Las Vegas hotel and casino operator MGM Resorts International could move to sell its casino resort in the Massachusetts City of Springfield as part of a strategy to become an “asset-light” company.
Last month, MGM agreed to offload the iconic Bellagio property on the Las Vegas Strip to New York investment firm The Blackstone Group in a sale and leaseback deal that will see the gaming and hospitality powerhouse trouser $4.2 billion.
Under the terms of the deal, a 95%/5% joint venture formed by Blackstone Real Estate Income Trust and MGM will acquire the resort and will lease it back to a subsidiary of the casino company.
MGM’s Chairman and CEO, Jim Murren, said during the company’s third-quarter earnings call in late October that a similar real estate sale for MGM Grand is under consideration and a transaction is likely to be announced by the end of this year.
The company is also discussing the sale of its Aria and Vdara resorts, and according to media reports MGM Springfield could be up for sale, as well.
MGM plans to use the proceeds from the sale of properties to reduce debt, build a “fortress balance sheet”, and invest in what could be a more than $10 billion integrated resort in Osaka, Japan, if it wins one of three casino licenses up for grabs there.
MGM’s Legally Binding Agreement with Springfield
Commenting on the potential sale of MGM Springfield, MGM said in a recent statement that it is proud of their work in their Springfield community and is “committed on building on our shared accomplishments.”
The statement went on that the recently announced transactions “focus exclusively on the transfer of real estate and have no bearing whatsoever on the property’s management and operations.” MGM promised that any deal that might occur as well as the ones already announced would have “no impact on employees, partners or the guest experience.”
The $960 million MGM Springfield opened doors in the city’s South End in August 2018. While it has created thousands of direct and indirect jobs and has generated millions in revenue since its launch, the property failed to meet executives’ expectations that it would bring in around $418 million in gaming revenue during its first full year of operation. It generated just under $274 million between August 2018 and August 2019.
Of the possible sale of MGM Springfield, the city’s Mayor, Domenic J. Sarno, said that Springfield has a “very strong Host Community Agreement” with the resort’s owner and that they will “certainly hold MGM to this legally binding agreement.”
Under the agreement, the city and the Massachusetts Gaming Commission must give their approval to “any and all adjustments to said agreement.”
In May, MGM was in talks to buy Encore Boston Harbor, the $2.6 billion resort that Wynn Resorts opened in the Greater Boston area in late June. The discussed transaction raised questions of what MGM would do with its Springfield casino. Springfield’s Mayor said back then that the company reached out to him and assured him of their commitment to the property and to the city. MGM also told the city’s top official that if any transaction occurred, he and the state Gaming Commission would have the ultimate say in what might or might not happen.
MGM eventually pulled out of the Encore Boston Harbor sale talks citing the concerns raised by their Springfield host community as one of the reasons for its decision not to pursue the acquisition of the Greater Boston property.
Source: MGM Springfield property may be sold, leased back by casino giant, The Republican
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