MGM Resorts Creates a Real Estate Company Named “MGM Growth Properties LLC”

Mandalay Bay - MGM Growth Properties Casino

Mandalay Bay Is One of 10 Properties the New MGM Growth Properties LLC Will Own, along with $4 Billion in Debt.

MGM Resorts plans to shift some of its casino assets to a newly-created real estate division, MGM Growth Properties LLC. The company released a statement saying the move is meant to “boost value for shareholders” and give the parent company and the new company more flexibility to grow.

The announcement came while company executives were touting better-than-expected 3rd Quarter results. MGM Resorts’s quarterly report included a $66.4 million profit, which is a turnaround from the loss reported a year ago during 2014 Q3. In further good news, the newly-constructed Mandalay Bay Convention Center is booked already through the entirety of 2016.

MGM Growth Properties

Despite the good news, it was the launching of a new company which garnered the bulk of MGM Resorts news over the past two days. The plan is to create a “real estate investment trust” or REIT, which would own 10 of MGM Resorts’ casinos. This REIT, which will be called MGM Growth Properties LLC, would assume $4 billion of the gaming company’s debt.

Jim Murren’s Press Conference

MGM Resorts CEO Jim Murren held a conference call late last week to discuss the financial move. He said that MGM Resorts would own a substantial interest in MGM Growth Properties, estimating it would be about 70%. The new company would go public with an initial public offering in the 1st Quarter of 2016.

Jim Murren told the financial media and gaming analysts on the conference call, “We’re in it together. We want to see (MGM Growth Properties) grow, and grow rapidly.

New Company Is Not a Spinoff

A spokeswoman for MGM Resorts, Meghan Repko, later declined to call the move a spinoff. Instead of giving shareholders stock in the new company, like a spinoff allows, MGM Growth Properties will be its own separate company. The public will be given the opportunity to buy stock, with no special consideration for the current investors.

MGM Growth Properties’s Assets

Ten properties in all are expected to be owned by MGM Growth Properties. Those include six Las Vegas-area casinos, including Mandalay Bay, New York-New York, Excalibur, Monte Carlo, The Mirage, and Luxor. The Park, a non-gaming retail outlet mall still under construction, is also part of the assets package. The Park is going to be located on the Las Vegas Strip between Monte Carlo and New York-New York, in a part of the Strip dominated by the MGM Resorts properties.

Along with the seven Las Vegas properties, three regional casinos are going to be a part of the assets owned by the new company. Those casinos operate in Michigan and Mississippi, including the Mississippi Gold Strike Tunica, the Beau Rivage Biloxi, and the MGM Grand Detroit in Michigan.

Terms of the Lease

Under the new structure, MGM Resorts will be the renter of the properties, while MGM Growth Properties will be the landlord. The arrangement includes a long term masters lease with a 10-year term. This can be extended by MGM Resorts with a series of four 5-year leases, taking the arrangement through the year 2045. MGM Resorts would be responsible for improvements and renovations on the properties, despite being the tenant.

MGM Resorts’s Remaining Assets

Meanwhile, MGM Resorts would own several of the company’s top Las Vegas properties. This includes the MGM Grand and Bellagio casinos on the Las Vegas Strip, along with the Circus-Circus casino. It also will continue to own the Las Vegas Strip CityCenter complex, which includes a number of smaller casino-hotels and retail outlets. The Las Vegas Arena, a 20,000-seat sports and concert venue still under construction, will remain an asset of the original company.

The Borgata casino-resort in Atlantic City, New Jersey also will remain under the parent company’s control. The Borgata is the most successful land-based and online casino brand in the New Jersey gaming market.

Jim Murren said MGM Resorts will continue to own the MGM China operations. This includes the MGM Macau, a 50% joint venture opened in 2007 alongside Pansy Ho, daughter of China’s King of Gambling, Stanley Ho. After the IPO (and concerns by US regulaors), MGM Resorts owned 51% of the operation. Other assets still under MGM Resorts’s control are Diaoyutai MGM Hospitality (China), MGM Hakkasan (Asia, Middle East, Abu Dhabi), and MGM Mirage Vacations (Milwaukee).