MGM Shall be Lifted, Evercore

After a lengthy proposal from investment firm Land and Buildings, which suggested MGM Resorts International split and form a REIT, MGM has partnered with investment bank Evercore, who will serve as advisers for the company.

MGM Resorts International has announced investment bank Evercore will jump aboard its team of advisers. MGM has been in the news nonstop over the past few weeks with talks of a possible REIT split for the company. MGM has denied the claims, which were suggested by Land and Buildings, an investment firm with a small stake in the company. The proposal by Land and Buildings is severely flawed according to MGM.

Jonathan Litt, Land and Buildings founder, is fearful MGM is overbuilding again, something which has been the demise of several casino-resort companies in the past. MGM currently has projects in Springfield, Massachusetts, Washington, D.C., Macau and a $350 million arena being built behind the New York, New York casino in Las Vegas.

“The company is embarking on another $5 billion in development, but we’re not going to know for three years how these projects do and their track record is not great,” Litt said. At the end of last year, MGM had roughly $14 billion in long-term debt, and on April 16 said $1.45 billion in bonds was converted into 78 million shares of stock. In addition, the company said it will distribute 35 percent of CityCenter’s excess cash flow to owners moving forward.

Litt called the moves, “too little, too late,” in a letter to shareholders. His letter also suggested the nomination of Matthew Hart and Richard Kincaid to the MGM Resorts board. Kincaid was CEO of Equity Office Properties Trust, while Hart was president of Hilton Hotels Corp. until it was acquired in 2007.

In regards to the proposal by Litt, MGM said it, “has a narrow, short-term focus and makes numerous financial, structural and tax assumptions that appear unsupported or are factually incorrect.” MGM also pointed out a strong domestic performance, although its Macau presence has been recently troubled, which is par for the course for every company as corruption has seen a major crackdown.