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Bellagio sold to Blackstone in $4.2B leaseback deal

Discussion in 'Casino Industry & Development' started by SH0CK, Oct 15, 2019.

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  1. SH0CK

    SH0CK Stylin' and Profilin' Quasi Tech Admin

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    Per @Chuck2009x original post awhile back, Blackstone buys the Bellagio to lease it back to MGM. Now what are they gonna do with $4B?

    https://www.reviewjournal.com/business/casinos-gaming/bellagio-sold-to-blackstone-in-4-2b-leaseback-deal-1871119/
     
  2. UKFanatic

    UKFanatic The Arbiter of Taste Caviar Kid

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    Free brownies
     
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  3. The Rumor

    The Rumor VIP Whale

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  4. UKFanatic

    UKFanatic The Arbiter of Taste Caviar Kid

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    Shareholders like brownies!
     
  5. mikel123

    mikel123 High-Roller

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    I'm sure they will put it to good use after Jimbo skims some off the top :whistle:
     
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  6. SH0CK

    SH0CK Stylin' and Profilin' Quasi Tech Admin

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    I like the brownie idea better. Especially when they owe $15B in debt.
    https://www.businesstimes.com.sg/consumer/mgm-to-sell-bellagio-circus-circus-resorts-for-about-us5b
     
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  7. PalmWind

    PalmWind Tourist

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    I think these deals are all about freeing up capital for Japan.
     
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  8. VegasFirstTimer

    VegasFirstTimer High-Roller

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    Smart move. Aria has been the flagship property of MGM for some years now. Why not get cash for Bellagio before needing to put money into the property as it is quickly being worn down. Probably costs less to buy a newer property than to update Bellagio.
     
  9. The Rumor

    The Rumor VIP Whale

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    I don't think you understand what they did. They sold the capital asset. That's all. They still run the casino and other core operations. They pay a ton of rent (starting at ~265 M a year) for the privilege to do so. They are still heavily invested in the Bellagio remaining top tier.

    They also don't own Aria; City Center does. They own a 50% stake in City Center. It's probably not your crown jewel if you don't own more than half of it.

    The Bellagio remains their crown jewel. They just felt they couldn't turn down 4.25 B for the physical asset underlying the operations that they still control. It's the same thing they have done with every single other casino they own besides the MGM Grand. A lot of their peers have done similar things.
     
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  10. BillDonovan

    BillDonovan Low-Roller

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    They’ll raise resort fees, again.
     
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  11. stlguy197239

    stlguy197239 VIP Whale

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    Doesn’t Blackstone own the Cosmo as well?
     
    Let's try this Thanksgiving thing again
  12. LVRaiders

    LVRaiders High-Roller

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    Business as usual per this article - MGM will continue to run the casino/hotel in the new joint venture with Blackstone

    MGM Resorts International has agreed to sell the Bellagio resort in Las Vegas to Blackstone Group for $4.25 billion. MGM will then lease back the property and continue operations. The company also announced it is selling Strip casino Circus Circus to real estate mogul Phil Ruffin for $835 million. The moves, which leave the company with just two wholly owned properties, come amid growing pressure from investors to cut back on debt.
     
    Labor Day Wknd
  13. grapplefu

    grapplefu Tourist

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    What other property besides MGM Grand do they wholly own?
     
  14. stlguy197239

    stlguy197239 VIP Whale

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    Not sure because the wiki page for MGM Resorts International indicates they wholly own Luxor, Park MGM, Exclaibur, NYNY, the Mirage, and Mandalay Bay.

    The only thing that is not clear is if they did the trick CET did where the hotels/casino are owned by one company and the land is owned by a different company under the umbrella? Technically that would qualify as not being wholly owned but it is an accounting trick.
     
    Let's try this Thanksgiving thing again
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  15. CLE_Greg

    CLE_Greg 100% Full Blown Degen

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    Yes, but what’s unclear to me is that the Bellagio deal was sold into the Blackstone REIT with 5% interest in the holding company retained by MGM. I’m not sure if the Cosmo is part of the same portfolio but yes, still Blackstone. It appears they retained the same financial advisors for both the potential sale of the Cosmo (reported on back in April) and this purchase. All that said, MGM will continue to manage Bellagio and it not likely anything major will change in terms of day to day operations. The decision to liquidate the asset to raise capital and operationalize the monthly cost seems like it was largely driven by some activist investors who want to see the company divest from hard assets in order to return some of that cash to shareholders (ie. said activist investors).
     
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  16. stlguy197239

    stlguy197239 VIP Whale

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    If Blackstone is not careful, they will be the third largest casino company in Vegas without even trying. Blackstone was the company that bought Busch Entertainment (Busch Gardens, Sea World) when I worked there many moons ago. As far as I know they still own the company despite coming out when they made the purchase and claiming they would be trying to sell within a few years. They were hoping that the economy would turn around and the interest would go up and they could make a profit. About a decade later they are still running the company.
     
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  17. CLE_Greg

    CLE_Greg 100% Full Blown Degen

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    MGM is reportedly seeking to unload city center as well. Unclear if their partners, (The Government of Dubai) will want to go along and divest as well. But, if Blackstone ends up involved in that deal they will pretty quickly become one of the most powerful real estate owners in Vegas having control of the high end center strip properties. It’s not a bad thing necessarily, however if MGM retains management of City Center in the deal like they did with Bellagio, it could make sense for a deal where the REIT keeps the Cosmo real estate instead of selling it like was previously suggested, and MGM leases it as well (or at least manages it) now that they are shifting the business to a more operationalized/transactional cost method of doing business.

    I would hate to see it, but it might make the most sense for all involved. MGM gets the property for all intents and purposes as it would appear to a normal customer, and Blackstone can continue to milk the asset for monthly returns to shareholders.
     
  18. stlguy197239

    stlguy197239 VIP Whale

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    Interesting. The rumor for years is they have been trying to sell Cosmo so it makes me wonder why they would go the opposite way and buy MORE stuff on the strip.
     
    Let's try this Thanksgiving thing again
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  19. CLE_Greg

    CLE_Greg 100% Full Blown Degen

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    It is curious and to your point, seems to go against their stated intentions, however MGM wanting and willing to sign long term lease/management agreements might change the math. It protects their down side on the asset value in the event of a market devaluation, and provides them with a nice, stable ROI every month. I'm wondering if this Bellagio deal is going to end up part of larger talks, as in step one of a 3 step plan including city center and lease/management of cosmo. Its unlikely MGM will go out of business anytime soon, so even if Vegas sees another decline in traffic like it did back in 08-10, Blackstone is still relatively safe. If anything, this seems risky for MGM given that the contract appears to be a fixed monthly cost (from what little I could gather from the reporting). It makes sense today while the getting is good, but it may bite them in the ass when another downturn happens. My guess is that the MGM activist investor will hope to be gone by then and MGM could end up another broken shell of a company just like we've seen over and over again when companies hand board seats to folks with short term goals and very little regard for long term consequence.
     
  20. The Rumor

    The Rumor VIP Whale

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    It's a different arrangement. Cosmo is a fully owned and operated casino property. They bought it in an older private equity fund and want to cash out.

    The Bellagio deal is a pure real estate play. They bought a big building and collect rent. They will own it in a separate, new real estate fund.
     
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