MGM Resorts International announced on Tuesday that it has sold two of its Las Vegas Strip casinos: Circus Circus and Bellagio. The combined sales price of the two properties is $5.075 billion.
The agreement to sell Circus Circus, one of the mainstays of the north end of the Strip, was rumored to have been in place a month ago, but there was no official announcement until yesterday. Acquiring the property is Phil Ruffin, who previously bought Treasure Island from MGM ten years ago.
For $825 million, Ruffin gets Circus Circus, a 10-acre RV park, and a 37-acre festival grounds adjacent to the casino and hotel.
“Circus Circus has anchored the north end of the Las Vegas Strip for over 50 years, and I am excited to add it to my casino portfolio,” said Ruffin. “I have tremendous respect for Jim Murren and the MGM team, and my relationship with them goes back to my friendship with Kirk Kerkorian and continues to this day.”
$662.5 million of the purchase price will be paid in cash, while the rest will be paid via a note due in 2024.
Then there is the Bellagio, one of the most iconic casinos in the world. This deal is a little more complicated. In it, MGM has formed a joint venture with Blackstone Real Estate Income Trust. That joint venture has agreed to acquire Bellagio from MGM for $4.25 billion and then lease it back to a subsidiary of MGM for $245 million per year.
MGM Resorts will continue to operate Bellagio while paying rent and will maintain a 5 percent equity stake in the property.
MGM Resorts International Chairman and CEO Jim Murren said of the deal:
This transaction confirms the premium value of our owned real estate assets, highlights the unique value of Bellagio as a premier asset in gaming and solidifies our status as a premier operator of gaming and entertainment properties. We will use the proceeds from this transaction, together with the proceeds from the pending sale of Circus Circus Las Vegas, to build a fortress balance sheet and return capital to shareholders. By the end of 2020 we intend to have domestic net financial leverage at our operating properties of approximately 1x.
MGM calls these the first steps in its “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,” the company said in a press release.
The company mentioned that the cash injection will help it in its pursuit of a gaming license in Japan. In September, Bloomberg reported that MGM was looking to shed Bellagio and MGM Grand in order to raise money for a $10 billion resort in Osaka, Japan. It is competing for one of three licenses in the country.
It has not yet sold MGM Grand and still controls MGM Springfield, a 50 percent stake in CityCenter, and 68 percent of MGM Growth Properties.
Both the Circus Circus and Bellagio sales are expected to close in the fourth quarter of 2019.