Casino operator MGM Resorts International on Monday announced that it has completed the necessary transactions to establish a subsidiary, MGM Growth Properties LLC, as a publicly traded real estate investment trust (REIT).
MGM Growth Properties closed last week its initial public offering for 57.5 million shares priced at US$21.00 a share – the high end of its target range. It raised proceeds of approximately US$1.1 billion, after deducting underwriting discounts and its estimated expenses for the offering, said MGM Resorts.
The REIT is being spun out of MGM Resorts and includes 10 MGM Resorts properties – all in the United States – including seven casino resorts on the Las Vegas Strip, according to regulatory filings.
As of December 31, the 10 properties to be covered by the REIT collectively accounted for 24,466 hotel rooms; approximately 2.5 million square feet (232,258 sq metres) of convention space; more than 100 retail outlets; more than 200 food and beverage outlets; and approximately 20 entertainment venues, said MGM Resorts in a Monday press release.
MGM Resorts – the parent company of Macau-based MGM China Holdings Ltd – remains a majority owner of MGM Growth Properties after the IPO. The U.S.-based casino operator will continue to manage the assets owned by MGM Growth Properties under a 10-year lease agreement. The lease has an option for renewal in tranches of five years at a time.
MGM Resorts will retain 100 percent ownership of some of its most iconic properties, including the Mirage (pictured), the Bellagio and MGM Grand Las Vegas, as well as its equity interest in MGM China Holdings.
In connection with the creation of the REIT entity, MGM Resorts said it entered into a new amended and restated credit agreement, following which it will redeem for cash all US$1.23-billion – measured as an aggregate principal amount – of its outstanding 7.50-percent senior notes and its 10-percent senior notes, both due in 2016.
The company’s new credit facility is comprised of a US$1.2-billion revolving credit facility and a US$250-million term loan and replaces in its entirety its prior credit agreement, the firm said in Monday’s statement.
MGM Resorts chairman and chief executive, Jim Murren, said the creation of the REIT entity allowed MGM Resorts to strengthen its balance sheet and gave it financial flexibility.
“We have achieved a historic milestone at MGM Resorts, and we look forward to working with MGM Growth Properties to further solidify our position as the leader in entertainment, gaming, and hospitality,” said Mr Murren.
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Co-chairperson and executive director of Macau casino operator MGM China