MGM Resorts reorganization moves get initial OK from gaming regulators

Mandalay Bay on Las Vegas Blvd on September 30, 2015.

Nevada gaming regulators today gave MGM Resorts International initial approval for some reorganization moves associated with its plan to create a new company that will own a major chunk of its real estate.

The state Gaming Control Board gave its unanimous blessing to MGM Resorts, which announced last year that it planned to create a new real estate investment trust, MGM Growth Properties LLC, that will own 10 of its properties. MGM Resorts will own a majority of the new company and will lease back all of the properties, which include seven on the Strip.

MGM Resorts Chairman and CEO Jim Murren, who will also be chairman of the new company, told the board that the reorganization will create two strong businesses and indicated that it was motivated at least in part by a desire to boost the value of his company’s real estate. MGM Growth Properties plans to launch an initial public offering at some point in the near future, but it’s not clear exactly when that will happen.

Regulators do not have to approve the creation of MGM Growth Properties itself, according to attorney Ellen Whittemore. Rather, the moves approved by the board today include related transactions from a number of other MGM subsidiaries, she said.

The Las Vegas properties that will be owned by the new MGM company are Mandalay Bay, the Mirage, Monte Carlo, New York-New York, Luxor, Excalibur and the Park development. MGM Growth Properties will also own three regional casinos: MGM Grand Detroit, Beau Rivage and Gold Strike Tunica.

The Strip’s MGM Grand, Bellagio and Circus Circus will not be owned by the new company, nor will any of MGM Resorts’ jointly owned developments, such as CityCenter and the T-Mobile Arena.

In addition to discussing the real estate reorganization, today’s special meeting of the gaming board also allowed Murren to give regulators an overview of his company’s status more generally. He said he was grateful that his company had a strong 2015 after “many years of struggle,” evoking MGM Resorts’ fight to keep the development of CityCenter on track amid the recession.

“It’s fortunately making quite a bit of cash now,” Murren said of CityCenter.

Murren reiterated his company’s strong support of the Las Vegas Convention Center expansion and walked regulators through the various resorts and other developments that MGM Resorts is building, such as the Park dining and entertainment district and the arena, both of which open on the Strip next month.

Murren placed particular significance on one new resort that his company is building far away from Nevada: the $1.3 billion MGM National Harbor, slated to open just outside Washington, D.C. later this year. With the nation’s capital just miles away, Murren said the National Harbor resort will help spread a positive image of the casino industry to a critical audience.

“The No. 1 threat to our industry is ignorance … the perception of who we are as a company, what we are as an industry, is so distant, in many cases, from reality,” he said. “(National Harbor) will be a symbol, I think, of what the entire industry stands for.”

MGM Resorts is scheduled for another regulatory appearance on Thursday, when the Nevada Gaming Commission will consider the company’s real estate-related moves for final approval.

In other business, the control board also approved Las Vegas-based Pinnacle Entertainment Inc.’s big real estate plans today. Pinnacle plans to lease back most of its real estate assets from Gaming and Leisure Properties Inc., the real estate investment trust spun off from Penn National Gaming Inc. in 2013. That transaction is up for final approval from the gaming commission Thursday as well.