Zorak

https://www.reuters.com/article/us-m...-idUSKBN1WU2RE

PlaneAdmirer

It is interesting. Blackstone and MGM are buying the Bellagio with Blackstone being the majority holder. The yield, from memory, is sub 6%. When the lease is up, can Blackstone lease the property to another operator? It's hard to imagine that MGM would make a property that is connected via tram to Aria, Vdara, and ParkMGM subject to a third party leasing it. Also, how does this impact MGM desire/willingness to upgrade Bellagio? A recent review on The Points Guy was pretty harsh, but probably fair.

The goal seems to be to raise cash for Japan, but selling Bellagio is a weird transaction. I haven't looked in a while but historically Bellagio generated the most cash of any MGM property.

gengar

It sure looks like MGM is going all-in on Japan. A couple notes:

1. MGM already owns Bellagio, so they are selling off 95% of it to Blackstone;
2. TI and Mirage kept their tram even after MGM spun off TI, so no reason to think this will be any different especially with MGM management in place; and
3. Any upgrade to Bellagio is going to go through Blackstone now.

It will be interesting to see what changes will happen to Bellagio in the short-term. With Cosmo, my impression was that Blackstone focused on synergy early on after the takeover, but then went pretty hard on cost-cutting later.

PlaneAdmirer

Circus Circus is an out right sale including the operation. MGM will continue operate and manage the Bellagio. Further upgrades to Bellagio will be dependent on MGM.

gengar

No, definitely not. Any capex decisions at Bellagio are going to go through Blackstone.

PlaneAdmirer

From Blackstone's website:

Blackstone Real Estate Income Trust (“BREIT”), and MGM Resorts International (“MGM Resorts”) (NYSE: MGM) announced today that BREIT and MGM Resorts will form a 95%/5% BREIT-led joint venture to acquire the real estate assets of the Bellagio for $4.25 billion in a sale-leaseback transaction.

As part of the transaction, MGM Resorts will lease the property from the joint venture and continue to manage, operate and be responsible for all aspects of the property on a day-to-day basis. MGM Resorts will sign a long-term lease and continue to be responsible for all operations and capital expenditures of the Bellagio, with the joint venture owning the property and receiving rent payments.

It's a pure NNN lease and MGM is on the hook for everything at the property. That's why I think it is interesting. Bellagio despite generating a lot of cash flow looks neglected compared to ARIA and other properties like Wynn and Venetian/Palazzo. Also, the lease must have built in rent escalators and renewals for a fairly long time because Blackstone will eventually have an incentive (and obligation to their shareholders) to see if other operators will offer better terms to lease Bellagio. I wonder if the trademarks were included in the lease along with the property.

gengar

Nothing you posted disputes what I said. Any capex decisions are going to go through Blackstone. They're a 95% stakeholder.

writerguyfl

Did you miss this sentence? It disputes what you wrote.

gengar

It does not at all dispute my statement. Responsible (and especially in this case, specifically meaning financially responsible) doesn't mean being the ultimate decision maker. Not sure why this even has to be said.

writerguyfl

You're reading something that's not there. But, that's fine.

gengar

The people who read "responsible... for capital expenditures" to mean 'solely the decision makers on anything involving a capital expenditure' are the ones "reading something that's not there".

ijgordon

You're largely wrong, but keep digging.
Most of the transaction documentation has been filed with the SEC and is publicly available.

gengar

Anyone who actually believes Blackstone will be a completely passive 95% partner is beyond naive.

Zorak

I think you've all made clear what you believe, so maybe we can move on

MSPeconomist

1. What is MQM doing in Japan?

2. IIRC MGM partners with Hyatt WOH. Will this impact participation in that program (night credits and perks)?