MGM hands over its casinos to Blackstone.
Las Vegas's casino behemoth, MGM Resorts, has sold two of its esteemed establishments, the MGM Grand and Mandalay Bay Resort & Casino, to New York's investment fund, Blackstone, for a whopping $2.5 billion (approx. €2.2 billion). This sale is a testament to a growing investor confidence in the Las Vegas area. Just a few months ago, MGM Resorts also sold the Bellagio to Blackstone.
Joint Venture Deal with a MGM Subsidiary
Under a joint venture deal, Blackstone will purchase the MGM Grand and Mandalay Bay, both key facilities on the iconic Las Vegas Strip. These are part of a partnership between Blackstone and the MGM subsidiary, MGM Growth Properties. MGM Growth Properties holds 50.1% of the stake while Blackstone holds the remaining 49.9%. Blackstone will obtain ownership of the two casinos’ assets and will rent both properties to MGM Resorts annually for $292 million (around €261 million).
This deal looks profitable for Blackstone. The MGM Grand, aside from its 15,980 square meter casino area, has a hotel boasting over 5,000 rooms. It boasts the third-largest hotel in the world, and is also part of the "Leading Hotels of the World," a globally acclaimed alliance of prestigious hotels. The MGM CEO Jim Murren termed the deal as a significant milestone for the corporation. During media interaction, he said:
"This acquisition aligns with our previously communicated asset-light strategy. It will provide us with an enviable balance sheet and robust cashflow generation, empowering MGM Resorts with exceptional strategic flexibility and ensuring future growth opportunities for our shareholders."
Sale of Bellagio and Circus Circus
The renowned Bellagio was sold to Blackstone for $4.25 billion (approx. €3.8 billion) in October last year. MGM Resorts will continue to manage the business under a lease-back arrangement. This implies MGM will dominate operations at the property, owing an annual rent of $245 million (approximately €219 million). The casino region covers 11,000 square meters, while the hotel has nearly 4,000 rooms. The Bellagio is celebrated for its computer-controlled water show (Fountains of Bellagio), featured in the movie Ocean's Eleven.
Another famous MGM property, Circus Circus, was sold to billionaire investor Phillip Gene "Phil" Ruffin (a close friend of Donald Trump) simultaneously with the Bellagio. The sale price of this casino, established in 1968, exceeded $825 million (around €740 million). Interestingly, MGM had owned the property from 2005. The aim of these sales was a strategic shift, announced as "MGM Efficiency Offensive 2020 " in January 2020.
In 2020, due to losses on their balance sheets, MGM came under significant pressure from their stockholders. They responded by selling some of their casino properties. In total, proceeds from these disposals amounted to a substantial $8.2 billion (approx. €7.3 billion). As mentioned in an interview with Bloomberg in October:
"The casino sector is significantly transforming, and we believe a better use of our strategic resources is by focusing on sports, live entertainment and reducing our debt load."
Casinos' Sales at Caesars
Meanwhile, the US casino industry is experiencing turmoil: Caesars Entertainment, MGM's chief rival, has also announced casino sales in Las Vegas. Most recently, the acclaimed Rio All-Suite Hotel & Casino was sold to a New York City-based real estate firm, Imperial Companies, for $516.3 million (about €465 million) in October. Caesars will continue to manage operations at the property for the next two years, with yearly rent payments of $45 million (around €40.4 million).
The Imperial Companies have the option of extending the lease for another year, but only if they return $7 million (€6.2 million) to Caesars. After this agreement's end, both parties are at liberty to resume their business relationship. As with MGM, Caesars will remain the operator of the facility. The sale will have no bearing on marketing, guest experiences or employee roles.
Note: This announcement followed Caesars' acquisition by El Dorado in June, involving a $8.6 billion (€7.8 billion) takeover. Last year's massive shareholder losses prompted the buyout. Despite this sale, the rival World Series of Poker (WSOP) will continue in the Rio.
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Source: www.onlinecasinosdeutschland.com
