MGM sellsBellagio and rents it back from a joint-venture with Blackstone Real EstateIncome TrustBellagio dealhelps execute the company’s asset-high strategyFlexibilityremains chief priority for MGM as the company relieves itself of debt
MGMsells both the Las Vegas Bellagio and Circus Circus Las Vegas casinos in a bidto boost operational flexibility, and possibly prepare for an expansion inJapan.
MGM Resorts Pushes Ahead with Bellagio Deal
OnTuesday, October 15, MGM Resorts International revealed two flagshipdeals – one involving a joint-venture with Blackstone Real Estate Income Trustfor the sale and lease of the Las Vegas Bellagio Hotel, and one for thesale of Circus Circus Las Vegas Strip Casino for $825 million.
In the first deal, MGM Resorts agreed to form a joint-venture with Blackstone Real Estate Income Trust and then lease back the Bellagio to MGM Resorts in a deal that amounted to $4.2 billion. As a result, the MGM subsidiary will be expected to pay $245 million annually for renting the property.
MGMwill hold 5% of the equity in the joint-venture, as the company tries tostreamline its portfolio and dump debt that investors have been lucky to lap upfor the sake of owning prime piece of real-estate on The Strip.
MGM is expecting to push ahead with plans to establish an Integrated Resort (IR) in Japan, which will need an estimated capital of at least $5 billion to develop a project in Osaka, one of the main prefectures, on time.
While it may seem counter-intuitive to drop ownership of the property and then rent it from another company, MGM said that this move came after a careful review of real estate portfolio, overall valuation and operational potential. Here’s what MGM said about the Bellagio deal in an official press release:
“MGM Resorts is evolving its business model away from primarily a capital intensive, brick and mortar real estate business towards a developer, manager and operator of leading gaming, hospitality and entertainment properties.”
Bellagio Deal Boosts Operational Flexibility
Bellagiowas the other flagship deal that was announced and sealed on Tuesday. Itpertained to the sale of the property for the total value of $825 million to anaffiliate of Treasure Island owner Phil Ruffin.
MGMResorts CEO Jim Murren, who arrived just a month ago on the MGM board,felt the need to explain the deal: “MGM Resorts has engaged in an exhaustiveprocess to evaluate its owned real estate and remains committed to executingits asset-light strategy i 7BALL n a measured way that maximizes value for itsshareholders.”
Murrencited MGM’s focus on operational flexibility as an absolute priority, whichonce again hinted about future investment moves that would probably relate to Japan.
