MGM Resorts International (NYSE:MGM) Strikes Deals To Stabilize Its Balance Sheet

MGM Resorts International (NYSE:MGM) on Tuesday announced two business deals it is pursuing. The first one is to sell the Las Vegas property known as Circus Circus, which is currently valued at $825 million. Reports indicate that it will be selling out the property to Phil Ruffin, an affiliate of Treasure Island owner.

Salem’s remarks

The chairman of the board of directors to this company’s real estate committee Paul Salem has spoken about the matter. He describes the Circus Circus as one of the non-core assets that they have. For this reason, it wasn’t quite a big deal giving it out.

The second deal involved the company and Blackstone Real Estate Income Trust. These two formed a joint venture in which case they agree on a deal to lease back Bellagio real estate. This estate was previously owned by MGM. In this deal, the property valuation stands at $4.25 billion.MGM moves into the deal hoping for a 5% equity in this joint venture.

However, it expects that by the time the deal closes, it will have about $4.2 billion. A subsidiary of the company reveals that it has set aside $245 million that will pay the annual rent.

Positive attributes about the deal

Analysts have been looking at the Bellagio deal and the associated rent valuation critically. They have concluded that it was one of the highest ever paid in Las Vegas. The group has termed it a significant step for the company because it will serve as a strong benchmark for it. That is in all the future instances it will ever need to strike deals of a similar nature.

Salem is a supporter of the transaction because he thinks it will redefine asset ownership in Las Vegas.

A lot has been happening in recent times. At the start of the year, MGM decided to bring Keith Meister on board. The official was to become one of its board members to help in decision making, among other things.

Meister spent many years working with Corvex Management, where he used to be its chief investment officer. It is worth noting that Corvex Management had a stake of roughly 3% in the company’s overall shares.

Leave a comment