MGM’s balance sheet clean-up

MGM Resorts International is looking to sell the MGM Grand Casino on the Las Vegas Strip by the end of 2019.?This move comes only a short time after the company sold its Circus Circus and Bellagio properties. All sales are part of a new company strategy to lighten the number of expensive assets it has on the books.?

part of a new company strategy to lighten the number of expensive assets

MGM Resorts’ growth strategy will see the company use funds from these sales to invest in other opportunities, as well as return some of the funds to its investors. 

The CEO and chairman of MGM Resorts International, Jim Murren, spoke about the sale plans for the MGM Grand during an investor conference call regarding the recently released third-quarter earnings. 

The recent MGM property sales

Earlier this month, MGM sold the Bellagio casino property to the Blackstone Group for $4.2bn. MGM will keep a 5% stake in the property and will be paying an annual rent of $245m to continue operating the resort.

sales will “fortify” the company’s balance sheet

The Circus Circus was acquired by the owner of the Treasure Island, Phil Ruffin, for $825m. Murren believes these sales will “fortify” the company’s balance sheet going into the future.?

Other potential deals in the cards

It doesn’t look like MGM Resorts International is stopping there either. Murren said there could be similar deals happening with some of the company’s other properties.

These include the Vdara, Aria, MGM Springfield, and potentially the MGM Growth Properties real estate investment trust. 

A useful blueprint going forward

MGM is using its previous sales as a blueprint for selling the likes of the MGM Grand. Murren said the company will be looking to take a similar approach to the sale of the Bellagio.?

He also described how MGM’s new asset-light approach implies “separating the ownership of capital-intensive, lower return assets and recycling that capital into high ROI opportunities.”

Expanding into other markets

With the money that the MGM is making off these major properties, it will look at new business opportunities. Its main focus, for now, is embracing the nationwide expansion of sports betting, as well as securing a license for an integrated resort in Osaka, Japan.?

MGM Resorts International already has a number of deals in the sports betting space. It is now on board with Yahoo Sports and Buffalo Wild Wings to help gain nationwide exposure for its sports betting offerings. 

The financial outlook for MGM Resorts

The two latest deals did have an impact on the third-quarter earnings for MGM Resorts International. There was a $37.1m loss for the period, although revenues of $3.3bn showed a 9.4% year-on-year rise. The main reason for the loss was due to a one-off $219m non-cash impairment charge resulting from the sale of the Circus Circus.?

Murren believes the financial future of MGM Resorts is bright. Its properties can look forward to hosting the ConExpo-Con/Agg trade show which takes place every three years, as well as the NFL Draft in April.?Its entertainment venues are jam-packed with leading talent, while the local Las Vegas Knights NHL team has started the new season strongly in the T-Mobile Arena, which is co-owned by the MGM.?