MGM Resorts have reached an agreement to sell their Circus Circus casino property in Las Vegas to an affiliate of Treasure Island owner Phil Ruffin for a consideration of $825m.
MGM Resorts regard Circus Circus as not core to their business model moving forward, hence the decision to part ways with the 3,773 room hotel and casino complex. Circus Circus which opened over fifty years ago in 1968, as a cost of $15m and initially only comprised a casino, with the hotel being added later at a reported cost of $23m.
Now home to multiple restaurants, entertainment amenities, hotel complex and gaming space of some 123,928 sq ft, the decision by MGM Resorts to off-lay Circus Circus, comes as a bit of a surprise.
However, the agreed sale of Circus Circus is only one of two announcements made by the MGM Resorts group, with the other being that the company have agreed a joint venture project with Blackstone Real Estate Income Trust .
This will see MGM Resorts sell the Bellagio resort complex in Las Vegas to Blackstone Real Estate Income Trust in a deal worth $4.25 billion. However, MGM Resorts will subsequently lease back the Bellagio and retain a 5% equity stake in the joint venture.
These two announcements from MGM Resorts, are set to shore up the group’s balance sheet, with a considerable cash injection into the group. Paul Salem, who is the chairman of the MGM’s real estate committee of the company’s board of directors, commented on the deals, stating: “We want to make sure if and when the next recession comes we have a fortress balance sheet.”
Salem went on to say regarding the Bellagio deal: “The deal for Bellagio, which valued it at roughly 17.3 times rent was one of the highest ever paid for a Las Vegas strip asset. This transaction will certainly make people realize what the value of Las Vegas assets is.”
It is no coincidence that the two deals have come about just months after Keith Meister ( No relation to Casinomeister! ) was afforded a position on the MGM board.
However, Salem speaking about Meister’s input into the deals, played down the significance somewhat, stating: “Keith was on our real estate committee and he was very active on it. But before he joined the board we were on this path anyway.”
