would you consider acquiring the real estate of any non-domestic assets?

James C. Stewart -- Chief Executive Officer

I think we have our hands full with domestic right now, there's a lot of opportunities, and it's a market that we are in and understand the best and the legal frameworks -- or we understand the best and so on. To the extent there are international opportunities where we are extremely confident that the legal framework and the tenant and that we're going to be protected in the event of downturns and so on, it's always something that we would consider. To the extent MGM was the owner-operator today, it makes it easier for us just because we have obviously the existing relationship between the two companies.

All of that said, I think our first choice or the place we'd most like to put our capital at least right now is in the United States.

Operator

Our next question will come from Smedes Rose with Citi.

Smedes Rose -- Citi -- Analyst

I wanted to ask you, just two, I think, pretty quick questions. But the regional operators, you talked about having a pretty full pipeline, and you talked a little bit about how you're thinking about underwriting. I'm just wondering, from the operators' perspective, do you think they come out of this being more or less interested in working with REITs as an alternative source of capital versus sort of more traditional providers. Do you think the relationship with, say, local banks has changed particularly coming out of this? Just interested in your perspective on how they may come to the table at this point.

James C. Stewart -- Chief Executive Officer

Andy, do you want to take it?

Andy H. Chien -- Chief Financial Officer

Sure. I think we've alluded to this a bit, too, is that the conversations we're having as far as sale leasebacks or utilizing the REIT structure has certainly increased in number and more parties are interested in such structure, given that in the early days of the shutdown, there were some pretty significant financing that were done rather extensively. And companies started to think about debt maturities and what would happen as well as covenants and what they needed to waive. And so those are things that are inherent, obviously in the debt markets, but when it comes to the sale leaseback, you just have to come up with the rent payments, right? And so a lot of the companies have turned to that and have called upon the REITs to think about structures, whereas for some of those companies, they were not thinking about that at all before. So I think it's really raised our profile as an extremely viable and interesting new way to finance some of those companies that had not looked at it previously. And that's regional or Vegas. And I think all of it is encompassing that.

Smedes Rose -- Citi -- Analyst

And then I just wanted to ask you, too, in your Q, you added a new risk disclosure around the MGP/BREIT venture that certain covenants might be broken and affected distributions. Could you just provide a little more color on that? I know you mentioned that all rents have been received through October, but I just -- it stood out, so I wanted ask you about it.

Andy H. Chien -- Chief Financial Officer

Sure. We're just updating all the risk factors for the current environment. Obviously, all the structures that we have in place. Obviously, there's the CMBS level requirements as well as JV level requirements that we've instituted that would take quite some time to run through each of them. But we just want to highlight that given the current environment.

Operator

Our next question will come from Spenser Allaway with Green Street. Please go ahead.

Spenser Allaway -- Green Street -- Analyst

Thank you. We've talked a lot about non-gaming as a sort of complementary or additional growth avenues to gaming. But given the fact that there's such a finite opportunity set within gaming, I'm just curious if down the road, do you think -- do you guys think you're going to feel obligated to invest outside of gaming in order to keep pace with peers who are investing in these non-gaming avenues?

James C. Stewart -- Chief Executive Officer

Yes. I think there are 50 to 60 properties, depending on the point in time where we look that are on our list of gaming properties that we would at least on the surface based on our surface analysis would like to bring into the fold. If you think -- our smallest transaction that we've ever done is $637.5 million, which is the annual acquisition budget for most of the retail triple nets entirely over the year across a number of little deals. So we don't need to do a lot of deals to be able to move the needle at the same level as our peers or even greater. And there are a lot of opportunities out there in gaming. So I'm not at all concerned over running out of opportunities in the next medium term. Over the very long-term, I think, one, I think, ultimately, the gaming industry will entirely move toward a owner-operator lease structure. I think that other industries that have been faced very similar pressures have ultimately found that's the most efficient structure for them, and I think that this one will, too, because there's just too much money left on the table by not utilizing both pools of capital. But over the very long-term to the extent that the gaming -- there were no new gaming properties built and all of them moved to that level, then I think naturally that one -- anyone in our position who wants to exist for the long-haul and continue to grow their AFFO and dividend would need to look into adjacent fields. But there's a lot of runway in the gaming industry. And it's also not a static business. There are expansion opportunities, new states opening up, new jurisdictions opening up, new licenses being given, new buildings going up. Even here in Las Vegas, in Downtown Las Vegas, you have $1 billion development in the form of the circuit casino that went up, the Virgin Casino going up where the Hard Rock was.

So I would say there's a long runway in gaming. Also there is a big unknown as to where, what, how exactly the industry looks then, but I know that it will. And so we always want to look at non-gaming properties that will accrete AFFO on a non-leveraging basis, allow us to raise our dividend and make sure that they pay the rent for the entire alliteration of the lease term. And when you take over the building, you're proud to own it and people are lining up to release it. But I think there may be a tendency for people to underestimate how much runway we also have just in the existing gaming business. There's a lot of properties out there.

Spenser Allaway -- Green Street -- Analyst

Okay. And how do you guys balance that? Keeping the focus on your core competency that's gaming, but also keeping an eye on that longer-term reality that you just alluded to and the fact that you might eventually have to underwrite credit outside of gaming, and you obviously don't want to fall too far behind in terms of your peers going out and taking a lead on that. So how do you balance that in the meantime?

James C. Stewart -- Chief Executive Officer

It's a question of where you get the most bang for your buck, where do you get the most accretion for the leased cash out the door on -- but still ensuring that your quality threshold gets balanced. I think, if anything, this case study of COVID-19 has provided us is the absolute strength and resiliency of the gaming business as opposed to some of these others. That's not lost, I think, on our own investors and on the management team here. And in terms of trying to keep up with someone else, the extend the deal is smart to do, we want to do it, but that is the absolute last thing that we would want to try to instill in the corporate culture here because I think what that would generate is a mentality of kind of just a me too mentality when you go out and try to do something else for the sake of doing it as opposed to a prudent underwriting of any single asset to hit the metrics that I just mentioned here.

So the balancing really comes to you have -- we have right now, great access to capital, it's reasonably priced, many things look attractive, given that you have finite time and resources, and ultimately, capital at these levels, where do you get the most AFFO accretion, provided that you're -- you don't -- that you are maintaining your quality and durability thresholds.

Spenser Allaway -- Green Street -- Analyst

And then maybe just one last one, if I may. Just going back to the headlines around Las Vegas Sands, why should we not see this as a negative REIT to Las Vegas, given how prominent players are potentially looking to exit from assets?

James C. Stewart -- Chief Executive Officer

Well, one, $6 billion in the bank for someone if they can actually achieve that price would be -- is pretty attractive and really would be an incredible checkmark for the place. Two, if you look at their business model, they really have been the company that is willing to spend very significant amounts of money, for example, in Macau, in Singapore, initially here in Vegas in their Vegas property, although not compared to those two other opportunities and they are a very, very savvy group who takes the risks on things like that and then reaps the rewards. And then Macau and Singapore investments are prime examples of that. Their facility here that's already up and running and generating very high cash flows, doesn't have those types of characteristics. I'm speculating into looking at that because it's not like I have any kind of knowledge on it, but beyond sort of knowing the industry, but it's just -- that's the nature of the company.

Operator

And our next question will come from Robin Farley with UBS. Please go ahead.

Robin Farley -- UBS -- Analyst

Just kind of circling back to the question of the LVS Vegas assets that they've confirmed thar are for sale. Can you characterize for us kind of what the level of interest is out there with operators that might be looking at those assets that would want a REIT partner? And obviously, some other REITs have set out, right, that they're not really interested in getting more Vegas exposure. So I would think that you would be involved in any conversation with an operator that was thinking about buying those assets because that would enable a more competitive bid than somebody not partnering with the REIT. So can you give us a sense of kind of what the level of interest is out there from operators that are trying to speak to you about this? And just trying to get a sense of that.

James C. Stewart -- Chief Executive Officer

We can't comment on any kind of speculative deal or news. So I'll just leave it at that.

Robin Farley -- UBS -- Analyst

But I mean, it's not -- I mean is it reasonable to think that you would be having very active conversations at this point?

James C. Stewart -- Chief Executive Officer

I have to throw back to my prior answer. Can't comment on it, Robin.

Robin Farley -- UBS -- Analyst

Maybe one other kind of related question, which is just thinking about obviously, any kind of transaction, you'd have to be thinking or a buyer, would have to be thinking about when could the property get back to kind of what 2019 levels look like? And I'm just curious, in your view -- not that you're the buyer here, but just your view, you own Vegas assets and have a great view in that market. What kind of time frame would you think Vegas assets would take to get back to the EBITDA levels they saw in 2019?

James C. Stewart -- Chief Executive Officer

Andy, you want to take it?

Andy H. Chien -- Chief Financial Officer

Sure. Robin, I think it's pretty dependent on really the group's business coming back in town. As we've seen some of the Q1 conventions gone virtual or delayed to later in the year, I think it's a question of when people have the confidence to start coming to those larger meetings. And look, the industry is being very creative. Governor lifted meeting room to 250, but if you can separate a larger convention into groups of 250, then you can certainly have those on-site here. I think that will start to bring back some of the meetings. And I don't think we quite hit that stride until hopefully crossing our figure later in 2021. And certainly, some of the expense reductions that we've seen throughout the industry, regions, corporate -- the corporates, I think that nears the benefit of Vegas as well, Vegas destination once all of the businesses are kind of back online. And so if it's a latter half 2021 and then into 2022, I think that's certainly potentially in the cards. And if some of those expense reductions hold across the corporations and then flow through to Vegas destination, I think we could potentially see a 2019 return sooner than that given the margin improvements we've seen throughout the space.

Robin Farley -- UBS -- Analyst

Sooner than -- I'm sorry, because you had mentioned earlier in your comment about group business coming back later half 2021 into 2022. Is that what -- when you say sooner than -- you mean your expectation is that EBITDA would get back in 2022 to 2019 levels?

Andy H. Chien -- Chief Financial Officer

Potentially, right? And it all depends on the timing as well as what kind of margin improvements there are and what's sustainable. And as operators have shown through time, they've been very creative on finding new uses for space as well as introducing new processes, new concepts to be able to drive incremental profitability and people into the buildings. Starting with the sports opportunity online, that's something that did not exist in any 2019 numbers really. And so that's another level that could add to that and get us back to 2019.

Robin Farley -- UBS -- Analyst

Maybe if I could ask kind of one more. The reason I was asking that question about -- just given your earlier comments in the call, James, it might have been your comment when you were talking about -- you're willing to have a three-way conversation, but that a transaction with 2 parties is easier than with 3 parties. Just thinking about the size of a potential transaction just based on the numbers that have been reported widely for potential LVS Vegas assets, it seems like that would be something that would likely be done with the joint venture partner, just given the size of that. So I'm trying to square that with your comment that sounded like you're kind of not necessarily doing anything -- not looking to do anything with -- in a joint venture structure.

James C. Stewart -- Chief Executive Officer

We look at every type of financing tool that one can have when looking at a deal. For smaller deals, almost certainly, unless there's some other advantage that comes to the joint venture partner, it's easier for us just to finance in the bank bond or equity markets. For bigger ones, such as the Grand, I think it made a lot of sense to joint venture on that. And when I was commenting earlier, I was commenting on where I thought a deal -- would a deal happen within the existing JV versus the master lease, I mean it's easier in the master lease because you have one party. And that was really yet. So it wasn't meant to be any kind of comment on any specific deal or anything like that. The bigger the size, the more likely a JV partner, just given the need for a larger amount of capital. But if it's inefficient capital, then you would not use it.

Operator

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

James C. Stewart -- Chief Executive Officer

Thanks, Chuck. I would like to thank everyone for joining the call. I look forward to speaking to you again through this next quarter and our next call.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Andy H. Chien -- Chief Financial Officer

James C. Stewart -- Chief Executive Officer

Rich Hightower -- Evercore -- Analyst

Shaun Kelley -- Bank of America -- Analyst

Joe Greff -- JP Morgan -- Analyst

John DeCree -- Union Gaming -- Analyst

Jared Shojaian -- Wolfe Research -- Analyst

Barry Jonas -- Truist Securities -- Analyst

John Massocca -- Ladenburg Thalmann -- Analyst

Thomas Allen -- Morgan Stanley -- Analyst

Jay Kornreich -- SMBC -- Analyst

Smedes Rose -- Citi -- Analyst

Spenser Allaway -- Green Street -- Analyst

Robin Farley -- UBS -- Analyst

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