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One big casino owner buys another in a more than $ 17 billion deal, putting real estate ownership of several of Las Vegas’ biggest resorts under one corporation.
Caesars Entertainment spin-off Vici Properties has reached a deal to acquire MGM Resorts International’s spin-off MGM Growth Properties, the companies said on Wednesday.
The deal – valued at $ 17.2 billion, including the assumption of approximately $ 5.7 billion in debt – is expected to close in the first half of 2022.
MGM Resorts will continue to operate all of the properties that Vici acquires, and the deal will not bring any changes for guests or employees of the resorts, MGM spokesperson Brian Ahern said.
Yet the buyout easily ranks among the biggest real estate sales the Strip has ever seen, significantly expands Vici’s already growing portfolio on Las Vegas Boulevard, and comes as the valley’s tourism industry recovers from the devastating effects of the coronavirus still raging pandemic.
Vici CEO Ed Pitoniak said on a conference call that the deal creates the largest private owner of meeting and convention space in the country and the largest hotel owner in the United States in terms of of rooms.
He also said the Strip could be “America’s most economically productive street”.
“$ 10,000 on a bottle of vodka”
New York-based Vici’s real estate portfolio includes Caesars Palace, Harrah’s Las Vegas and Harrah’s Laughlin. MGM Growth’s holdings include MGM Grand, Mandalay Bay, The Mirage, Park MGM, Luxor, New York-New York and Excalibur.
In total, Vici acquires some 33,000 hotel rooms across the country from MGM Growth.
“This is large-scale, high-quality real estate,” said Pitoniak, who noted that MGM Growth and Vici have collected “100% of our rent so far thanks to COVID on time and in species “.
Plus, Las Vegas is the world’s first “adult experiential theme park”, he said.
“As much as parents love to spend money on their kids, whether it’s in Orlando or anywhere else, I don’t think anyone has ever spent $ 10,000 on a bottle of apple juice,” Pitoniak said. “Las Vegas is a place where people make… $ 10,000 on a bottle of vodka or whatever they can buy. “
Vici was already in the process of increasing its stake in the US casino capital before the buyout was unveiled.
In early March, Vici and investment firm Apollo Global Management announced a deal to purchase the Venetian, Palazzo and Sands Expo and Convention Center for approximately $ 6.25 billion from casino operator Las Vegas. Sands Corp., Vici acquiring the real estate and Apollo buying the operations side.
The deal is expected to be finalized early next year.
With the latest sale, MGM’s clients in Las Vegas won’t notice a difference even if the ownership of resort real estate changes, said Brendan Bussmann, director of government affairs for Las Vegas-based Global Market Advisors.
“For the average consumer, he doesn’t care who owns the owner,” Bussmann said. “MGM will continue to operate these properties as if they were their own. “
MGM Resorts, which created MGM Growth in 2016 and remains its majority shareholder, expects to receive around $ 4.4 billion in cash from Wednesday’s deal and hold a stake in Vici worth around $ 370 million.
Bill Hornbuckle, President and CEO of MGM Resorts, said the transaction helps mark the “culmination” of the casino giant’s so-called asset relief strategy of selling its real estate and constitutes ” a big step forward in simplifying our corporate structure “.
Eyes outside of Vegas
For MGM, eyes are now on what the company will do with the extra money from the Vici deal.
Macquarie Capital games analysts, in a note Wednesday, said the move “positions MGM well for business simplification and a healthier balance sheet to fuel growth.”
MGM Resorts CFO Jonathan Halkyard said on a quarterly earnings call on Wednesday that plans on how to allocate this new capital were already underway, although the money was not expected to reach the business before about nine months.
Halkyard said MGM plans to seek out “inorganic opportunities to really advance the company’s vision as a leading gaming entertainment company, on a global scale.”
An analyst asked on the call whether the sale of the physical assets and MGM’s discussions of developing its vision globally meant the company saw no benefit in expanding its presence in Las Vegas.
“We’re not going to comment now,” Hornbuckle said.
Previous movements
MGM Resorts has made billions offloading real estate in recent years.
Just a month ago, he announced that he was buying his partner in the sprawling CityCenter complex for more than $ 2.1 billion, giving MGM full ownership of the Aria and Vdara complexes, and agreeing to sell the real estate of the two hotels in New York financial giant The Blackstone Group and re-let it.
Blackstone purchases the properties for $ 3.89 billion in cash and leases them to MGM for an initial annual rent of $ 215 million.
Blackstone also partnered with MGM Growth on a $ 4.6 billion deal in early 2020 – shortly before the pandemic – to acquire the MGM Grand and Mandalay Bay real estate and lease the properties to MGM Resorts. .
Vici said on Wednesday that it would retain MGM Growth’s stake in the joint venture with Blackstone and indicated that under the lease of those properties the current annual base rent is around $ 298 million.
Additionally, Blackstone bought the Bellagio real estate in 2019 for around $ 4.2 billion in cash from MGM Resorts and re-let them to the company for an initial annual rent of $ 245 million.
The costs of recent acquisitions underscore the value of land and buildings along the Strip, said Jordan Bender, analyst at Macquarie Group.
“The underlying real estate is worth a lot more than what investors and analysts could talk about, and you’ve really seen it over the last few years,” Bender said.
The Review-Journal is owned by the family of Dr Miriam Adelson, majority shareholder of Las Vegas Sands Corp. Las Vegas Sands operates The Venetian, Palazzo and Sands Expo and Convention Center.
Contact Eli Segall at [email protected] or 702-383-0342. To pursue @eli_segall on Twitter. Contact Colton Lochhead at [email protected]. To pursue @ColtonLochhead on Twitter.
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