Two more iconic properties sold

MGM Resorts International announced on Tuesday that it has agreed to sell both the MGM Grand Las Vegas casino and the Mandalay Bay. The total value of the deal is approximately $4.6 billion.

The sale of MGM Grand is the most heavily-covered part of the deal in MGM’s press release. A joint venture between MGM Growth Properties LLC, a publicly traded REIT spun off from MGM Resorts International in 2016, and the Blackstone Real Estate Income Trust will acquire the MGM Grand. This portion is valued at about $2.5 billion, which consists of $2.4 billion in cash and $85 million in MGM Growth Properties “operating partnership units.”

Additionally, for up to 24 months after the deal closes, MGM Resorts can sell $1.4 billion worth of its partnership units to MGM Growth. The company says that it plans on doing so early during that period. These partnership units are essentially shares in MGM Growth Properties. If MGM Resorts does sell the $1.4 billion chunk, it will take its ownership share of MGM Growth from 68 percent down to 55 percent.

The joint venture will be nearly split down the middle, owned 50.1 percent by MGM Growth and 49.9 percent by Blackstone.

“These announcements represent a key milestone in executing the Company’s previously communicated asset-light strategy, one that enables a best-in-class balance sheet and strong free cash flow generation to provide MGM Resorts with meaningful strategic flexibility to create continued value for our shareholders,” said Jim Murren, Chairman and CEO of MGM Resorts, in Tuesday’s announcement. “As such, we remain determined to prudently pursue accretive opportunities related to our remaining owned real estate assets including MGM Springfield, our 50% stake in CityCenter and our 55% economic ownership in MGP (pro forma for the potential $1.4bn redemption).”

Oddly, the sale of Mandalay Bay is almost just a foot note in the press release. Less than a sentence is devoted to the deal for that property on the south end of the Strip. The joint venture will lease both casinos to MGM Resorts for $292 million (per year, one would assume).

Just the latest sales for MGM

This deal is very similar to the one MGM entered into in October 2019 in which it sold Bellagio and Circus Circus for just over $5 billion combined. Bellagio was sold to Blackstone, again in a joint venture with MGM. MGM agreed to lease the property from the joint venture for $245 million per year, while also keeping a 5 percent stake in the property.

Circus Circus was sold to Phil Ruffin, who bought Treasure Island from MGM about a decade earlier. Ruffin acquired Circus Circus, a 10-acre RV park, and a 37-acre festival grounds adjacent to the casino and hotel, for $825 million.

As Jim Murren said, it is all part of MGM’s “asset-light” strategy, in which it has shed itself of almost all of its properties while at the same time continuing to operate them via lease-back agreements. The company plans to use the money to grow its sports betting and entertainment business, as well as develop a casino in Japan.

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