Casino operator MGM Resorts International and its real estate investment trust MGM Growth Properties LLC are reportedly seeking an investor to form a joint venture that would own the company’s MGM Grand and Mandalay Bay casino resorts in Las Vegas.
According to people familiar with the ongoing talks, MGM and its REIT have been looking to channel interest from investors that have historically been attracted to casino assets.
MGM and MGM Growth Properties have not commented on the latest round of news relating to the Las Vegas casino operator’s plans for the future of its properties.
MGM’s REIT spun off from the main company in 2016. MGM Growth Properties owns most of MGM’s hotel and casino resorts and leases them back to the operator to run them.
News about MGM seeking investors to purchase the real estate assets of MGM Grand and Mandalay Bay emerged just over a month after the company sold the Bellagio to New York financial services firm The Blackstone Group in a $4.2 billion deal. The property’s new owner will lease it back to MGM for an initial rent of $245 million a year.
MGM has also recently sold its Circus Circus property to Treasure Island owner Phil Ruffin for $825 million.
Becoming an Asset-Light Company
MGM’s CEO, Jim Murren, said during the company’s latest earnings call that they expected to announce a buyer for their MGM Grand casino resort by the end of the year. The executive also explained that the latest transactions as well as any future ones would help his company gain a more flexible financial structure and better capitalize on its strengths as a developer and manager of casino resorts.
Mr. Murren revealed that they were also in the process of evaluating the sale of MGM’s remaining sales, including CityCenter in Las Vegas, a joint venture the casino operator had formed with investment firm Dubai World that also includes ARIA Resort & Casino.
The recent sale of properties and future deals are part of MGM’s strategy to become an asset-light company and to build a “fortress balance sheet.”
MGM is seeking to raise capital for its planned integrated resort in Japan. The company is eyeing Osaka as the potential host of its property and has said that investment in that project could go all the way up to $10 billion or even more.
Mr. Murren said last month that when they offload MGM Grand, they would use proceeds from the sale to reduce debt and invest in net growth opportunities. Aside from Japan’s nascent casino market, MGM has also shown big appetite for expanding in the rapidly growing US sports betting field.
Last year, the company formed a joint venture with Isle of Man-based gambling group GVC Holdings to jointly explore growth opportunities in states where athletic wagering is legal or poised to become legal.
Source: MGM Seeks Investors for MGM Grand, Mandalay Bay Venture, Bloomberg
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