MGM Resorts International announced that it’s selling two casinos on the Las Vegas Strip, including their staple, Bellagio. The property will be sold to New-York based company Blackstone. According to MGM representatives “the property will hold a 5% stake in the venture and $4.2 billion cash and will continue to operate the hotel and casino, which it will rent from the venture for $245 million a year. The transaction values Bellagio at $4.25 billion.” MGM will separately sell, Circus Circus, its other Strip casino, to Phil Ruffin, the current owner of Treasure Island Las Vegas. The deal is estimated at $825. The latest property sales come in efforts from MGM Resorts to liquidate real-estate determined to pay down their debts. “The sale will free up cash, offering MGM flexibility to operate in new and different ways,” said MGM Resorts Chairman and CEO Jim Murren.
MGM liquidating real-estate for cash
MGM-operated Strip properties including Park MGM, Mirage and Mandalay Bay, as well as all the MGM Resorts regional properties, have all been managed by MGM Growth Properties, a real estate investment trust founded by MGM Resorts back in 2015. MGM representatives reveal that the company is looking to expand into sports betting, entertainment, and would also like to expand on their international presence. Furthermore, they want to focus their attention on countries such as Japan, where recently gambling has been legalised in various locations.
“That is a better use of our capital resources than the traditional gaming model,” said Mr Murren. It is worth mentioning that “MGM Resorts still owns MGM Grand in LAs Vegas, MGM Springfield in Massachusetts, a 50% stake in City Centre Las Vegas and have 68% ownership over MGM Growth Properties,” according to the Wall Street Journal.
The Bellagio seen as a more stable investment for Blackstone
The Bellagio will be the second Las Vegas Strip property owned by Blackstone, following their 2014 acquisition of the Cosmopolitan hotel and casino. Blackstone paid $1.7 billion for the Cosmopolitan and invested an additional $500 million to renovate it. Currently, the hotel has one of the highest room rates on the Strip, soon to be sold for $4 billion. A great return on investment if you ask us! Although the Bellagio particularly represents a different type of investment, since MGM will continue to operate the property while Blackstone will act as the landlord leasing out the place. “Owning the Bellagio under a long-term lease with MGM provides stable cash flow and excellent downside protection for the asset,” said Tyler Henritze, head of U.S. acquisitions for Blackstone’s real-estate group.