The fire sale at MGM Resorts Int. continues, even after the offloading of two of their most prized venues – the Bellagio Las Vegas and Circus Circus Las Vegas. On multiple occasions, the gaming giant’s representatives stated that the company wants to acquire more liquid assets to fund two main goals – nationwide sports betting rollout and the launch of an integrated resort (IR) in Osaka, Japan. There’s a lot at stake here, but there’s a catch.
MGM has signed two lease-back agreements for the aforementioned properties, giving them more than enough room to maintain their quality of service. Now, they’re exploring options for the sale of two more venues, the MGM Grand Las Vegas, in addition to the Mandalay Bay Resort and Casino Las Vegas. There’s no information pertaining to the duration of the solicitation period, but interested parties are bound to be plentiful.
Everything Has to Go
In an attempt to liquify some of its assets, MGM expressed a desire to shed many landmark properties in Sin City. The main reason for this change of strategy has a lot to do with shareholders expecting some kind of return in the near future. Additionally, MGM has aspirations to pull off a country-wide sportsbook rollout, something that the operator’s customers have been waiting for. This is without even mentioning the attempt to become the first and most esteemed casino brand in Japan, as they’ve recently legalized casino gambling.
Investors have welcomed this decision with open arms and suitors were easy to find, from the get-go. First, MGM agreed to sell the Bellagio Las Vegas on a 30-year lease-back deal, which would net them approximately $4.2 billion, effective immediately. The purchasing party is none other than Blackstone Group LP, one of the most reputable private equity firms on the East Coast The next domino to fall was Circus Circus Las Vegas, bought by Phil Ruffin for a cool $825 million. Ruffin also owns the Treasure Island Las Vegas venue.
New Goals in Sight
James Murren, the CEO of MGM Resorts Int. reiterated his company’s desire to sell even more properties. While they would be paying a significant amount of money in renting fees (close to one billion, to exact), they are getting an immediate return in the form of a financial injection from proven trade partners. Everyone expected it to be a fire sale, but a Bloomberg report caught everyone off guard. The piece touched on the rumors that MGM will be offloading the MGM Grand Las Vegas and Mandalay Bay, as soon as they manage to attract worthy suitors. With several new casinos set to open before 2022, land in Vegas has become an even hotter commodity than it usually is. MGM has timed its change in direction perfectly, as the newly-adopted progressive policy doesn’t take a long time to be executed properly.
However, everything depends on how much money will MGM needs for its new ventures? In 2016, the company created MGM Growth Properties, a real estate investment trust (REIT), designed to operate, oversee and lease-back most existing properties. In total, the brand has 13 properties under its ownership, which some shareholders deemed unnecessary as there wasn’t a focus on expanding into different niches in the gaming industry. Multiple sources say that international expansion is “on the menu” and that the Osaka license is “MGM’s to lose”. Osaka officials, on the other hand, hope that the new IR will be open before the scheduled World Expo, set to take place in this iconic city.
The MGM Grand Las Vegas is known as the biggest hotel in the United States, boasting just under 7,000 rooms. It’s considered to be MGM’s “flagship” resort, and also the one with the highest reputation. The Mandalay Bay Resort and Casino Las Vegas aren’t far behind, as it provides a total of 4,752 rooms for its mainly international clientele.
Due to the sheer importance of these properties, it’s expected that MGM will drive the price way up, as it can cut deals and conveying a sense of urgency during negotiations with potential buyers. Most reports indicate that both properties will be gone before the end of 2019.
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