MGM Resorts agrees to sell MGM Grand, Mandalay Bay to a joint venture, including Blackstone

MGM Resorts International


MGM -0.42%

He said Tuesday that he would sell the MGM Grand and Mandalay Bay resorts and casinos on the Las Vegas Strip to a joint venture that includes

Blackstone Group Inc.,

Bx -0.38%

in an agreement that values ​​the properties at $ 4.6 billion.

The agreement, first reported by The Wall Street Journal, values ​​the real estate assets of MGM Grand at around $ 2.5 billion and those of Mandalay Bay at just over $ 2 billion.

Blackstone will own a little less than half of the properties through the real estate investment trust not listed in private capital and the real estate giant, while

MGM growth properties


MGP -0.24%

LLC, a publicly traded REIT, will own the rest. MGM Resorts separated from MGM Growth Properties LLC in 2016 and still controls REIT, which owns some MGM real estate, including Mandalay Bay.

MGM Resorts expects to receive cash revenues of approximately $ 2.4 billion from the agreement, as well as $ 85 million in MGM Growth partnership units. As part of the agreement, MGM Growth also agreed to purchase up to $ 1.4 billion of its MGM Resorts operating partnership units. If you buy the total amount, you would leave MGM Resorts with a 55% stake in the REIT below the current 68%.

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The deal is similar to the sale of MGM Resorts from its flagship casino Bellagio in Las Vegas to Blackstone last year. In October, Blackstone said its real estate investment trust, known as BREIT, would take control of Bellagio’s real estate through a $ 4.25 billion joint venture with MGM. MGM, which retained a 5% stake in the company, continues to operate the casino and rents ownership of the company for $ 245 million a year.

MGM Executive Director

Jim Murren

He said at a conference call in October that the company also planned to sell the MGM Grand and would use the Bellagio transaction as a plan for future real estate businesses.

The MGM Grand Las Vegas is the company’s largest property per square meter, as of its most recent annual financial presentation. It includes a hotel and resort, as well as three condo towers, and is the company’s second most profitable property behind the Bellagio. MGM Grand, Bellagio and Mandalay Bay together contributed $ 1.1 billion in adjusted earnings before interest, taxes, depreciation and amortization, or about 40% of the company’s total.

Last year, MGM sold another Las Vegas Strip casino, Circus Circus, to

Phil Ruffin,

who also owns the Treasure Island casino. Circus Circus, which sold directly for $ 825 million, was one of MGM’s least profitable properties on the Strip.

Transactions are expected, when totaled, to provide $ 8.2 billion in cash to MGM.

Sales are part of MGM’s “asset light” strategy, with the intention of taking cash out of its real estate and focusing on new business areas that include sports betting, entertainment and casino development in Japan. The company, which has a market value of approximately $ 17 billion, began evaluating real estate agreements to help pay off the debt after its board of directors formed a real estate committee in January 2019. The remaining real estate assets of MGM Resorts include MGM Springfield in Massachusetts and a 50% stake in CityCenter in Las Vegas.

Blackstone is building a presence on the Las Vegas Strip. The company paid $ 1.7 billion for the Cosmopolitan hotel and casino in 2014 and set aside another $ 500 million to complete and renovate the property. Blackstone is looking to sell the property, which could generate $ 4 billion or more, the Journal reported.

Write to Katherine Sayre at [email protected], Miriam Gottfried at [email protected] and Cara Lombardo at [email protected]

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