MGM Resorts International and Blackstone real estate investment trust have entered a new joint venture that sees the latter secure the applicable assets of Las Vegas’ Bellagio for $4.25bn.
The joint Blackstone and MGM venture, which sees each company represented 95 per cent to five per cent, follows investment bank Union Gaming stressing that Las Vegas could well be set for a flurry of activity following the recent sale of the Rio All-Suite Hotel and Casino by Caesars Entertainment.
As part of the latest transaction, MGM is to lease the property from the joint venture and continue to manage, operate and be responsible for all aspects on a day-to-day basis.
Furthermore, MGM Resorts will sign a long-term lease and continue to be responsible for all operations and capital expenditures of the Bellagio, with the joint venture owning the property and receiving annual rent payments of $245m.
“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. We look forward to a long and productive partnership with this world-class company,” commented Jon Gray, Blackstone President and COO.
Subject to customary closing conditions, the sale is expected to be finalised during the fourth quarter of this year and forms part of MGM’s ongoing asset light strategy following an extensive strategic review.
Designed to accelerate top line growth, enhance return on investment and result in a more financially robust, global enterprise, the move comes as MGM strives to evolve from a primarily brick and mortar real estate business towards a developer, manager and operator of leading gaming, hospitality and entertainment properties.
“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,” explained Jim Murren, chairman and CEO of MGM Resorts International.
“We will use the proceeds from this transaction, together with the proceeds from the pending sale of Circus Circus Las Vegas, to build a fortress balance sheet and return capital to shareholders.
“By the end of 2020 we intend to have domestic net financial leverage at our operating properties of approximately 1x.
“These transactions enhance the company’s strategic and operational flexibility and reinforce its commitment to targeted new growth opportunities, including securing and investing in one of the integrated resort licenses in Japan and becoming an industry leader in sports betting in the US. We remain committed to delivering on our 2020 goals and continue to be on track to achieve our previously announced targets.”