The proposal of MGM Resorts to sell its MGM Springfield casino and then lease back the venue could face certain scrutiny from the Massachusetts Gaming Commission (MGC) and apparently skeptical city officials. This week, the most likely sale/leaseback option got increased attention, particularly after a similarly structured transaction was announced recently for the MGM-owned Bellagio in Las Vegas.
Domenic J. Sarno, Springfield Mayor, stated that the city has a “very strong Host Community Agreement with MGM and we will certainly hold MGM to this legally binding agreement.” On the other hand, a finance professor at Boston College “doubts” that MGC would approve such an arrangement for MGM Springfield. MGC spokeswoman Elaine Driscoll confirmed to Casino.org on Wednesday that “commission approval is required for a change in the real estate structure.” But McGowan understands why MGM may investigate such a sale/leaseback scenario.
According to McGowan, MGM has cash flow problems that they need to address. Since opening on Aug. 23, 2018, MGM Springfield hauled in $252.82 million in gross gaming revenue (GGR) as of July 31 this year. GGR expected to raise $410 million during its first year of operations. MGM is suing to block the venue from ever opening. Early forecasts projected that the Encore Boston Harbor could post GGR of $800 million in its first year in business, which works out to an average of $66.66 million per month.
MGM Resorts publicized the $4.25 billion sale and leaseback of the Bellagio last month. MGM will sell the property to a real estate venture controlled by the Blackstone Group under the Bellagio deal. MGM would then lease back the resort casino for 30 years, paying $245 million a year. MGM also will receive a five percent equity interest in the venture. MGM is expected to use some of the money to reduce debt, as well as boost dividends and share repurchases.
MGM Growth Likely Buyer
Real estate investment trust (REIT) could try to acquire the MGM Springfield and other MGM venues. REIT is majorly owned by MGM Resorts. MGM Growth Chief Financial Officer Andrew Chien confirmed to analysts, “The Right Of First Offers (ROFOs) are things that we will be discussing jointly with MGM to the extent it make[s] sense.” MGM Grand, MGM Springfield, and CityCenter “remain as obvious possible growth opportunities” for MGM Growth, according to a report in the Las Vegas Review-Journal.