MGM Growth Properties Mulls Run at Las Vegas Sands Strip Assets

Posted on: November 3, 2020, 08:17h. 

Last updated on: November 3, 2020, 10:00h.

MGM Growth Properties (NYSE:MGP) could consider buying the Venetian, Palazzo, and Sands Convention Center if the gaming real estate investment trust (REIT) can find the right operator to partner with.

MGM Growth
Mirage Las Vegas, seen here, is owned by MGM Growth Properties. The company is interested in Vegas deals with the right partner. (Image: USA Today)

On a Monday conference call with analysts and investors to discuss the company’s third-quarter earnings, MGP executives indicated they’re potentially interested in adding to holdings in Las Vegas. The city already accounts for half the real estate firm’s portfolio.

In acknowledging challenges to Sin City’s convention business created by the coronavirus pandemic, MGP CEO James Stewart sees the largest US gaming hub as well-positioned to rebound relative to Chicago, Florida, and New York, “once we get to the other side of COVID.”

I think the attractiveness of Vegas and our venues here is going to only increase compared to those other cities, given space, ability to creatively sort of structure that space, and weather and so on, versus sort of a more urban environment in the form of many of those urban cities,” he said. “So the answer is, yes, we think a deal could get done on the strip. We would definitely be interested.”

Last week, Las Vegas Sands (NYSE:LVS) said it’s considering a sale of the Venetian, Palazzo, and Sands Convention Center for $6 billion, and that discussions to that effect are in early stages.

MGP Could Depart from Norm

The list of interested suitors for the LVS assets is likely lengthy, but is trimmed significantly when it comes down to finding those capable of cutting a $6 billion check.

For MGP’s part, such a deal would be a departure from the norm. Currently, the landlord has just one tenant. MGM Resorts International (NYSE: MGM), and that operator already said that while it’d be positive for Las Vegas if Sands can fetch $6 billion for those properties, its footprint in the city is large enough that it doesn’t need to buy venues there.

MGP executives didn’t identify possible partners. But they made clear on a transaction of that magnitude, the priority is knowing the operator can meet its lease obligations, regardless of the economic environment.

“If we can go to bed at night without having anything keep us up over worrying about is the rent going to get paid, it’s absolutely a deal that we should do,” said Stewart.

REIT Competition

Analysts recently pitched the idea of LVS selling the two integrated resorts and the convention center to a REIT and then leasing the venues back.

However, of the three publicly traded gaming real estate firms, only MGP and VICI Properties (NYSE:VICI) could make a move on the Sands properties. Rival Gaming & Leisure Properties (NASDAQ:GLPI) recently said its preference is for holdings in regional markets, not Las Vegas.

VICI executives recently said they’re interested in Las Vegas deals, but didn’t specifically mention the LVS properties.

In Sin City, MGP owns the real estate of Excalibur, Luxor, Mandalay Bay, MGM Grand, Mirage, New York New York, and Park MGM.