Tags: reit | real estate | investment | trust

MGM Resorts Creates REIT for Hotels to Help Boost Value

Image: MGM Resorts Creates REIT for Hotels to Help Boost Value
(Dollar Photo Club)

Thursday, 29 Oct 2015 10:45 AM

MGM Resorts International, the Las Vegas casino owner that’s been under pressure from an activist investor, said it will put its properties into a real estate investment trust to help cut debt and boost the stock price.

MGM Resorts will contribute the real estate associated with 10 of its properties with than 24,000 hotel rooms in total — including Mandalay Bay, The Mirage, New York-New York and Luxor in Las Vegas — and the REIT will assume approximately $4 billion of debt, according to a statement Thursday. The shares rose 6.9 percent to $23.26 at 9:31 a.m. in New York.

The casino owner is joining companies including Penn National Gaming Inc., Caesars Entertainment Corp. and Pinnacle Entertainment Inc. in creating a REIT. Land & Buildings Investment Management LLC, an activist investor, has been pushing MGM Resorts to restructure, and Chairman and Chief Executive Officer Jim Murren had said a decision would come this year.

The company is in the middle of an effort to boost profit by $300 million annually through a combination of cost-cutting and steps to increase revenue. MGM Resorts has had to cope with a steep drop in business from the Chinese enclave of Macau, one of its largest markets, as well as weak betting at home.

MGM Resorts also reported third-quarter earnings that beat analysts’ estimates after reducing expenses. Profit totaled 12 cents a share, excluding items, compared with a loss of 4 cents a year earlier. Analysts were forecasting profit of 4 cents, the average of 17 estimates compiled by Bloomberg.

REITs have become a popular tool to lower taxes and improve returns for investors. REITs don’t pay federal income taxes and are required to distribute at least 90 percent of taxable earnings as dividends.

MGM Resorts will lease the 10 properties from the REIT — also including regional casinos MGM Grand Detroit in Michigan and Beau Rivage and Gold Strike Tunica, both in Mississippi -- under a lease with an initial 10-year term and four five-year extensions at its option. The company will keep full ownership of the Bellagio and MGM Grand Las Vegas.

The transaction is expected to be completed in the first quarter.

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MGM Resorts International, the Las Vegas casino owner that's been under pressure from an activist investor, said it will put its properties into a real estate investment trust to help cut debt and boost the stock price.
reit, real estate, investment, trust
358
2015-45-29
Thursday, 29 Oct 2015 10:45 AM
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