by Michael J. Shapiro | October 16, 2019

Gaming giant MGM Resorts International continues to unload real estate, in line with the asset-light transformation toward which the company is evolving. MGM has entered into a joint venture agreement with Blackstone Real Estate Income Trust, essentially selling off its Bellagio real estate and then leasing it back to continue operating the iconic Las Vegas Strip resort. In a separate deal, MGM will sell Circus Circus Hotel & Casino Las Vegas to an affiliate of Treasure Island owner Phil Ruffin for $825 million.

The Bellagio deal, which is expected to close in the fourth quarter of this year, entails the MGM-Blackstone joint venture acquiring the Bellagio real estate at a value of $4.25 billion and leasing it back to an MGM subsidiary for an annual rent of $245 million. MGM Resorts receives an influx of approximately $4.2 billion as a result of the deal, in addition to 5 percent equity interest in the joint venture.

"This transaction confirms the premium value of our owned real estate assets, highlights the unique value of Bellagio as a premier asset in gaming and solidifies our status as a premier operator of gaming and entertainment properties," explained MGM chairman and CEO Jim Murren.  

There will be no changes to the operation of Bellagio, according to a company spokesperson, and guests and employees should see no difference in their experiences. The Circus Circus deal, however, results in the classic Vegas property dropping out of MGM's portfolio.

"Circus Circus has anchored the north end of the Las Vegas Strip for over 50 years, and I am excited to add it to my casino portfolio," enthused gaming magnate Phil Ruffin. "I have tremendous respect for Jim Murren and the MGM team, and my relationship with them goes back to my friendship with [former MGM CEO] Kirk Kerkorian and continues to this day."

Circus Circus joined MGM as part of the company's Mandalay Bay Resort Group purchase in 2005. The property, which first opened in 1968, is known for its 5-acre indoor amusement park, 10-acre RV park and 37-acre festival grounds. It employs about 2,300 people.

The deal is subject to customary closing conditions, including regulatory approval, and is expected to be finalized in the fourth quarter as well. Ruffin hasn't revealed plans related to his company's operation of Circus Circus.

Taken together, the deals and general corporate transformation unlock a lot of funds for MGM to focus on developing, managing and operating gaming and hospitality properties, as opposed to owning and maintaining real estate. While the asset-light transformation was actually announced quite some time ago, freeing up funds now might also be advantageous in light of the recent $800 million settlement MGM agreed to pay to victims and families of the Oct. 1, 2017 mass shooting that occurred at a country music concert on the company's property.

MGM still has several extremely valuable real estate assets, the company pointed out in a statement, including MGM Grand in Las Vegas, MGM Springfield in Massachusetts, a 50 percent stake in CityCenter on the Strip and a more than two-thirds ownership in the MGM Growth Properties subsidiary. The company will be exploring options to monetize these assets as well, according to the statement.