The Las Vegas Strip Is Changing Before Our Eyes
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Las Vegas has gone through many transformations over the last half-century. The majority of the Las Vegas Strip's real estate has been sold to investment firms called real-estate investment trusts. Most of these deals have been to monetize real property and maintain the hotel and casino operations in an asset-light entity.
MGM Resorts will receive $4.4 billion in cash and retain 1% of VICI Properties' operating partnership. Public shareholders will get 1.366 shares of stock for each MGP share they currently own. VicI will assume $5.7 billion of M GP's debt. MGM Resort's net debt will be reduced by over $8 billion after the deal closes.
MGM Resorts will receive $4.4 billion in cash and retain 1% of the VICI operating partnership. Public MGM Properties shareholders will get 1.366 shares of V ICI stock for each MGP share they currently own. V ICC will assume $5.7 billion of M GP's debt.
MGM will enter a new triple-net master lease that will total $860 million in annual rent for 25 years. The rent will rise at 2% annually for the first ten years and the greater of 2%. or the consumer price index (capped at 3%). thereafter.
MGM Resorts is going to be asset-light to simplify the balance sheet and the business model. The company will lose control of valuable Las Vegas real estate for development purposes. It will also have rent as a fixed expense each month.
MGM is giving up control of its own REIT to VICI. This is a change for Las Vegas. Investors should understand the risks. MGM has a huge fixed cost to pay for going forward.
