Activist Investor 'Pleased' With Recent Gains In MGM Growth Properties' Stock

Land and Buildings, an activist investor and large shareholder of MGM Resorts International MGM was successful in forcing the company to split its real estate assets into a controlled REIT named MGM Growth Properties LLC MGP

The newly-created entity began trading for the first time on Wednesday. After pricing its IPO as high as $21 per share, shares opened for trading at $22.75.

Land and Buildings commented on the stock's successful trading debut in a letter on Thursday. The activist investor said it's "pleased" with the opening price which represents an approximate 14x 2017 EBITDA multiple.

"We first pointed out in March 2015 that MGM's real estate was deeply undervalued as part of the parent company. MGM REIT's IPO confirmed our position," the letter said. "We believe MGM Resorts likely has over 40% upside from its current share price to fair value based in part on the valuation at which MGM REIT is trading."

The letter continued that the issue's public offering also marks a "significant positive development for shareholders" as it improves corporate governance and eliminates the overlap among the Board and management teams of both companies.

"We are gratified to have played a role in this value creation opportunity, and would hope the Board of Directors and management teams of MGM Resorts and MGM REIT to continue to explore ways to enhance value," the letter concluded.