MGM Resorts creates REIT for hotels to cut debt, boost value

Oct 30, 2015 9:25 AM

MGM CEO Jim Murren said the intent of this plan that had been under review  for months before this week’s announcement is to increase the value of assets such as real estate that the corporate parent feel are under-valued.

“This transaction,” Murren explained during a conference call with financial analysts, “provides MGM shareholders numerous financial benefits, including delivering our balance sheet and enhancing long-term shareholder value,. “MGM is creating a new growth platform to more effectively execute its strategic initiatives, including portfolio diversification.”

The assets of the REIT are to include  “ten premiere real estate assets” that collectively have more than 24,0-00 hotel rooms and more than 2.3 million square feet of convention and meeting space.

The resort properties will include Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor, Excalibur and The Park, all in Las Vegas. The three regional properties are MGM Grand Detroit, the Beau Rivage in Biloxi and Gold Strike Tunica.

Luxury parent company resort on the Las Vegas Strip such as MGM Grand and Bellagio will not be part of the trust. MGM will also retain  Circus Circus on the Strip, its half interest in CityCenter and the new 20,000-seat arena to be complete on the Strip by next Spring. Neither is the MGM investment in Macau and in nongaming hotels in mainland China to be part of the REIT.

Murren said MGM Resorts will lease the properties under terms of  a lease with an initial 10-year term and four five-year extensions at MGM’s option.

Phil Hevener has been writing about the Nevada gaming business for more than 30 years. Email: [email protected].