MGM looking to sell another Las Vegas Strip hotel property

MGM Resorts International is working toward a deal to sell another Las Vegas Strip casino, the MGM Grand, before the end of the year, part of a continuing strategy to pull cash out of its real estate.

Earlier this month, the company agreed to a sale-leaseback of the Bellagio and an outright sale of Circus Circus on the Strip, separate deals the company expects to generate a combined $4.3 billion in net cash.

"These transactions were key steps, but by no means the end of our journey," said MGM Chief Executive Jim Murren in a conference call with Wall Street analysts Wednesday. "The Bellagio real-estate transaction represents more to us than a smart financial deal. It provides a likely blueprint for the future."

For the three months ended Sept. 30, MGM Resorts reported revenue increased 9% from the same quarter last year to $3.3 billion. The company reported a 42% decline in consolidated operating income to $238 million and a net loss of $37 million.

The company attributed that to a $219 million impairment charge related to the agreement to sell Circus Circus. The noncash charge reflects that the casino sold for less than the value of the property recorded on MGM's books.
Treasure Island owner Phil Ruffin is buying Circus Circus for $825 million, including both the real estate and the business. New York investment firm Blackstone Group Inc. entered into a sale-leaseback of the Bellagio, which valued the casino at $4.25 billion. MGM Resorts retained a 5% stake through a joint venture with Blackstone and will pay annual rent of $245 million to continue operating the casino.

The Bellagio and Circus Circus transactions are expected to close by the end of this year, and any deal reached for MGM Grand by the end of this year would close in early 2020, Mr. Murren said Wednesday.

Proceeds from the recent sales initially will go toward paying down debt and shareholder returns, while the company looks to monetize more real estate, Mr. Murren said.

The company still owns MGM Springfield in Massachusetts and a 50% stake in CityCenter in Las Vegas. Other MGM Resorts property is held by MGM Growth Properties LLC, a real-estate investment trust the company spun off in 2016, in which MGM Resorts has about 68% ownership. Mr. Murren said Wednesday the near-term goal is to own less than 50% of MGM Growth Properties and even less in the future.

The company, which had $15.1 billion in debt as of Sept. 30, is preparing for a potentially $10 billion investment in Japan. MGM Resorts executives are trying to secure a deal in Osaka to develop a resort with gambling, hotel, retail and convention space. Japan recently legalized casino gambling and several casino companies -- including U.S.-based operators such as MGM, Las Vegas Sands Corp. and Wynn Resorts Ltd. -- are competing for projects in a handful of locations.

Without the accounting charge, consolidated operating income was up 11%, the company said. The company's adjusted earnings before interest, taxes, depreciation and amortization rose 14% to $814 million.