By Todd Horwitz

MGM Resorts to sell MGM Grand and Mandalay Bay

MGM Resorts International is selling the MGM Grand and Mandalay Bay resorts and casinos on the Las Vegas Strip to a joint venture for about $2.5 billion. The joint venture includes private-equity and real estate company Blackstone Group and MGM Growth Properties LLC. The joint venture will be owned 50.1% by MGM Growth Properties and 49.9% by Blackstone. It will also acquire the real estate assets of Mandalay Bay from MGM Growth Properties and lease both properties to MGM Resorts for an initial rent of $292 million.

The total value of the two transactions is $4.6 billion. MGM Resorts anticipates cash proceeds of approximately $2.4 billion. MGM Resorts announced in October that it was selling the real estate of Bellagio to a joint venture with Blackstone for about $4.25 billion. Last month MGM Resorts said it closed on the sale of Circus Circus Las Vegas and 37 adjacent acres for $825 million. The deal, announced Tuesday, is targeted to close in the first quarter.

As part of the deal, MGM Growth also agreed to buy up to $1.4 billion of its operating partnership units from MGM Resorts. If it purchases the full amount, it will leave MGM Resorts with a 55% stake in the REIT down from a current 68%. The deal is similar to MGM Resorts’ sale of its flagship Bellagio casino in Las Vegas to Blackstone last year.

In October, Blackstone said its real-estate investment trust, known as BREIT, would take control of the Bellagio’s real estate through a $4.25 billion joint venture with MGM. MGM, which retained a 5% stake in the venture, continues to operate the casino and is renting the property from the venture for $245 million a year. MGM Chief Executive Jim Murren said on a conference call in October that the company planned also to sell the MGM Grand and would use the Bellagio transaction as a blueprint for future real estate deals.

The MGM Grand Las Vegas is the company’s largest property by square footage, as of its most recent annual financial filing. It includes a hotel and resort as well as three condominium towers, and it is the company’s second-most-profitable property behind the Bellagio. Together, MGM Grand, Bellagio and Mandalay Bay brought in $1.1 billion in adjusted earnings before interest, taxes, depreciation and amortization or about 40% of the company’s total.

Todd “Bubba” Horwitz