Bellagio And MGM Grand Las Vegas For Sale

Mia Gardner | 26 Sep 2019

It would appear that two giants of the Las Vegas strip are in talks about a potential real estate sale. MGM Resorts International is apparently negotiating with Blackstone Group Inc. over the sale of two of MGM’s biggest and most well known casinos. These are the Bellagio and the MGM Grand Las Vegas. According to a report by Bloomberg, the potential deal could be worth $7 billion for MGM Resorts International.

Both of these organisations are major players on the Las Vegas strip. They both own numerous land-based operations with big resorts attached to them. MGM Resorts International, however, is the biggest of them all. They own almost the entire southern half of the Las Vegas strip, with a host of big names operating under their banner. These include New York New York, the Mirage, Mandalay Bay, Excalibur, Monte Carlo and Luxor. Blackstone Group Inc. is no slouch on the real estate holdings on the strip either. They have over $154 billion worth of holdings in the city.

Potential Leaseback Agreement

While none of the details of this potential sale are public knowledge yet, it has been surmised that this will be a leaseback deal. This is when the new owners immediately lease the property back to the previous owners. With this kind of deal, the real estate experiences little to no change in terms of management or the running of operations. However, the previous owners turned tenants get an injection of cash to their business to use in other areas.

It would really be a win-win situation for both organisations. Blackstone Group Inc. will be able to increase their footprint on the Las Vegas strip – often seen as the place to be for land-based casino operators. However, they won’t have to take on the running costs of the casinos, as this will all still fall on the shoulders of MGM Resorts International. Additionally, players won’t notice the change, as things should continue to run as is.

MGM Looking To Leverage Real Estate

For MGM Resorts International, the reason for selling is quite clear. They have openly been looking for ways to leverage their real estate holdings this year in order to free up cash for other endeavours. Back in July this year, it was believed that MGM was looking to buy back stocks that had recently been taken over by Starboard Value LP – an investment firm.

Another theory for this kind of leaseback deal is that MGM Resorts International is looking to free up money for their bid to obtain one of three soon-to-be available licenses in Osaka, Japan. They will need to build a new resort worth about $10 billion if they are successful.