Massachusetts: MGM Springfield real estate sold to MGM Growth for $400M

The Las Vegas-based casino operator will continue to manage the boutique resort and casino under a lease agreement with MGM Growth Properties.
The transaction, which was announced Tuesday, is not unusual.

MGM Springfield was the last of MGM’s regional properties to be acquired by the REIT. MGM Resorts held a 42% ownership stake in MGM Growth as of March 31.

MGM Resorts called the deal part of its “asset-light” commitment that began in 2015 when it created MGM Growth, the gaming industry’s second casino-centric REIT.

“For MGM, (the transaction) improves its already strong liquidity position, enhancing its ability to invest in its land-based casinos or BetMGM and return capital to shareholders,” J.P. Morgan gaming analyst Joe Greff told investors In a research note.

MGM Springfield will be added to the existing master lease between MGM Resorts and MGM Growth. The rent payment to MGM Growth will increase by $30 million, of which $27 million will be base rent and $3 million will be percentage rent.

Truist Securities gaming analyst Barry Jonas said he continues to be “constructive on MGM Growth given the security of its rent and an increasingly visible pathway to the removal of corporate governance overhangs.”

MGM Growth said the sale is expected to close by the end of the year. MGM Growth’s portfolio currently includes eight Strip hotel-casino and The Park dining and entertainment complex, all operated by MGM Resorts. MGM Growth also currently owns seven MGM Resorts’ properties in Detroit, Cleveland, Mississippi, Maryland, Atlantic City, and New York.

Bellagio is owned by a REIT controlled by the Blackstone Group and leased back to MGM Resorts. CityCenter on the Strip, a 50-50 joint venture between MGM Resorts and Dubai World, is operated by MGM Resorts and not part of a REIT.

MGM Resorts CEO Bill Hornbuckle said in a statement that MGM Springfield “has exhibited strong financial performance as it emerges from the pandemic, and the property delivered record (adjusted cash flow) in the first quarter of 2021.”

MGM Springfield opened in 2018 and was Massaachusetts’ first full-scale casino resort. MGM Resorts spent $960 million to build the resort.  The property currently has 1,841 slot machines, 38 table games, and 240 hotel rooms. MGM Springfield reported $252 million in gaming revenue in 2019.

MGM Growth CEO James Stewart said the transaction will to the company’s adjusted funds from operations (AFFO), which is a financial measure used to estimate the value of a REIT.

Shares of MGM Resorts closed at $38.76 on the New York Stock Exchange Tuesday, down 70 cents or 1.77%. MGM Growth closed at $34.01, also on the New York Stock Exchange, down 66 cents or 1.90%.