The Nevada Gaming Commission on March 16 unanimously approved allowing MGM to proceed with its plan to create the MGM Growth Properties real estate investment trust (REIT).
MGM wants the REIT to own 10 of its properties, including seven on the Las Vegas Strip.
Those properties are the Mandalay Bay, Mirage, Monte Carlo, New York-New York, Luxor, Excalibur, and The Park developments on the Las Vegas Strip, plus the MGM Grand Detroit, and the Gold Strike Tunica and the Beau Rivage casinos in Mississippi.
The Gaming Commission’s regulatory approval wasn’t for creating the REIT. Instead, it granted approval for related transactions, which in turn enable MGM to create its REIT.
Once created, MGM Resorts will turn over ownership of the 10 properties to the REIT, lease them back, and continue operating them as the properties’ landlord. MGM Resorts will continue employing all casino workers and is responsible for all capital and operational costs.
The ten properties contain a combined 24,466 hotel rooms, 2.5 million square feet of convention space, 20 entertainment venues, more than 100 stores, and more than 200 restaurants and drinking establishments.
MGM would pay $550 million per year in rent with a 10-year master lease.
MGM will own most of the REIT shares, and MGM Resorts CEO Jim Murren will be its chairman. MGM also intends a future public offering of the REIT shares, which will be traded under the MGP symbol on the New York Stock Exchange.
Murren told the commission the REIT will improve MGM’s balance sheet, while also enabling MGM to pursue more assets, and expects to register it with the Securities and Exchange Commission in April.
MGM reported its domestic cash flow are at their highest level since 2008, with cash flow up by 11% and net revenue by 3% since then. It expects those numbers to continue improving, as more than 43 million visitors are expected to visit Las Vegas this year.
MGM also announced it reached a deal to sell the Shops at Crystals retail center at the CityCenter in Las Vegas for $1.1 billion. A joint venture between the Simon Property Group and Invesco Real Estate agreed to by the luxury shopping center.
Wells Fargo Analyst Cameron McKnight suggested the deal would add about 50 cents to each share in MGM Resorts, and MGM would use the money to pay down CityCenter’s debt to about $100 million.
The 324,000-square-foot retail center is jointly owned by MGM and Dubai World, and features 10 retail anchor brands, including Gucci, Louis Vuitton, Prada, Tiffany & Co., Dolce & Gabbana, among its more than 40 luxury retail stores.
The Simon Property Group also owns the Forum Shops at Caesars and two Premium Outlet Malls in Las Vegas.
