MGM Resorts International is selling its real estates assets including the Bellagio and Circus Circus.
MGM Resorts International has entered into an agreement to form a joint venture with Blackstone Real Estate Income Trust that values the real estate of the Bellagio at $4,25 billion. Th joint venture will acquire the Bellagio and lease it back to a subsidiary of MGM Resorts for initial annual rent of $245 million. MGM Resorts will receive a 5 percent equity interest in the joint venture and cash of approximately $4.2 billion. This transaction is expected to close int he fourth quarter of 2019.
“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,” said Jim Murren, chairman and CEO of MGM Resorts International in press materials. “These transactions enhance the Company’s strategic and operational flexibility and reinforce its commitment to targeted new growth opportunities, including securing and investing in one of the integrated resort licenses in Japan and becoming an industry leader in sports betting in the U.S. We remain committed to delivering on our 2020 goals and continue to be on track to achieve our previously announced targets.”
MGM Resorts International has also entered into an agreement to sell Circus Circus Las Vegas for $825 million to an affiliate of Treasure Island owner Phil Ruffin.
“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. 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,” says Treasure Island owner Phil Ruffin in press materials.
The Company acquired Circus Circus Las Vegas in connection with its acquisition of Mandalay Resort Group in 2005. Originally opened in 1968, today the property has 2,300 employees and is home to the Adventuredome (a 5-acre indoor amusement park), a 10-acre RV park, and 37-acre festival grounds.
The $825 million purchase price will comprise $662.5 million paid in cash and a $162.5 million note due 2024.
The transaction for the Circus Circus property is expected to close in the fourth quarter of 2019 subject to customary closing conditions, including receipt of necessary regulatory approvals. The Company expects to record a third quarter impairment charge of approximately $220 million in connection with this transaction.
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. This strategy is designed to accelerate MGM Resorts International’s top line growth, enhance its return on investment profile and result in a more financially robust, global enterprise that is best positioned to take advantage of future growth opportunities.