MGM Resorts (“MGM”), the global casino operator, announced it is selling the MGM Grand and the Mandalay Bay for $2.5 billion. The properties, which are two of MGM’s largest, are being acquired by a joint venture between Blackstone (the private equity giant) and a publicly-traded REIT called MGM Growth Properties (“MGM Growth”). And no, the similar names are not a coincidence.
In 2015 MGM Resorts created a new entity called MGM Growth Properties. The concept was to establish two distinct entities: one focused on operating casinos (MGM) and one focused exclusively on property ownership (MGM Growth). Today, MGM Growth owns roughly 15 casinos that are all leased right back to MGM.
The Leaseback Trend: The Daily Upside has written before about how the sale-leaseback strategy has become a popular tactic in corporate America. Bed Bath & Beyond just announced a $250 million sale-leaseback transaction to reinvigorate growth. Darden Restaurants completed a massive real estate transformation to streamline operations. MGM’s latest real estate deal is another step towards its goal of becoming an “asset-light” operator and pivoting towards digital gaming. MGM completed a similar transaction when it sold the Bellagio late last year, raising over $4 billion.
The Future of Gaming: Many analysts believe the move will allow the company to focus on growth initiatives including digital gaming. In 2018, MGM teamed up with a British company called GVC to form “Roar,” a digital sportsbook and online gaming platform.
Online gaming has become an increasingly important part of the ecosystem and MGM is focused on building Roar’s footprint. But the digital landscape is competitive, and non-traditional players are entering the space. For instance: Barstool Sports, the millennial-focused media brand has its own online sportsbook that is reportedly in talks to be acquired by Penn National Gaming.