MGM Resorts International is set to sell iconic Las Vegas Strip resort the Bellagio in a US$4.2 billion deal that will see it continue to operate the property.
On the same day as MGM also revealed it had sold another Strip casino, Circus Circus, for US$825 million, the company announced it has entered into a definitive agreement to form a joint venture with Blackstone Real Estate Income Trust that will purchase the property and then lease it back to MGM for initial rent of US$245 million per annum.
MGM will be paid US$4.2 billion in cash plus 5% equity interest in the joint venture.
The decision to sell both Bellagio and Circus Circus is part of the company’s plan to lighten its asset portfolio in order to reduce debt and free up cash for new investment opportunities, including the development of an integrated resort in Japan and the expanded involvement in the growing US sports betting industry.
“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,” said MGM Chairman and CEO Jim Murren.
“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.”
MGM added that its asset-light strategy was the culmination of an extensive strategic review of the interplay of its real estate portfolio, overall valuation and operational potential.
“MGM Resorts is evolving its business model away from primarily a capital intensive, brick and mortar real estate business towards a developer, manager and operator of leading gaming, hospitality and entertainment properties,” the company said in a media release.
“Between the Bellagio transaction and the pending Circus Circus sale, the Company is expecting to receive gross proceeds of approximately US$5 billion and estimated net cash proceeds of US$4.3 billion.”
