MGM wants to get lighter

MGM continues to look to shed properties, as Bloomberg is reporting that MGM Resorts International and MGM Growth Properties LLC, a real estate investment trust spinoff, are looking for an investor to buy the MGM Grand and Mandalay Bay.

Bloomberg’s sources provided little detail and MGM Growth Properties did not comment on the matter, but Bloomberg said the deal MGM Resorts and MGM Growth are looking for with an investor is some sort of joint venture. It would almost certainly involve a lease-back structure.

Bellagio, Circus Circus already sold

Last month, MGM Resorts International agreed to sell Circus Circus and Bellagio, part of the company’s ongoing move toward being “asset light.” It wants to get out of the real estate business and focus more on its gambling operations.

Circus Circus was sold to Phil Ruffin, who bought Treasure Island from MGM a decade ago. Ruffin acquired Circus Circus, a 10-acre RV park, and a 37-acre festival grounds adjacent to the casino and hotel for $825 million. $662.5 million of that is cash, while the rest is payable via a note due in 2024.

Bellagio, one of the most prominent casinos in the world of poker, was sold to a joint venture comprised of MGM Resorts and Blackstone Real Estate Income Trust for $4.25 billion. The property will then be leased back to MGM for $245 million per year. MGM will keep operating the Bellagio, so the customer experience will likely remain unchanged.

In a press release at the time, MGM briefly explained the “asset-light strategy”:

MGM Resorts is evolving its business model away from primarily a capital intensive, brick & mortar real estate business towards a developer, manager and operator of leading gaming, hospitality and entertainment properties.

One could reasonably guess that the joint venture MGM Resorts and MGM Growth are seeking with a third party will work something like the Bellagio deal.

MGM owns almost no casinos

MGM Grand and MGM Springfield (Massachusetts) are the only two casinos MGM Resorts International still owns completely. It also has a 50 percent stake in CityCenter.

MGM Growth Properties, which is 68 percent owned by MGM Resorts, owns 13 casinos:

Beau Rivage
Borgata Hotel Casino and Spa
Yonkers Raceway & Empire City Casino
Excalibur Hotel and Casino
Gold Strike Tunica
Luxor Las Vegas
Mandalay Bay
MGM Grand Detroit
MGM National Harbor
MGM Northfield Park
The Mirage
New York-New York Hotel and Casino
Park MGM

A major reason that MGM Resorts is shedding real estate is to raise money for its charge into Japan. The country recently legalized casino gambling and has three licenses available. MGM is considered a front-runner for one of the licenses. It plans on building a $10 billion resort in Osaka.

Regardless of the way a deal is done, it is widely expected that MGM will sell the MGM Grand by the end of this year.

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