MGM Resorts reduced its ownership stake in its real estate investment trust December 2, adding $700 million in cash to its balance sheet. The additional funds could reduce debt or contribute towards the growth of its expanding sports betting venture.
The payment from real estate investment trust MGM Growth Properties reduced the ownership stake from 56.7 percent to 53 percent. MGM Growth owns the land and real estate of eight Strip properties and 15 properties in total covering eight states, all of which are managed by MGM Resorts. Properties include MGM Grand, Mandalay Bay and Luxor on the Las Vegas Strip, plus the Borgata in Atlantic City and MGM National Harbor near Washington D.C. among many others.
“Today’s announcement reflects our continued focus on enhancing our balance sheet to strengthen our financial flexibility,” MGM Resorts CEO Bill Hornbuckle said in a statement.
Macquarie Securities gaming analyst Chad Beynon said the company now has a “cash cushion” that can pay down debt which stood at more than $11.4 billion at the end of September or to enhance the operations of BetMGM, a 50-50 partnership with GVC Holdings.
MGM Resorts ownership in MGM Growth has come down from a high of 73 percent after the launch of the REIT, according to CDC Gaming Reports.
MGM Resorts continues to own real estate, including MGM Springfield in Massachusetts, a 50 percent ownership in the Las Vegas Strip’s CityCenter development, and a 56 percent ownership in MGM China, and its two resorts.
“We believe the opportunistic exercise of our redemption right as well as our recent senior notes offering allow us to continue pursuing our strategic goals while navigating the crisis,” Hornbuckle said.
MGM Growth does not have any debt maturing until 2023, but had $3.55 billion in long term debt as of Sept. 30.
In November, analysts asked the REIT’s management whether there was any interest in acquiring two resorts and a convention complex on the Strip operated by Las Vegas Sands. The company had reportedly been in talks to sell The Venetian and Palazzo, seeking at least $6 billion for the hotel-casinos and the Sands Expo and Convention Center.
MGM Growth CEO James Stewart told analysts the REIT would consider adding another Strip resort as long as the company has a suitable partner.
“Our recent capital raise will allow us to fully fund this final redemption under the waiver agreement with cash on hand, while still maintaining a balance sheet positioned for future growth,” Stewart said in a statement December 2.
