Jonathan Litt, the hedge-fund manager who runs Land & Buildings Investment Management, told Bloomberg that MGM Resorts International should convert its properties into a real estate investment trust and spin off its hotels, adding that the moves would help the casino operator cut its debt in half, and boost the valuation of the company.
“MGM’s high-quality real estate portfolio is substantially undervalued in the public markets,” Litt said. “We have been attempting to work collaboratively with MGM management to find an optimal corporate structure for the company.”
For its part, MGM had said in February that it was evaluating options including a REIT structure.
“The concept of converting gaming assets to REITs is not a new one,” Chief Financial Officer Dan D’Arrigo said on a conference call at the time. “We look at this all the time. We believe that our assets are undervalued.”
As Bloomberg writes, "The rationale behind spinoffs is that a unit tucked under a diverse company’s umbrella may be worth more if it were a separate publicly traded entity."