MGM Resorts to form joint venture with Blackstone Real Estate Income Trust
MGM Resorts announced that it has entered into a definitive agreement to form a joint venture with Blackstone Real Estate Income Trust that values the real estate of Bellagio at $4.25B, which represents a purchase price multiple of 17.3x rent. In this landmark transaction for the gaming and entertainment industry, the joint venture will acquire the Bellagio real estate and lease it back to a subsidiary of MGM Resorts for initial annual rent of $245M. MGM Resorts will receive a 5% equity interest in the joint venture and cash of approximately $4.2B. The transaction is expected to close in the fourth quarter, subject to certain closing conditions. Central to executing this strategy is monetizing real estate efficiently and effectively redeploying the significant amount of capital the company is unlocking. Between the Bellagio transaction and the pending Circus Circus sale, the company is expecting to receive gross proceeds of approximately $5B and estimated net cash proceeds (including expected transaction costs) of $4.3B. These transactions are the first steps in executing the asset-light strategy, and the company still retains several highly valuable real estate assets including MGM Grand, MGM Springfield, its 50% stake in CityCenter and its 68% economic ownership in MGM Growth Properties LLC. The Company anticipates opportunistically monetizing and/or unlocking value from the abovementioned remaining real estate portfolio in a measured manner that maximizes value creation for its shareholders and broader constituents. MGM's fortress balance sheet and robust free cash flow generation will enable it to take advantage of targeted growth initiatives and opportunistically return capital to shareholders.