MGM Resorts Is Betting Big on Las Vegas
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MGM Resorts has made a big bet on the future of the Las Vegas Strip. MGM recently agreed to acquire half of CityCenter for $2.125 billion and sell the other half for a total of $3.89 billion.
It's become very popular to sell the real estate of casinos to a real-estate investment trust (REIT) stock. Penn National started the trend by forming Gaming and Leisure Properties in 2013. Caesars used Vici Properties to engineer the merger with Eldorado Resorts in 2015. MGM entered the arena with MGM Growth Properties(NYSE:MGP) in 2016. Most of the Las Vegas Strip realestate is owned by one of these three REITs.
MGM Resorts is betting big on Las Vegas. The casino business model has changed. Now, casino companies can sell the real estate of their projects for nearly the same cost as building the casino. In the financial crisis, MGM sold Treasure Island to help fund its own operations. It sold the property under Bellagio, the MGM Grand, Mandalay Bay and now CityCenter for $12.7 billion.
MGM Resorts is betting big on Las Vegas. The company has used most of the cash it has gotten from REITs to fund growth rather than pay down debt. It hasn't reduced debt to compensate for having higher operational risk. It's possible the strategy could pay off for investors if revenue grows in the coming years.
