MGM Resorts International is a large casino gaming company with properties stretching around the globe, including within the US. The brand will be selling the Mandalay Bay and MGM Grand in an effort to become asset-light. The offloading of the two properties are just the next in a line of sales from major gaming operators in the US.
Details of the Sale
Earlier this week, MGM Resorts stated that their real estate investment trust, MGM Growth Properties, signed a definitive agreement with Blackstone Real Estate Income Trust (BREIT). The two will form a joint venture and the Mandalay Bay and MGM Grand will be acquired.
The acquisition will see the joint venture take over the MGM Grand and Mandalay real estate, both located on the Las Vegas Strip. The deal values both properties at $4.6bn. MGM Growth Properties will own 50.1% of the venture while BREIT will have the remaining 49.9%.
It is expected that the transaction will close by the end of the first quarter. It is subject to customary conditions before closing can be completed. When the deal is done, MGM will be under a triple net master lease for the two casinos. They will be responsible for the operations of both properties and provide rent to the new owners in annual payments. The first annual rent will come in at $292 million.
Deal Revealed Last Year
The sale of the two casino properties is not a huge surprise as the deal was first announced by MGM Resorts last year. In 2019, the company reported that they were in talks with potential buyers who were showing interest in purchasing the two Strip properties.
By November of last year, it was revealed that MGM could provide the name of a buyer before the year’s end. It is not surprising to find that Blackstone is the buyer of the Mandalay Bay and MGM Grand as they also purchased the Bellagio last year.
The Bellagio deal valued the property at $4.2 billion. The two struck a deal last year to allow MGM to remain the operator and then pay an annual rent. For the Bellagio, the rent comes in at $245 million.
MGM’s real estate investment trust focuses on the acquisition as well as ownership and leasing of large-scale resorts. The group’s portfolio now includes the Luxor, Park MGM, The Mirage, New York-New York and the Excalibur.
The Blackstone group has been quite busy obtaining gaming assets in Las Vegas over the past few years. They currently have billions of valued real estate in Nevada. Along with the recent acquisitions, the company took on The Cosmopolitan in 2014 for over $1.7 billion.
Head of US Acquisitions for Blackstone, Tylr Henritze, commented on the new Mandalay Bay and MGM Grand deal by stating that the lease with MGM provides stable cash flow and excellent downside protection for their investors.
MGM’s real estate assets in the US will not consist of MGM Springfield and 50% of the CityCenter, after the sale of the two Las Vegas Strip casinos are complete.