MGM Resorts International and real estate giant Blackstone closes the companies’ $4.25 billion sale and leaseback of the Bellagio Monday, putting the Las Vegas Strip resort under new ownership but leaving the current operations staff and management in place.
The transaction was announced roughly a month ago.
A joint venture that is 95% owned by Blackstone Real Estate Investment Trust, a subsidiary of the New York-based Blackstone, will own the land and real estate associated with the hotel-casino. MGM Resorts, which owns 5% of the joint venture, will pay annual rent of $245 million.
MGM Resorts “continues to manage, operate and be responsible for all aspects of the property on a day-to-day basis,” according to the three-paragraph statement.
On the same day the Bellagio transaction was announced, MGM also said it had agreed to sell Circus Circus Las Vegas to rival casino operator Phil Ruffin for $825 million. That deal is expected to be reviewed by Nevada gaming regulators next month and could close before the end of the year.
MGM Resorts Chairman and CEO Jim Murren has said the net proceeds from the transactions – roughly $4.3 billion after taxes – go directly to MGM’s balance sheet, allowing the casino giant to reduce a portion of its $15 billion in long-term debt and allow the company to focus on “high growth potential” opportunities.
“These transactions make us far less vulnerable in any global economic cycle,” Murren told The Nevada Independent a day after the deals were announced. “We’re late in that economic cycle and we need to be prepared for the unforeseen.”
The casino sales had been rumored for months and didn’t take the investment community by surprise. MGM Resorts announced in January it had formed an ad-hoc committee of its board that was tasked with evaluating the company’s real estate both on the Las Vegas Strip and in regional markets.
Murren said the potential for other casino sales and leasebacks allows MGM to continue to “unlock and monetize” the value of its real estate.
During the company’s Oct. 31 third quarter earnings conference call, Murren said a similar sales-leaseback for the flagship MGM Grand Las Vegas could be announced before the end of the year. He said the Bellagio deal was a model he would like the company to follow.
#exclusive – MGM, Blackstone complete $4.25B sale-leaseback of Bellagio. –@howardstutz, CDC Gaming Reports. https://t.co/LeCYjAuTtv @MGMResortsIntl @Bellagio @blackstone #CDCgaming
— CDC Gaming Reports (@CDCNewswire) November 18, 2019
“The Bellagio real-estate transaction represents more to us than a smart financial deal,” Murren said during a question and answer session with analysts. “It provides a likely blueprint for the future.”
Murren said the deal for the Bellagio – which he called the company’s “most valuable asset” – set the tone for a sale-leaseback of MGM Grand Las Vegas, which was the company’s first resort when it opened in 1993. In the third quarter that ended Sept. 30, Bellagio had revenues of $333.8 million and MGM Grand had revenues of $318.3 million, the highest of any of the company’s wholly owned resorts.
Shares of MGM closed at $31.53 on the New York Stock Exchange Monday, up 35 cents or 1.12%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
