MGM Growth Properties (MGP) is the real estate investment trust (REIT) created by MGM Resorts International. For MGP to secure the MGM Resorts deal, it will have to sell some of its shares according to REIT.
REIT announced that it has 24 million shares to offer in the financing of the joint venture with MGM Resorts.
MGP has been working as a separate entity for about three and a half years now. For the sake of the deal, MGP will sell 12 million shares to Morgan Stanley Co., LLC, BofA Securities and J.P.
The trio comprises of underwriters of the company who after the forward sale agreement will have the eligibility to purchase 12 million other shares. These shares will be from different entities or their affiliates.
The sale value will be wholly dependent on the time of closing the deal. For instance on November 19th, the 12 million shares valued at $390 million which was one percent lower than the mid-day prices. After MGP announced the sale, stock value depreciated from $32.85 in the afternoon to $31.32. The latter value was the stock price during after-hours trading.
In a statement quoted by CalvinAyre.com, MGP explained that it will receive the proceeds from the sale of its 12 million shares.
However, it will not receive proceeds from shares sold by forward purchasers as well as their affiliates unless they meet the expectations laid out in the prospectus supplement. This action is to be followed in the initial stages but could change later in the course of the sale.
MGP also captured how the proceeds will be used by the company. It pointed out that the net proceeds would be used to settle a portion of the outstanding borrowings from its secured term loan A and B facilities. Through this repayment, MGP believes that it will enhance its chances in having the joint venture with MGM Resorts International consummated. Call it a form of appeasement if you may.
Meanwhile, MGM is planning to sell some of its assets in deals that are still ongoing. The Bellagio has already been sold off to Blackstone REIT at a hefty price of $4.25 billion. Next in line is the Circus Circus which is to be s.old off to Phil Ruffin, Treasure Island’s owner. Circus Circus has been valued to be $825 million and the deal is expected to close in Q4 of 2019.
Other assets to be handed over are Las Vegas assets MGM Grand and Mandalay Bay. MGM Springfield in Massachusetts will also meet the same fate. MGP is already the owner of Mandalay Bay land and now that it is taking over the business side makes perfect sense.
For MGM CEO Jim Murren, the sale of the company’s assets is part of fulfilling his “MGM 2020” goals. The company owns 66% of the MGP and through the sale of assets Murren has reduced the MGM overhead through giving MGP the company controls.