MGM Resorts Welcomes Asset-light Approach As MGM Nears Sale

MGM Resorts International praised its policy of becoming an asset-light operator, with several media outlets claiming that the company’s flagship MGM Grand property might have an investor by the end of the year.

The Las Vegas headquarters company entered into two agreements earlier this month, the first of which involved the sale of the Bellagio estate to Blackstone Group for $4.25bn before the owner of Treasure Island, Phil Ruffin, entered into a final $825 m Circus Circus contract.

Talking at a conference call after its latest financial report was published, it was said that its flagship MGM Grand could be transferred the next Las Vegas Strip.

Proceedings from any potential sale would be used to reduce debt and reinvest in additional opportunities around the world, including the imminent integrated resort scene in Japan.

Jim Murren, chairman and CEO of MGM Resorts, explained: “We recently announced two significant transactions, which form part of our broader asset-light strategy and the shift in our business model away from a capital-intensive real estate business towards a developer, manager and operator of leading gaming, hospitality and entertainment properties.

“We entered into an agreement to sell Circus Circus Las Vegas for consideration of $825m and entered into an agreement with Blackstone Real Estate Income Trust that values the real estate of Bellagio at $4.25bn, representing a purchase price multiple of 17.3x rent.

“We expect that the agreements to sell Circus Circus Las Vegas and to monetise the Bellagio real estate assets will provide us with net after tax cash proceeds, including expected debt breakage costs, of $4.3bn, a majority of which will be used to fortify our balance sheet and then return capital to shareholders.”

Unveiling its financial performance for the third quarter MGM saw revenue hit $3.31 billion, a nine percent increase from $3.02 billion, with the casino segment of the company rising 13.4 percent to $1.66 billion (2018: $1.46 billion).

Compared to the previous year, operating income decreased by 42 per cent to $238.3 million (2018: $410.9 million), with adjusted EBITDA boosted by 14 per cent to $814 million (2018: $716 million).

Maintaining optimism for the period ahead, Murren concluded: “I am excited about the prospects for our business as we enter 2020. We expect the combination of a healthy Las Vegas market and successful implementation of MGM 2020 to drive EBITDA and free cash flow growth.

“Simultaneously our asset light transition will generate significant proceeds from real estate monetisation that can be used to strengthen our balance sheet, meaningfully reduce our shares outstanding, and invest in select growth initiatives.

“Our increased profits spread across fewer shares outstanding will result in enhanced free cash flow per share and generate meaningful value for our shareholders.”