Advertisement

Mandalay Bay, MGM Grand sold to Blackstone in $4.6B deal

Bookmark this
January 14, 2020 By Eli Segall

A few months after it bought the Bellagio for more than $4 billion, The Blackstone Group has partnered on a deal to acquire two other Strip properties for even more.

The New York financial giant, which has been on a real estate buying binge in Southern Nevada for years, announced Tuesday it agreed to form a joint venture with casino operator MGM Resorts International’s real estate investment trust to acquire the MGM Grand and Mandalay Bay properties for $4.6 billion. The transaction is expected to close within the first three months of the year.

The real estate trust, MGM Growth Properties, will own 50.1 percent of the joint venture, and Blackstone will own 49.9 percent.

MGM Resorts will lease back the two hotel-casinos and continue to operate them, as it does with the Bellagio.

MGM’s strategy

The sell-off is the latest move by MGM to bolster its balance sheet. The company eliminated more than 1,000 jobs, mostly in Las Vegas, last year as part of its “MGM 2020” cost-cutting plan; sold the Bellagio’s real estate for around $4.2 billion in cash; and sold Circus Circus and 37 acres of adjacent land for $825 million to Treasure Island owner Phil Ruffin, a deal that closed last month.

These sales, combined with the sale-leasebacks announced Tuesday, are expected to provide total net cash proceeds of $8.2 billion to MGM Resorts, according to the company.

MGM said it plans to use a substantial portion of the proceeds for stock buybacks and dividends.

Jefferies analyst David Katz said Tuesday’s announcement was expected. An SEC filing from November revealed that MGM Resorts was in preliminary discussions with MGM Growth regarding the sale-leaseback of the MGM Grand.

While the sale could provide a boost to MGM Resorts’ shares, Katz said the long-term valuation of the repositioned company is uncertain.

“Overall, we expect neutral reaction to the news,” Katz said in a note Tuesday.

According to a statement Tuesday from MGM Resorts, this likely won’t be the last time it sells off assets.

Chairman and CEO Jim Murren said the company will “continue to monetize” its owned real estate to pursue growth initiatives, which include sports betting and a resort in Japan.

It could take years before investors can gauge whether MGM Resorts’ so-called asset-light strategy was a success, according to a note Tuesday from SunTrust Robinson Humphrey analyst Barry Jonas.

He said it could take a recession and a Japan casino, which he believes would be completed no earlier than 2025, to assess the merits of MGM’s shift.

“Investors will need time to digest the ramifications of MGM’s journey to a full operating company … potentially late cycle with added political uncertainty,” Jonas said in a note last month.

Blackstone’s buying spree

Led by billionaire Stephen Schwarzman, Blackstone has picked up properties all over the Las Vegas Valley since the market crashed, ranging from houses and apartments to casinos and office buildings.

“This transaction reflects our continuing strong conviction in Las Vegas,” Blackstone President and Chief Operating Officer Jon Gray said in a statement Tuesday.

Blackstone bought tens of thousands of houses around the country to rent out after the economy tanked, launching Invitation Homes in 2012 for the venture. Invitation owned more than 900 homes in the Las Vegas area by the end of 2016, not long before its initial public offering, and nearly 3,000 by the end of September, securities filings show.

Outside of housing, Blackstone bought the 68-acre Hughes Center office park east of the Strip for $347 million in 2013 and The Cosmopolitan of Las Vegas for more than $1.7 billion in 2014, scooping up a trendy hotel-casino that was deeply in the red at the time.

It also bought downtown’s 5.4 million-square-foot World Market Center furniture-showroom hall for an undisclosed sum in 2017 and has shelled out hundreds of millions of dollars for apartment complexes over the past few years.

Its purchase of the Bellagio closed in November and, by all appearances, was the most expensive sale ever of a Las Vegas resort, with the closest competitor being its purchase of the Cosmopolitan.

MGM Resorts shares were down 0.4 percent Tuesday morning to $33.24. MGM Growth Properties shares were up 0.2 percent to $30.19, and Blackstone Group shares were down 0.3 percent to $58.23.


Recent Articles

‘Love Island’ to air from Las Vegas, starting Aug. 24

‘Love Island’ to air from Las Vegas, starting Aug. 24

in Entertainment News, News

The Cromwell is ready for its close-up. CBS confirmed on Wednesday that Season 2 of “Love Island” will air six nights a week from the Las Vegas Strip hotel, beginning with a two-hour premiere Aug. 24.

August 5, 2020 By Christopher Lawrence

Allegiant Stadium may soon offer tours to fans left out of games

Allegiant Stadium may soon offer tours to fans left out of games

in News

While Raiders fans will not be able to attend a home game this season, they will get to view Allegiant Stadium.

August 4, 2020 By Mick Akers

Downtown Grand’s Gallery Tower accepting reservations in September

Downtown Grand’s Gallery Tower accepting reservations in September

in News

The Downtown Grand has officially christened its latest expansion, Gallery Tower, named for the art program that will be displayed throughout the property.

August 4, 2020 By Bailey Schulz

Garth Brooks reschedules concert at Allegiant Stadium

Garth Brooks reschedules concert at Allegiant Stadium

in News

Garth Brooks won’t be the lid-lifter at Allegiant Stadium after all. The country superstar has moved his Aug. 22 date at the stadium back to Feb. 27.

July 30, 2020 By John Katsilometes

Advertisement

Must Read Articles

Landmark Las Vegas restaurant Paymon’s changes name

Landmark Las Vegas restaurant Paymon’s changes name

in Food

Pretty much everything was quite different in 1987 than it is now, 33 years later, but in the cases of Las Vegas and Paymon Raouf, the contrasts are particularly striking.

July 10, 2020 By Heidi Knapp Rinella

Boutique hotel being built in Las Vegas’ Arts District

Boutique hotel being built in Las Vegas’ Arts District

in News

A boutique hotel promising a “modern aesthetic” is under construction in Las Vegas’ Arts District.

July 23, 2020 By Eli Segall

Illuminating of roof signs signals end of Allegiant Stadium branding

Illuminating of roof signs signals end of Allegiant Stadium branding

in News

With the expected completion date for Allegiant Stadium drawing near, the company tasked with installing the majority of signs is capping off its work with a trio of the largest signs on the site.

July 13, 2020 By Mick Akers

Las Vegas Sands’ Palazzo hotel tower to halt weekday reservations

Las Vegas Sands’ Palazzo hotel tower to halt weekday reservations

in News

Las Vegas Sands’ Palazzo hotel tower will no longer accept reservations on weekdays, beginning July 21.

July 13, 2020 By Bailey Schulz

Advertisement