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MGM Mulling Real Estate Sale of High-End Las Vegas Strip Properties, Including Bellagio, MGM Grand

MGM Resorts International (NYSE:MGM) is reportedly in discussions to sell but retain operating rights to some of its glitzier Las Vegas Strip properties, including the Bellagio.

MGM’s Bellagio on the Las Vegas Strip could be for sale. (Image: Travelzoo)

If commenced, the transactions would be in the form of a sale-leaseback, meaning MGM would sell a real estate asset to a buyer, lease the venue back from that party and continue running the casino at the property.

MGM Resorts, the largest operator on the Strip, is working with a team to gauge interest from suitors for the Bellagio and MGM Grand, Bloomberg reported, citing unidentified sources familiar with discussions that are being deemed “private.”

A logical suitor for those casinos would be MGM Growth Properties LLC (NYSE:MGP), a gaming and leisure real estate investment trust (REIT) spun off from MGM Resorts in 2016.

In Las Vegas, MGP already owns Excalibur, the Luxor, Mandalay Bay, the Mirage, New York New York and Park MGM, all of which are operated by MGM Resorts. The real estate company also owns the Borgata in Atlantic City and MGM Springfield in Massachusetts.

Cozy Relationships

In addition to MGP, the major domestic gaming REITs are Gaming & Leisure Properties (NASDAQ: GLPI) and VICI Properties (NYSE:VICI). All three real estate firms count the companies they were separated from as their most important tenants.

For example, VICI owns Caesars Palace in Las Vegas and 10 Harrah’s casinos, among other properties managed by Caesars Entertainment Corp. (NASDAQ:CZR). And that number does not include the Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Atlantic City VICI is scooping up in a $3.2 billion transaction related to Eldorado Resorts, Inc.’s (NASDAQ:ERI) $17.3 billion acquisition of Caesars.

Gaming & Leisure Properties, spun off from Penn National Gaming, Inc. (NASDAQ:PENN) nearly six years ago, owns 43 casinos and racetracks in 17 states, the bulk of which are run by that regional gaming company.

Earlier this year, MGM Resorts launched a real estate committee comprised of directors John Kilroy Jr., Keith Meister and Paul Salem, aimed at extracting value from the company’s property holdings. Both Meister and Salem have been buyers of the gaming company’s stock this year and in the case of Meister, he is seen as an activist investor pushing MGM to find avenues for increasing shareholder returns.

Underscoring the closeness of the gaming company and MGP, MGM Resorts CEO Jim Murren, President and COO Bill Hornbuckle and Executive Vice President John McManus are all members of the MGP board.

Other Suitors?

MGM Resorts is likely to find an eager audience when it comes to selling Strip venues, which rarely come up for sale. The Bloomberg article did not identify potential buyers for Bellagio and MGM Grand, but billionaire Phil Ruffin, who has been linked to other Las Vegas casino deals, bought Treasure Island from MGM in late 2008 and tried to acquire the Mirage in 2015, but his $1.3 billion offer was rejected.

Not mentioned in the Bloomberg piece were MGM’s Aria and Circus Circus, both of which are located in Las Vegas. Aria would fit the bill as a luxury property with the potential to fetch a compelling price tag from a buyer.