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MGM Resorts Spin-Off And Sold For $17 Billion

Friday, August 6, 2021   /   by Ken Couture

MGM Resorts Spin-Off And Sold For $17 Billion

MGM Resorts spin-off and sold for  $17 billion.png
A major casino owner is buying another casino for more than $17 billion, giving the real estate ownership of many of the largest resorts in Las Vegas to a company.

The two companies announced on Wednesday that Vici Properties, a spin-off of Caesars Entertainment, has reached an agreement to acquire MGM Growth Properties, a spin-off of MGM Resorts International.

The transaction is valued at US$17.2 billion, including the assumption of approximately US$5.7 billion in debt, and is expected to be completed in the first half of 2022.

MGM spokesman Brian Ahern (Brian Ahern) said that MGM Resorts will continue to operate all properties acquired by Vici and that this transaction will not bring changes to the resort's clients or employees.

Despite this, the acquisition easily ranks among the largest real estate sales in the history of the Gaza Strip, significantly expanding Vici's already growing portfolio in the Las Vegas Strip, and continues as the housing industry Valley tourism continues to grow. Recovering from the pandemic amid the devastating side effects of the raging coronavirus.

Vici CEO Ed Pitoniak stated on the conference call that the transaction created the largest owner of meeting and private meeting space in the country and the largest hotel owner in the United States (by room).

He also said the Strip might be “the most economically productive single street in America.”

Vici's New York real estate portfolio includes Caesars Palace, Harrah's Las Vegas, and Harrah's Laughlin. MGM Growth's holdings include MGM Grand, Mandalay Bay, Mirage, MGM Park, Luxor, New York, New York, and Excalibur.

In total, Vici is acquiring approximately 33,000 hotel rooms nationwide from MGM Growth.

“This is large-scale and high-quality real estate,” said Pitoniak, who noted that both MGM Growth and Vici have collected “100 percent of our rent so far through COVID on time and in cash.”

Moreover, Las Vegas is the world’s premiere “adult experiential theme park,” he said.

“As much as parents like to spend money on their kids, whether in Orlando and other locations, I don’t think anybody’s ever spent $10,000 on a bottle of apple juice,” Pitoniak said. “Las Vegas is a place where people do … $10,000 on a bottle of vodka or whatever else they may be buying.”

Before the acquisition was announced, Vici was already in the process of increasing its stake in US casino capital.

In early March, Vici and investment firm Apollo Global Management announced an agreement to acquire The Venetian, Palazzo, and Sands Expo and Convention Centers from casino operator Las Vegas Sands Corp. for approximately $ 6.25 billion. Vici acquired real estate and Apollo acquired Apollo. Management side.

The deal is expected to close early next year.

With the latest sale, MGM customers in Las Vegas won’t notice a difference even as ownership of the resorts’ real estate changes, said Brendan Bussmann, director of government affairs for Las Vegas-based Global Market Advisors.

“For the average consumer, they’re not worried about who the landlord is,” Bussmann said. “MGM is going to continue to operate those properties as if they were theirs.”

MGM Resorts, which has injected MGM Growth in 2016 and remains a major shareholder, is expected to receive approximately $ 4.4 billion in cash on Wednesday and own approximately $ 370 million worth of Vici shares.

"This transaction helps to show the" top "of the casino giant's asset-lightening strategy of selling real estate," said Bill Hornbuckle, president, and CEO of MGM Resorts. It's a big step forward to do. "

Eyes outside Vegas
For MGM, attention is focused on what the additional cash company will do in the Vici deal.

Macquarie Capital gaming analysts, in a note Wednesday, said that the move “positions MGM well for company simplification and a cleaner balance sheet to fuel growth.”

MGM Resorts CFO Jonathan Halkyard told Wednesday's quarterly earnings press conference that plans for how to allocate the newly found capital have been made, although the money is not expected. .

Halkyard said MGM plans to look for “inorganic opportunities to really further the company’s vision as a premier gaming entertainment company, globally.”

An analyst asked on the call whether the sale of physical assets and MGM's discussions about growing its vision globally mean the company sees no benefit in expanding its presence. its presence in Las Vegas.

“We’re not going to comment right now,” Hornbuckle said.

Previous moves
MGM Resorts has earned billions of dollars from its real estate over the past few years.

Just a month ago, it announced that it was buying out its partner in the sprawling CityCenter complex for more than $ 2.1 billion, giving MGM full ownership of the Aria and Vdara complexes, and at the same time agreeing to sell the properties of the two hotels to New York financial giant The Blackstone Group and re-let it.

Blackstone purchased the property for $3.89 billion in cash and leased them to MGM for an initial annual rent of $215 million.

Blackstone also partnered with MGM Growth in a $4.6 billion deal in early 2020 - just before the pandemic - to acquire the MGM Grand and Mandalay Bay properties and lease the property to MGM Resorts.

Vici said on Wednesday that he would retain MGM Growth's stake in the joint venture with Blackstone, and noted that under the leases for those properties, the current annual base rent is around $ 298 million.

Additionally, Blackstone bought the Bellagio property in 2019 for around $ 4.2 billion in cash from MGM Resorts and re-leased it to the company for an initial annual rent of $ 245 million.

The costs of the recent acquisitions underscore how much value exists in the land and buildings along the Strip, said Jordan Bender, an analyst at Macquarie Group.

“The underlying real estate is worth a lot more than investors and analysts might be talking about, and you’ve really seen that over the last few years,” Bender said.

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