MGM Resorts reduced its ownership stake in its real estate investment trust Wednesday, adding $700 million in cash to its balance sheet – cash that, one analyst suggested, could help fund growth efforts for the company’s expanding sports betting venture.
The payment from real estate investment trust MGM Growth Properties reduced the casino company’s ownership stake to 53%. MGM Growth owns the land and real estate of eight Strip properties and 15 properties in total covering eight states, all of which are managed by MGM Resorts.
“Today’s announcement reflects our continued focus on enhancing our balance sheet to strengthen our financial flexibility,” MGM Resorts CEO Bill Hornbuckle said in a statement.
MGM Resorts plans to use the $700 million in proceeds from the stock sale for “general corporate purposes.” As of Sept. 30, the Las Vegas-based company has $5.9 billion of liquidity on its balance sheet.
Macquarie Securities gaming analyst Chad Beynon said the company now has a “cash cushion” that can be used to pay down debt – MGM Resorts had more than $11.4 billion in debt on its balance sheet at the end of September – or to enhance the operations of BetMGM. That sports betting venture, a 50-50 partnership with GVC Holdings, is now live in eight states and expects to be in three more by the end of the year.
“The venture has recently gained market share and is impressively (in the) top three market share in all live markets,” Beynon said.
MGM Resorts has reduced its ownership in MGM Growth from a high of 73% when the REIT was launched. The company stated two years ago that it ultimately wants to reduce its ownership stake to roughly 30%.
MGM Resorts continues to own real estate, including its ownership of MGM Springfield in Massachusetts, a 50% ownership in the Las Vegas Strip’s CityCenter development, and a 56% ownership in MGM China, which includes two resorts.
Hornbuckle said the COVID-19 pandemic continues to impact the company’s operations at its properties across the U.S.
“We believe the opportunistic exercise of our redemption right as well as our recent senior notes offering allow us to continue pursuing our strategic goals while navigating the crisis,” Hornbuckle said.
MGM Growth does not have any debt maturities until 2023. MGM Growth had $3.55 billion in long term debt as of Sept. 30.
In November, analysts asked the REIT’s management whether there was any interest in acquiring two resorts and a convention complex on the Strip operated by Las Vegas Sands. The company had reportedly been in talks to sell The Venetian and Palazzo, seeking at least $6 billion for the hotel-casinos and the Sands Expo and Convention Center.
MGM Growth CEO James Stewart told analysts the REIT would consider adding another Strip resort as long as the company has a suitable partner.
“Our recent capital raise will allow us to fully fund this final redemption under the waiver agreement with cash on hand, while still maintaining a balance sheet positioned for future growth,” Stewart said in a statement Wednesday.
Shares of MGM Growth closed at $31.46 on the New York Stock Exchange Wednesday, down 9 cents or 0.29%. MGM shares, also traded on the New York Stock Exchange, closed at $29.35, up 54 cents or 1.87%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
