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MGM Resorts offloads more properties

Thu, Jan 16, 9:25pm by Ethan Anderson

Casino giant MGM Resorts International has offloaded two more Las Vegas properties as part of its strategy to become an asset-light company as it seeks to strengthen its balance sheet.

Casino News Daily reports the gambling company said this week that its real estate investment trust, MGM Growth Properties, has entered into a definitive agreement with Blackstone Real Estate Income Trust to form a joint venture and acquire the real estate assets of MGM Grand and Mandalay Bay.

MGP spun off from MGM in 2015, while BREIT is an entity of New York financial giant The Blackstone Group.

Under the terms of the recently agreed acquisition, MGP and BREITs joint venture will take over the real estate assets of premier Las Vegas Strip resorts MGM Grand and Mandalay Bay in a deal that values the two properties at $4.6 billion.

MGP will own 50.1 per cent of the joint venture, while BREIT will own the remaining 49.9 per cent.

The transaction is expected to close by the end of this quarter, subject to certain customary conditions.

Once the deal is finalised, MGM will enter into a long-term triple net master lease for the two major casino resorts and will remain responsible for their day-to-day operations and provide their new owners with annual rent payments.

The initial annual rent will be $292 million.

Together, MGM Grand and Mandalay Bay feature 9.743 hotel rooms and suites, more than three million square feet of meeting space, and approximately 300,000 square feet of casino space with diverse gambling options.

The sale of MGM Grand and Mandalay Bay did not come as a surprise as MGM revealed last year that it was in talks with suitors who were interested to purchase the two marquee properties.

It emerged this past November that MGM and its REIT were looking to channel interest from companies that have been historically interested in Strip resorts and that a buyer for MGM Grand and Mandalay Bay could be announced by the end of 2019.

It should also be noted that Blackstone emerging as the buyer of the two casino resorts did not come as a big surprise.

The financial group purchased MGM’s Bellagio last year in a deal that valued the iconic property at $4.2 billion.

In a similar manner, MGM and the property’s new owner entered into an agreement that enabled the casino operator to remain responsible for the day-to-day operations of the resort in exchange for an initial annual rent of $245 million.

MGM’s REIT focuses on the acquisition, ownership, and leasing of large-scale resorts.

Its portfolio currently includes The Mirage, Excalibur, Luxor, New York-New York and Park MGM.

It also owns Mandalay Bay’s real estate.

As for MGM Grand’s real estate, it is currently owned by MGM itself.

MGM offloads Vegas’ Bellagio

One of Las Vegas’ most glamorous resorts has been sold.

The Star Advertiser reported in November that The Bellagio was sold for $4.2 billion to Blackstone Group, the owners of the Cosmopolitan of Las Vegas.

The seller, MGM Resorts International, will retain a five per cent ownership stake and continue to operate the hotel and casino for Blackstone, meaning that nothing much will change in the short term.

The $4.2 billion price tag implies Blackstone is paying 17.3 times the annual rent of $245 million.

“This transaction confirms the premium value of our owned real estate assets, highlights the unique value of Bellagio as a premier asset in gaming and solidifies our status as a premier operator of gaming and entertainment properties,” MGM chief executive officer Jim Mruren said in a statement.

The deal is expected to close in the current quarter.

In the statement, MGM noted that the sale of Circus Circus, located at the north end of the Strip is “pending” and that divesting that property and Bellagio would result in gross proceeds of $5 billion and after-tax cash of $4.3 billion for the company.

Earlier this year, analysts forecast that on a pre-tax basis, Sales of Bellagio and MGM Grand could command $6 billion to $7 billion, indicating the latter could fetch up to $2.8 billion should that venue be sold.

After unloading Circus Circus and the Bellagio, MGM is seeking buyers to take on Mandalay Bay and MGM Grand.


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