Home Cash: On line casino Operators Are Promoting Their Properties to Wager on Progress

Aria Resort & Casino, owned by CityCenter, is slated to be owned by Blackstone Real Estate.

Courtesy MGM Resorts International

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Casino operators continue to sell their properties as their focus is on operating, not owning, real estate.

The latest example:

MGM Resorts International

(Ticker: MGM) said earlier this month that it would pay $ 2.1 billion for the remaining 50% stake in CityCenter on the Las Vegas Strip that it does not own so that it can then sell it.

CityCenter, which MGM Resorts has managed and is part of with Infinity World Development Corp. The Aria Resort & Casino and the Vdara Hotel & Spa owned 50% of the shares.

After the deal is finalized, MGM resorts will plans to sell these properties to fund-managed Blackstone Real Estate for $ 3.9 billion. MGM will continue to operate these properties.

More businesses of this type are likely, in part because they allow companies like MGM Resorts to raise capital to invest in projects aimed at greater growth.

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In a recent notice, real estate research firm Green Street wrote that “There are other assets in Las Vegas that operators could monetize at attractive prices in a post-Covid environment”.

Cedrik Lachance, director of REIT research at Green Street, recently told Barron’s that the pricing of the deal reflects the growing premium being placed on Las Vegas real estate. The city has benefited from an increase in leisure travel this year after a difficult 2020 due to Covid. Hotel occupancy was particularly high on the weekend.

Blackstone plans to acquire the two CityCenter properties for $ 3.9 billion, or 18.1 times the initial annual rent of $ 215 million MGM will pay. In other words, the reciprocal of this ratio – or the cap rate as it is known – is about 5.5%.

In contrast, if

Las Vegas Sands

(LVS) announced in March that it was the Venetian and other properties

VICI properties

(VICI) for $ 4 billion, the cap rate was around 6.25%, according to Lachance. In other words, the rental price for the latest deal is higher than Las Vegas Sands earlier this year. That undoubtedly reflects how much more uncertain things were for the city at the time regarding the Covid situation.

Still, according to Lachance, “the gambling business is very cheap for us, both public and private” – the public market is REITs.

Outsourcing real estate is not new to casino operators as they increasingly prefer an asset-light model in which they operate but do not own real estate.

MGM growth properties

(MGP), for example, was chosen as a path for

MGM Resorts International

Discharge real estate. In May it is Companies announced that it plans to sell the resort’s Springfield, Massachusetts property

MGM growth properties

for $ 400 million – the latest in a series of sales it made.

MGM Resorts International has the largest number of hotel rooms in the world Stripes.

Stocks of MGP Growth Properties, which are returning 5.6%, are up about 22% including dividends through July 14 this year, up from about 17% for the S&P 500. MGM Resorts International’s stock has gone down slightly better developed with a plus of about 27%.

VICI properties

owns, among other things, Caesars Palace on the Las Vegas Strip. VICI stock, with a yield of 4.2%, is down about 25% this year through July 14th.

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com