MGM Resorts International has entered into a definitive agreement to sell the majority of the operating partnership units it holds in real estate investment trust MGM Growth Properties LLC (MGP) to VICI Properties Inc.
Under the terms of the agreement, VICI will acquire MGM’s remaining stake for US$43 per unit as well as 100% of the outstanding class A shares of MGP in a stock-for-stock transaction, while MGM will receive US$4.4 billion in cash and retain a 1% VICI operating partnership stake worth US$370 million.
The transaction represents the fourth time in just over a year that MGM has reduced its interest in MGP after the REIT redeemed US$700 million worth of operating partnership units on two separate occasions last year, in May and December respectively, and another US$1.2 billion in March 2021. Those previous transactions had reduced MGM’s stake from 61% to 42.1%.
MGP’s extensive US property portfolio includes MGM Grand, Mandalay Bay and Luxor on the Las Vegas Strip – all of which are operated by MGM Resorts – plus the Borgata in Atlantic City and MGM National Harbor in Washington DC among many others.
Having already sold off the Bellagio in November 2019, MGM Grand and Mandalay Bay in January 2020 and reached an agreement to sell CityCenter only last month, MGM CEO and President Bill Hornbuckle said this latest MGP transaction continues the company’s asset light strategy, representing a “major step forward” in simplifying its corporate structure.
“As a result of these actions, we are well positioned and remain focused on pursuing growth opportunities in our core business, with significant financial flexibility to continue to deploy capital to maximize shareholder value,” he explained.
MGM said the formation of MGP in 2016 had resulted in the successful execution of multiple transactions, providing for significant cash proceeds that the company has used to strengthen its balance sheet, return capital to shareholders and fund substantial investments in significant growth opportunities.
“Among these investments is the formation of BetMGM, which has now solidified its position as a leader in the iGaming and sports betting market in the US,” it said. “These efforts also favorably positioned the company to weather the unprecedented crisis created by the COVID-19 pandemic and allowed the Company to emerge in a position of strength as the economy continues to rebound.
“After giving effect to the US$4.4 billion in cash proceeds from this transaction, as well as the MGM Springfield and CityCenter transactions, the company expects to have $11.6 billion of domestic operations liquidity available to enable execution of its goals of becoming the premier gaming entertainment company, returning value to shareholders and solidifying its balance sheet.”
The transaction will see an existing master lease between MGM and MGP that sees MGM rent and operate MGM Springfield, MGM Grand and Mandalay Bay amended and restated, providing for an initial term of 25 years with three 10-year renewals. Under the revised lease, MGM will pay MGP an initial annual rent of US$860 million.
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