LAS VEGAS – MGM Resorts International (the “Company” or “MGM Resorts”) (NYSE: MGM) today announced that it has entered into a definitive agreement pursuant to which a newly formed joint venture between MGM Growth Properties LLC (“MGP”) and Blackstone Real Estate Income Trust (“BREIT”) (the “Joint Venture”) will acquire the MGM Grand Las Vegas real estate assets in a transaction valued at approximately $2.5 billion, which represents a multiple of 15.75x rent. In connection with the transaction, MGM Resorts expects to receive net cash proceeds of approximately $2.4 billion and approximately $85 million in MGP operating partnership units. MGP has also entered into an agreement with MGM Resorts to deliver cash for up to $1.4 billion of MGM Resorts’ existing operating partnership units. MGM Resorts can elect to redeem units for up to 24 months post-closing, and anticipates doing so within the early part of that window. Combined with the previously announced Bellagio and Circus Circus Las Vegas transactions, and assuming the redemption of $1.4 billion in operating partnership units, these transactions are expected to provide total net cash proceeds to MGM Resorts of $8.2 billion. The transactions, as part of our broader asset-light strategy, will uniquely position MGM Resorts as a leader within the global gaming, hospitality and entertainment sector as a significant return of capital story, while also enabling it to achieve a fortress balance sheet.
“These announcements represent a key milestone in executing the Company’s previously communicated asset-light strategy, one that enables a best-in-class balance sheet and strong free cash flow generation to provide MGM Resorts with meaningful strategic flexibility to create continued value for our shareholders,” said Jim Murren, Chairman and CEO of MGM Resorts. “As such, we remain determined to prudently pursue accretive opportunities related to our remaining owned real estate assets including MGM Springfield, our 50% stake in CityCenter and our 55% economic ownership in MGP (pro forma for the potential $1.4bn redemption). Our corporate objective remains crystal clear, we will continue to monetize our owned real estate assets, which facilitates our strong focus on returning capital to our shareholders, while also retaining significant flexibility to pursue our visible growth initiatives, including Japan and sports betting.”
The previously completed Bellagio and Circus Circus Las Vegas transactions provided significant proceeds for deleveraging and the continued execution of the Company’s 2020 initiatives are expected to further support improvements to the Company’s balance sheet. The Company remains confident in achieving its previously stated net domestic financial leverage target, excluding MGP, of approximately 1x by end of 2020. The Company anticipates that a substantial portion of proceeds from this transaction, along with near-term cash proceeds from the operating partnership unit redemptions, will be used to return capital to shareholders through share repurchases and dividends. The Company intends to provide a more specific update on its capital allocation plan in connection with its earnings release for the fourth quarter of 2019.
“The valuation levels achieved on the Bellagio and MGM Grand Las Vegas transactions are a testament to MGM Resorts as a high-quality tenant and our overall asset quality. The robust interest in our recent transactions further validates the Company’s conviction on being able to unlock value for our shareholders through its asset light strategy” said Paul Salem, Chairman of the Real Estate Committee of the Company’s Board of Directors. “The transaction represents another key phase of our ongoing review of the Company’s assets and is in-line with all of the Real Estate Committee’s principal objectives of enhancing free cash flow per share, maximizing the value of our owned real estate and equity holdings, highlighting the strength of our operating business, and strengthening the Company’s financial position.”
The Joint Venture, which will be owned 50.1% by MGP and 49.9% by BREIT, will also acquire the real estate assets of Mandalay Bay from MGP and will lease both properties to MGM Resorts for an initial rent of $292 million.
Jon Gray, Blackstone President & COO, said, “This transaction reflects our continuing strong conviction in Las Vegas. We are pleased to once again partner with MGM Resorts, a world-class operator, as well as MGM Growth Properties.”
The transaction is expected to close in the first quarter of 2020, subject to certain closing conditions.
PJT Partners and J.P. Morgan are serving as financial advisors to MGM Resorts and the Real Estate Committee of the Board of Directors of MGM Resorts. Weil, Gotshal & Manges LLP is serving as MGM Resorts’ legal counsel.
Statements in this release that are not historical facts are “forward-looking” statements and “safe harbor statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and/or uncertainties, including those described in the Company’s public filings with the SEC. The Company has based forward-looking statements on management’s current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, the anticipated closing of the transaction, the expected net cash proceeds as well as the contemplated use of those proceeds, the Company’s ability to maximize value for its shareholders, execute on its asset light strategy and achieve its financial targets and goals. These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include effects of economic conditions and market conditions in the markets in which the Company operates and competition with other destination travel locations throughout the United States and the world, the design, timing and costs of expansion projects, risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions and additional risks and uncertainties described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports). In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.
About MGM Resorts International
MGM Resorts International (NYSE: MGM) is an S&P 500® global entertainment company with national and international locations featuring best-in-class hotels and casinos, state-of-the-art meetings and conference spaces, incredible live and theatrical entertainment experiences, and an extensive array of restaurant, nightlife and retail offerings. MGM Resorts creates immersive, iconic experiences through its suite of Las Vegas-inspired brands. The MGM Resorts portfolio encompasses 30 unique hotel and destination gaming offerings including some of the most recognizable resort brands in the industry. Expanding throughout the U.S. and around the world, the company recently acquired the operations of Empire City Casino in New York and Hard Rock Rocksino in Ohio, which was rebranded as MGM Northfield Park. In 2018, MGM Resorts opened MGM Springfield in Massachusetts, MGM COTAI in Macau, and the first Bellagio-branded hotel in Shanghai. The 82,000 global employees of MGM Resorts are proud of their company for being recognized as one of FORTUNE® Magazine’s World’s Most Admired Companies®. For more information visit us at www.mgmresorts.com.