Sale of MGM Springfield Brings in $400 Million for MGM Resorts
Posted on: Might 12, 2021, 09:01h.
Final up to date on: Might 12, 2021, 11:54h.
MGM Resorts Worldwide (NYSE:MGM) is promoting its MGM Springfield built-in resort to MGM Development Properties (NYSE:MGP), the gaming firm’s major landlord, for $400 million in money.
The deal is a sale-leaseback transaction, which has change into more and more well-liked within the gaming business in recent times. MGM maintains operational management and duty for its lone New England on line casino, whereas MGP turns into the proprietor of the property property, including one other long-term lease.
MGM Springfield might be added to the present Grasp Lease between MGM Resorts and MGP, and the hire fee to MGP will improve by $30 million, of which $27 million might be base hire and $3 million might be proportion hire,” in line with a press release issued by the businesses.
The true property firm’s $400 million obligation for the Massachusetts gaming venue might be paid for with money readily available or capital from financing devices, together with credit score revolvers. The transaction is scheduled to shut within the fourth quarter.
MGM Continues Transfer to Asset-Gentle Mannequin
The sale of the Springfield venue extends MGM’s transition to an asset-light working mannequin – one that features substantial actual property divestments.
In 2019, the gaming large entered a sale-leaseback transaction for the Bellagio on the Las Vegas Strip and adopted that up by promoting the property of MGM Grand and Mandalay Bay in early 2020. Bellagio is the one MGM on line casino resort within the US that MGP doesn’t personal at the very least a part of the true property property. Blackstone Actual Property Revenue Belief (BREIT) owns the bodily property of that venue. That entity partnered with MGP to accumulate MGM Grand and Mandalay Bay.
As a part of its asset-light strikes, the Mirage operator has additionally been paring its stake in MGP. In March, it hauled in $1.2 billion in gross proceeds by redeeming 37.1 million items of the gaming actual property funding belief (REIT). MGM now owns 42 % of the true property firm, a proportion that’s anticipated to proceed declining over time.
The strikes are bearing fruit for the Excalibur operator. On the finish of the primary quarter, it had $6.2 billion in money readily available and whole liquidity of $9.7 billion, together with money and revolver entry, giving it one of many strongest steadiness sheets within the gaming business.
Good Deal for MGP, Too
With the acquisition of MGM Springfield, MGP provides some geographic variety, because the Massachusetts venue is simply the second it owns within the New York and New England areas. It additionally owns the true property of Empire Metropolis On line casino in Yonkers, NY.
The REIT’s timing in shopping for the Springfield actual property additionally seems fortuitous, because it posted document earnings earlier than curiosity, taxes, depreciation, amortization, and restructuring or hire prices (EBITDAR) within the first three months of this 12 months.
MGP CEO James Stewart stated the transaction might be “instantly accretive to adjusted funds from operations (AFFO) per share.” AFFO is a key measure of a REIT’s monetary well being and efficiency.