Shedding some weight
MGM Resorts International has continued its asset-light, reduced Sin City exposure strategy by putting its famed Polynesian-themed The Mirage Las Vegas up for sale.
During an investor call on Wednesday, the casino operator’s CEO Bill Hornbuckle announced MGM intends to sell The Mirage to another operator. Nevada Independent journalist Howard Stutz took to Twitter to outline the overarching corporate mechanics of the sale:
The sale is the latest in a string of record-breaking, ownership-changing deals taking place on the Las Vegas Strip. Las Vegas-based MGM, like other casino and hotel operators, has been offloading its assets to concentrate on new business areas such as sports betting and a casino project in Japan.
Ultimately, MGM wants to cut its exposure to the Strip and stop pumping money into the aging property. On the investor call, Hornbuckle said — looking at capital allocation and the idea of diversification — MGM has “enough of Las Vegas.”
MGM moving on
In a communication to employees sent Wednesday, Hornbuckle said the decision to sell The Mirage was in the best long-term interests of MGM and the hotel-casino itself. He described the property as world class, iconic, and unique, adding that it was:
ripe for continued investment and development.”
While not the right flavor for MGM right now, Hornbuckle envisages the resort “will be the crown jewel in another operator’s portfolio.” According to the CEO, the sale process will not immediately affect the daily operations of The Mirage.
Hornbuckle added a personal note regarding his own history with The Mirage. He said he “will always hold fond memories” of the hotel-casino he helped open in 1989, where he spent the early part of his career. Hornbuckle described The Mirage as a “remarkable resort with great brand recognition and a strong, loyal following.”
An asset-shedding era
MGM’s asset-light strategy includes selling properties to enhance its “financial flexibility and secure new growth opportunities.” The firm has revealed a shifting focus towards sports betting and online gaming, getting behind its new mantra to become the most trusted and best-known brand in the industry.
Over the past year, Las Vegas has become a hotbed of big property deals as the major casino operators trim the fat of retail to feed other more lucrative ventures in the digital space. On Tuesday, Caesars Entertainment reaffirmed its plans to sell a Strip property early in 2022.
MGM makes its moves
MGM has, however, been the most high-profile mover and shaker in the Vegas buy, lease, or sell property market. In September, a $2.13bn deal gave MGM full ownership of the Strip’s Aria Resort & Casino and Vdara Hotel & Spa. MGM then promptly sold the Aria-Vdara real estate to private equity firm Blackstone for $3.89bn. While MGM will continue to manage and operate the properties, it will pay $245m per year to rent the real estate.
MGM agreed to pay $1.63bn in cash
During the investor call on Wednesday, Hornbuckle also formally announced that MGM is taking over management of the Cosmopolitan casino resort in Las Vegas. The deal, inked in September, came after MGM agreed to pay $1.63bn in cash to lease the real estate for 30 years, agreeing to an annual rent of $200m.