MGM Resorts International recently announced that it has sold two of its Las Vegas Strip casinos: Circus Circus and Bellagio. The combined sales price of the two properties is estimated to be a whopping $5.075 billion!
Rumored to have begun a month ago, the deal to sell Circus Circus was made official recently. American Businessman, Phil Ruffin, who previously also bought the Treasure Island from MGM ten years ago, acquired the property. The billionaire added Circus Circus, a 10-acre RV park and a 37-acre festival ground to his portfolio for $825 million! $662.5 million of the purchase price will be paid in cash, while the rest will be paid via a note due in 2024.
Then comes one of Las Vegas’ iconic Casinos, Bellagio which was jointly owned by MGM and Blackstone Real Estate Income Trust. The joint venture firm has agreed to acquire Bellagio from MGM for $4.25 billion and then lease it back to a subsidiary of MGM for $245 million per year. MGM Resorts will continue to operate the premier asset while paying rent and will maintain a 5% equity stake in the property.
The reason behind the sale of these real estate assets comes from the need to build an unquestionably strong balance sheet and return capital to its shareholders says Chairman and CEO of MGM Resorts International, Jim Murren. By the end of 2020, the company intends to have domestic net leverage at their operating properties of approximately 1x. The cash inflow will also aid the company in its pursuit of a gaming license in Japan.
MGM calls the move the first steps in its asset-light strategy, moving from a capital intensive brick and mortar real estate business to a developer, manager, and operator of leading gaming hospitality and entertainment properties.