MGM Grand, Mandalay Bay Real Estate to be Sold to JV Including Blackstone -- 4th Update

By Katherine Sayre, Miriam Gottfried and Cara Lombardo 

MGM Resorts International said a joint venture that includes Blackstone Group Inc. would buy the real estate of the MGM Grand and Mandalay Bay resorts and casinos on the Las Vegas Strip, in a deal valuing the properties at $4.6 billion.

The deal, first reported early Tuesday by The Wall Street Journal, values MGM Grand's real-estate assets at about $2.5 billion and Mandalay Bay's at just over $2 billion.

Blackstone will own slightly less than half of the properties through the private-equity and real estate giant's nonlisted real estate investment trust, while MGM Growth Properties LLC, a publicly traded REIT, will own the remainder. MGM Resorts spun off MGM Growth Properties in 2016 and still controls the REIT, which owns some MGM real estate including Mandalay Bay's.

MGM Resorts expects to receive cash proceeds of about $2.4 billion from the deal, as well as $85 million in MGM Growth partnership units.

As part of the deal, MGM Growth also agreed to buy up to $1.4 billion of its operating partnership units from MGM Resorts. If it purchases the full amount, it would leave MGM Resorts with a 55% stake in the REIT down from a current 68%.

The deal is similar to MGM Resorts' sale of its flagship Bellagio casino in Las Vegas to Blackstone last year.

In October, Blackstone said its real-estate investment trust, known as BREIT, would take control of the Bellagio's real estate through a $4.25 billion joint venture with MGM. MGM, which retained a 5% stake in the venture, continues to operate the casino and is renting the property from the venture for $245 million a year.

MGM Chief Executive Jim Murren said on a conference call in October that the company planned also to sell the MGM Grand and would use the Bellagio transaction as a blueprint for future real estate deals.

The MGM Grand Las Vegas is the company's largest property by square footage, as of its most recent annual financial filing. It includes a hotel and resort as well as three condominium towers, and it is the company's second-most-profitable property behind the Bellagio.

Together, MGM Grand, Bellagio and Mandalay Bay brought in $1.1 billion in adjusted earnings before interest, taxes, depreciation and amortization or about 40% of the company's total.

MGM last year sold another Las Vegas Strip casino, Circus Circus, to Phil Ruffin, who also owns the Treasure Island casino. Circus Circus, which was sold outright for $825 million, was one of the least-profitable of MGM's properties on the Strip.

The transactions, when totaled, are expected to provide $8.2 billion in cash proceeds to MGM.

The sales are part of MGM's "asset light" strategy, intended to pull cash out of its real estate and focus on new business areas including sports betting, entertainment and a casino development in Japan.

MGM Resorts, which has a market value of about $17 billion, began evaluating real estate deals to help pay off debt after its board of directors formed a real estate committee in January 2019.

The company's remaining real estate assets include MGM Springfield in Massachusetts and a 50% stake in

CityCenter in Las Vegas.

Blackstone is building up a presence on the Las Vegas Strip.

The company paid $1.7 billion for the Cosmopolitan hotel and casino in 2014 and put another $500 million into finishing and renovating the property.

B lackstone is looking to sell the property, which could bring in $4 billion or more, the Journal has reported.

Write to Katherine Sayre at [e-mail], Miriam Gottfried at [e-mail] and Cara Lombardo at [e-mail]

(END) Dow Jones Newswires

January 14, 2020 16:22 ET (21:22 GMT)

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