Blackstone Is in Talks to Buy the Bellagio and MGM Grand

[CPT]

Blackstone Is in Talks to Buy the Bellagio and MGM Grand

Blackstone Group Inc. is in advanced talks to buy and lease back the iconic Bellagio and MGM Grand Las Vegas casinos from MGM Resorts International, according to people with knowledge of the matter.

They have yet to agree on a transaction and one may not be reached, said the people, who requested anonymity because the talks are private. The terms of the potential deal couldn’t be learned.

Representatives for Blackstone and MGM Resorts declined to comment.

MGM Resorts shares rose as much as 5% before settling up 1.4% to $29.47 at 12:06 p.m. in New York.

MGM Resorts has been exploring selling and leasing back the properties individually or bundled together, Bloomberg News reported in July. Property sales free up cash for casino companies to expand while letting them continue to manage their resorts.
The Las Vegas-based company in January formed an independent committee to evaluate ways to extract value from its real estate portfolio. Activist investor Starboard Value built a position in the company with plans to push for changes, Bloomberg News reported that month.

MGM Resorts expects to share the results of the review in early fall, Chief Executive Officer Jim Murren said in a conference call with analysts in July.
The Bellagio and MGM Grand Las Vegas are two of the crown jewels in MGM Resorts’ portfolio of gaming resorts in the U.S. and China. Together, the properties have more than 10,000 rooms and about 315,000 square feet of casino space, according to the company’s most recent annual report.
MGM Resorts could receive proceeds of up to $4 billion selling the Bellagio and nearly $3 billion from a sale of MGM Grand, analysts with Bloomberg Intelligence said in July.
Blackstone, a New York-based private equity firm, has built up a hefty war chest for real estate transactions. Last week, it said it raised $20.5 billion for its ninth real estate fund, topping the $15.8 billion it raised for its predecessor vehicle.
The firm has a history in the gaming sector. It’s holdings include Spain’s Cirsa Gaming Corp., which it acquired last year for about $1.8 billion, and the Cosmopolitan of Las Vegas, which it acquired in 2014 for $1.7 billion.

[Penguin]

Heard about this the other day. Blackstone is a very sharp asset manager. They make money!! Somehow I think in the end those 2 properties will have to generate more cash to satisfy 2 entities. Wonder where that cash comes from??? HHH

[Pat]

The way those two properties are treating people lately, I hope they get sold

[Elf70]

The way I heard this on another forum was that Blackstone would only buy the real estate and MGM would lease the land back and still own and run the casinos. I don’t expect anything will change if this is true. Hopefully MGM will not end up running Cosmo. That would be tragic. They’d for sure destroy everything that’s good about Cosmo.

[Penguin]

What might change is that Blackstone will want cash for rent and MGM cash from casino operations. No book entries creating non-cash profits. Really can't see Blackstone jumping in for just normal cap rates. Also if this is triple lease then MGM shoulders all improvements, maintenance, and yearly rent increases. VICI properties deals may give one an idea how all this would be put together.

[CPT]

MGM Agrees to Sell Bellagio to Blackstone for $4.25 Billion

[Penguin]

Sold to a Blackstone REIT. Similar to what is happening with VICI and CET. Monetize the real estate to create cash for the casino operator. Since MGM will still operate the casino and pay rent back to Blackstone REIT I would say little would change for the players other than what has already been planned for in MGM's longer term operating plan.