MGM Resorts International’s creation of a real estate investment trust (REIT) has raised a lot of interest, but some question its potential impact.
MGM’s proposal to create a REIT for 10 of its properties, including its Las Vegas casinos, is just one of several that have been done in recent years and likely won’t herald similar moves by other gaming corporations.
Penn National Gaming, Pinnacle Entertainment, and Caesars Entertainment have either spun off REIT property investments or looked into it, and Boyd Gaming in 2014 announced it was looking into a REIT offering, but has done nothing since.
In MGM’s case, it intends to create a REIT named MGM Growth Properties, which has 24,000 hotel rooms, more than 2.3 million square feet of conventions and events space, and $4 billion in debt.
MGM officials say the move will create more value for its shareholders, and the move is one its investors generally welcome from MGM Resorts International, which is worth more than $13 billion.
Because the REIT is backed by its commercial gaming properties and hotels, MGM officials anticipate it will attract investors other than those focused on the gaming industry.
Critics say the move would make it harder for MGM to upgrade its aging properties, like the Excalibur in Las Vegas, which is one of the oldest casinos on the Strip and a likely candidate for a new casino project in coming years.
Critics also say a REIT could have a negative impact for investors in MGM Resorts International. The REIT would include seven Las Vegas casinos, The Mirage, Monte Carlo, New York New York, Luxor, Excalibur, Mandalay Bay and The Park, plus the MGM Grand Detroit, Beau Rivage, and Gold Strike Tunica.
After Penn National created its Gaming and Leisure Properties REIT, Penn National’s share price rose, while Gaming and Leisure Properties’ value dropped by more than 38 percent.
Proponents of the MGM REIT say it will work differently than Penn National’s recent move, and the REIT will take on $4 billion of MGM Resort International’s $12.8 billion in debt, but others remain skeptical and say it will take time to see if the REIT move is the right one for MGM and its investors.
MGM Resorts International earlier rejected a $1.3 billion offer from Treasure Island owner Phil Ruffin to buy the Mirage casino, the Las Vegas Review Journal reported.
The 80-year-old Ruffin in 2009 paid $775 million to buy the Treasure Island from MGM. He said MGM turned down his recent offer in favor of pursuing the REIT.
Ruffin said he mostly is interested in the 300,000 square feet of convention space at The Mirage and the 65 acres of land upon which The Mirage is situated.
Casino mogul Steven Wynn built the Mirage and Treasure Island casinos, which are connected by an elevated tram.
