MGM's proposed deals with Blackstone, Ruffin would hit $5B+

MGM Resorts International entered definitive agreements to sell Bellagio in Las Vegas and Circus Circus Las Vegas. The company described the two deals—one with Blackstone Real Estate Income Trust for Bellagio and the other with Treasure Island owner Phil Ruffin for Circus Circus—as the first steps in executing an asset-light strategy.

The casino giant currently owns several other real estate assets, including the MGM Grand in Las Vegas, MGM Springfield (Mass.), its 50 percent stake in CityCenter in Las Vegas and its 68 percent economic ownership in MGM Growth Properties. MGM Resorts said it anticipates opportunistically monetizing and/or unlocking value from these properties in a way that maximizes value creation for its shareholders and constituents.

The company will use proceeds from the sales “to build a fortress balance sheet and return capital to shareholders,” Jim Murren, chairman/CEO of MGM Resorts, said in a statement. "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 U.S.”

MGM Forms JV with Blackstone for Bellagio

Blackstone Real Estate Income Trust and MGM Resorts plan to form a joint venture split 95-5, respectively, that will acquire the real estate assets of the Bellagio for $4.25 billion in a sale-leaseback transaction. MGM Resorts estimated it will receive cash totaling approximately $4.2 billion. The deal is expected to close in the fourth quarter.

As part of the transaction, MGM Resorts will lease the property from the joint venture for an initial annual rent of $245 million. It will continue to manage, operate and be responsible for all aspects of the property on a day-to-day basis. 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 rent payments.

“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,” Jon Gray, president/COO of Blackstone Group, said in a statement. “We look forward to a long and productive partnership with this world-class company.”

Blackstone has been particularly busy over the past month. Most notably, it revealed earlier this month that its affiliate Blackstone Real Estate Partners IX plans to acquire a controlling interest in Great Wolf Resorts. The deal would form a $2.9 billion joint venture with Centerbridge Partners and give it a 65 percent interest in Great Wolf. On a smaller scale, Blackstone Group sold three Alaska hotels to Columbia Sussex and Blackstone Real Estate Partners Europe reached an agreement to buy five Greek hotels from the Mediterranean company Louis Group.

The Bellagio includes 3,933 guestrooms, more than 100,000 square feet of gaming, more than 200,000 square feet of meeting and convention facilities, retailers, botanical gardens and a wide range of food-and-beverage venues.

MGM Sells Circus Circus to Treasure Island Owner

MGM Resorts also entered a definitive agreement to sell the Circus Circus Las Vegas to an affiliate of Treasure Island owner Phil Ruffin for $825 million. The purchase price will comprise $662.5 million paid in cash and a $162.5 million note due 2024. The transaction is expected to close in the fourth quarter.

"Circus Circus has anchored the north end of the Las Vegas Strip for over 50 years, and I am excited to add it to my casino portfolio,” Ruffin said in a statement. “I have tremendous respect for Jim Murren and the MGM team, and my relationship with them goes back to my friendship with Kirk Kerkorian and continues to this day."

The company originally acquired the property in connection with its acquisition of Mandalay Resort Group in 2005. Today, the 3,767-room property has 2,300 employees and is home to a five-acre indoor amusement park, a 10-acre RV park and a 37-acre festival grounds.