Borgata Hotel Casino & Spa to Become Fully Owned by MGM Resorts International
Posted on: June 1, 2016, 12:02h.
Last updated on: June 1, 2016, 12:02h.
The Borgata Hotel Casino & Spa is the most prosperous resort in Atlantic City, and the property will soon become fully owned by MGM Resorts International after the company announced an agreement with Boyd Gaming to buy its 50 percent share for $900 million.
MGM and Boyd, both of which are headquartered in Las Vegas, jointly constructed the $1.1 billion Borgata and opened the non-Boardwalk casino resort in 2003 with its equity split 50-50. The marina hotspot has undergone three major renovations in its 13 years.
“Borgata is the premiere resort in Atlantic City,” MGM Resorts Chairman and CEO Jim Murren said in a press release. “While the market continues to experience challenges, Borgata has outperformed and differentiated itself as the undisputed leader in the city.”
MGM will, in turn, sell the Borgata to MGM Growth Properties, its real estate trust subsidiary, for $1.175 billion and then lease the property back to MGM Resorts.
Boyd Gaming President and CEO Keith Smith said the decision to sell provides significant value for shareholders and allows the company to reduce debt.
The transaction is expected to close in the third quarter of this year.
MGM Bets on Northeast
The largest casino company on the Las Vegas Strip, MGM Resorts appears to be focusing its attention on development outside of Sin City. Betting on anything inside the Atlantic City limits is currently a rather risky wager, even if it is the casino that is nearly doubling the revenues of any other venue in the area.
The Borgata has grossed $220,459,250 year-to-date. Its closest competitor in Atlantic City is also its neighbor, Harrah’s Resort Atlantic City, which has brought in $114.77 million in 2016.
None of the other six Atlantic City casinos have eclipsed the $100 million mark through the first quarter of the year.
The old business adage that you have to spend money to make money is apparently being realized inside the MGM boardroom. In addition to shelling out $900 million for the Borgata, the MGM is currently in the process of building the MGM Springfield in Massachusetts, a $950 million casino resort that is expected to open in 2018.
Atlantic City Status Quo
MGM seems to know something the rest of us don’t. Investing another $900 million in the Borgata and Atlantic City while voters have the option to bring two casinos to northern counties in the state wouldn’t make the most prudent business sense.
The Boyd Gaming buyout might imply that MGM doesn’t think voters will approve the November casino referendum.
In late May, Gov. Chris Christie (R) signed a financial rescue package for Atlantic City that will provide the local government with an influx of money through state loans. In exchange, the city has five months to draft a balanced budget and cut tens of millions of dollars from its annual expenditures.
“For Atlantic City officials, the final countdown starts today,” Christie said in a statement on May 27. “They know that if they fail to change their tendencies of wasteful spending and mismanagement, my administration will be empowered to immediately step in and do the job for them.”
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