Recently, the Blackstone Group purchased the Bellagio Hotel & Casino from MGM Resorts for a whopping $4.2 billion, but the sale terms include a leaseback.
This type of deal isn’t new at the Strip. This trend has been there for the last seven years, and analysts anticipate that the casino leaseback fad will continue in Las Vegas. Other companies will likely follow MGM’s example as they realize the method’s profitability.
The move by MGM Resorts will help enlarge the company’s foreign investment capacity.
Why MGM Sold the Bellagio
As one of the largest and successful casino companies around the globe, MGM owns and runs several Las Vegas’ hotel-casinos such as Mandalay Bay and Mirage. Recently, the company disclosed that it is intending to sell some of its greatest investments in the city.
Shortly after selling Circus Circus Hotel & Casino for $825 million, MGM also sold the Bellagio, a very prestigious spot on the Strip.
However, the Blackstone Group will lease the hotel-casino back to MGM at an annual cost of $245, allowing the latter company to continue operating it.
Analysts’ predictions reveal that casino leasebacks might become more common with time.
More Casino Leasebacks Could be on the Way
As Las Vegas’ property values continue to shoot upwards, hotel-casino owners are now opting to venture overseas.
Specifically, Japan is a very enchanting destination for several casino operators. With the Japanese government set to hand out only three licenses for the business, the country could soon become the globe’s third-largest casino market, as reports say.
The foreign investments need capital generation, casino leasebacks being the best option. Some companies already have an interest in the strategy.
Union Gaming’s betting analyst, John DeCree, said that property investors are now realizing that the casino industry is a feasible and steady investment.
Eldorado Resorts Could Soon Sell Properties in Las Vegas
Eldorado Resorts reported that it was using at least $17 billion to acquire Caesars Entertainment. Historically, no two casino companies have ever made a merger that big.
Currently, Eldorado is considering new revenue-generating ways to compensate for the astronomical purchase price.
Eldorado’s CEO Tom Reeg said, “Caesars has a lot of excess real estate both in and out of Las Vegas that could be used for future development, both for ourselves or in a partnership.”
Although he did not specify the properties the company would sell, the deals will likely be similar to that of MGM.
More sale-leaseback agreements are anticipated as more big firms seek to raise capital for overseas investments and upcoming businesses seek to own properties in Las Vegas.