MGM Resorts International has grown over the years to become one of the biggest players in Las Vegas. The name itself conjures up images of luxury hotel and casino properties up and down the famous Las Vegas Strip.
While MGM Resorts continues to maintain its lofty status, it is also looking to shed some of its vast holdings. According to a post on www.wsj.com, the company still has some Las Vegas Strip properties on the block. The company reported a third quarter loss related to the recent sale of Circus Circus. There were some impairment costs that dragged those numbers down.
The parent company of MGM Grand is trying to close a deal on that property by the end of the year. Earlier in the month of October, it also completed a sale-leaseback arrangement for the Bellagio. This is all part of a strategy to pull some cash out of its real estate holdings. This was confirmed by company officials at the end of last month.
The net cash generated from the Circus Circus and Bellagio deals is estimated to be $4.3 billion. MGM Resorts is also trying to lighten the number of expensive assets on its books. There is talk that both Aria and Vdara in Las Vegas could be sold. Other properties mentioned were MGM Springfield as well as the non-gambling entity MGM Growth Properties.
Another motivating factor is a potential move into the new Japanese casino market. There is speculation the cash could be funneled towards its integrated resort plans in that country. Other funds from this massive sell-off could be used to bolster the return to its investors.
The Bellagio was sold to the Blackstone Group for an estimated $4.2 billion. MGM will maintain a five percent stake in the property. It will also pay $245 million in annual rent to operate the casino resort.
Circus Circus was bought by Phil Ruffin for $825 million. He is also the owner of Treasure Island on the Las Vegas Strip.
The past deals like the one for the Bellagio could be the blueprint for the sale of MGM Grand. Jim Murren is the CEO and chairman of MGM Resorts International. He commented on the company’s new strategy in a recent call with investors. Pertaining to the new asset-light approach he talked of “separating the ownership of capital-intensive, lower return assets and recycling that capital into high ROI opportunities.”
Along with potential expansion into Japan, the company is looking to capitalize on the expansion of legal sports betting. Most notably, expansion in the US market. Recent deals with Yahoo Sports and Buffalo Wild Wings are designed to gain nationwide exposure for existing betting operations.
Mr. Murren remains bullish of the financial future of MGM Resorts. He made mention of hosting the ConExpo and Con/Agg trade show. He also talked of hosting the NFL Draft next April. The T-Mobile Arena in Las Vegas is co-owned by MGM. This is another example of its move into the realm of sports and sports betting.
• Source: Casino Giant MGM Looking to Sell More Las Vegas Strip Real Estate From Wsj.com/ On October 30, 2019.