Las Vegas casino and hospitality powerhouse MGM Resorts International on Tuesday announced a pair of deals to sell two of its flagship properties as it is looking to raise cash for a mega-resort in Japan where casino gambling became legal not long ago.
After several months of speculations, MGM confirmed Tuesday that it has agreed to sell the Bellagio, one of the icons of the modern-day Las Vegas Strip, to New York financial services firm The Blackstone Group in a $4.2 billion deal and Circus Circus Las Vegas to billionaire businessman and Treasure Island owner Phil Ruffin for $825 million.
MGM said that it would use the proceeds from the duo of deals to “build a fortress balance sheet and return capital to shareholders.”
The Bellagio Sale
MGM said Tuesday that it has entered into an agreement to form a joint venture with Blackstone Real Estate Income Trust (BREIT), in which it will hold a 5% equity interest. The joint venture will acquire the Bellagio and will lease it back to a subsidiary of the casino operator for an initial rent of $245 million a year. As mentioned earlier, the deal values the hotel and casino resort at approximately $4.2 billion.
The Bellagio spreads over 77 acres of land and features a 155,000-square-foot casino and 3,900 hotel rooms among other amenities. It has been among the most popular casino resorts on the Las Vegas Strip with its iconic fountains that feature dramatic aquatic shows, and multiple other attractions.
The deal is expected to close by the end of the year, subject to customary closing conditions. Commenting on the sale of the Bellagio, MGM Chairman and Chief Executive Jim Murren said that “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.”
Deal Not a Surprise
The sale of the Bellagio to Blackstone did not come as a big surprise. It was a few months ago when Bloomberg reported that MGM was seeking buyers for its Bellagio and MGM Grand properties to extract value from its portfolio of real estate assets.
Last month, the business news outlet reported that the casino operator was in advanced talks with Blackstone to sell and lease back the two properties. Mr. Murren declined on Tuesday to comment on whether their talks with the New York financial services giant included MGM Grand.
The Bellagio is the latest gambling asset to join Blackstone’s portfolio. In recent years, the company has purchased The Cosmopolitan of Las Vegas, which it is now reportedly looking to sell, and Spanish gambling giant Cirsa to increase its presence in the lucrative industry.
It has also been growing its footprint in Las Vegas through the acquisition of multiple apartment complexes, the 68-acre Hughes Center office park, and the World Market Center furniture showroom hall, among others.
Commenting on the acquisition of the Bellagio, Blackstone President and COO Jon Gray said Tuesday that “as big believers in MGM Resorts and Las Vegas, we are thrilled to partner with MGM to acquire the Bellagio on behalf of our BREIT investors.”
The Circus Circus Sale
The sale of Circus Circus was probably the most persistent Las Vegas rumor swirling around over the past several months. As mentioned above, MGM has entered into agreement to sell the property to businessman Phil Ruffin for $825 million.
The resort first opened doors in 1968. MGM purchased the property in 2005 as part of the acquisition of Mandalay Resort Group. Today, Circus Circus is home to the 5-acre indoor amusement park Adventuredome, a 10-acre RV park, and 37 acres of festival grounds, among other amenities.
Mr. Ruffin, who owns Treasure Island, said earlier this year that he was interested in buying Las Vegas Strip properties. Back in May, the businessman noted that he was eyeing Caesars Entertainment Corp. resorts and that he could pay $1 billion in cash and raise even more in debt for such properties.
The Circus Circus purchase price includes $662.5 million in cash and a $162.5 million note due 2024. The deal is expected to close during the fourth quarter of the year, subject to customary closing conditions. Among other things, Mr. Ruffin and MGM will need approval from Nevada gaming regulators to be able to close the transaction.
Mr. Ruffin commented that he is excited to add Circus Circus to his casino portfolio as the property “has anchored the north end of the Las Vegas Strip for over 50 years.”
MGM said it expects to receive gross proceeds of around $5 billion and net cash proceeds of around $4.3 billion from the sale of the Bellagio and Circus Circus. The company is selling two of its Vegas properties amid preparations to bid for a casino license in Japan that would authorize it to build a mega-resort in the country that is expected to become one of the largest gaming markets in the world.
MGM has long been focusing its Japan expansion efforts on Osaka, and recently reaffirmed its commitment to that city as other major casino operators have been dropping their Osaka plans in favor of other locations.
Source: MGM RESORTS INTERNATIONAL ANNOUNCES AGREEMENT TO MONETIZE BELLAGIO REAL ESTATE ASSETS, MGMResorts.com
MGM RESORTS INTERNATIONAL ANNOUNCES AGREEMENT TO SELL CIRCUS CIRCUS LAS VEGAS FOR $825 MILLION, MGMResorts.com
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