MGM Resorts International and Blackstone real estate investment trust have entered into a new joint venture which sees the latter purchase $4.25bn of Las Vegas’ Bellagio’s related assets.
The joint venture between Blackstone and MGM, which sees each company represent 95% to 5%, follows investment bank Union Gaming suggesting that Las Vegas could well be poised for a flurry of activity following Caesars Entertainment’s recent sale of the Rio All-Suite Hotel and Casino.
MGM is renting the property from the joint venture as part of the latest deal and continues to control, function and be accountable for all aspects on a daily basis.
In turn, MGM Resorts must sign a long-term lease and remain responsible for all Bellagio’s operations and capital expenditures, with the joint venture owning the property and collecting $245 million in annual rent payments.
Jon Gray, Blackstone President and COO said: “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.”
The sale is expected to be finalized in the fourth quarter of this year, subject to customary closing conditions, and is part of MGM’s continued asset light strategy following a comprehensive strategic review.
Designed to accelerate top-line growth, boost investment returns and result in a more financially robust global business, the move comes as MGM strives to evolve from a primarily brick and mortar real estate business to a leading gaming, hospitality and entertainment property developer, manager and operator.
“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.”