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MGM’s real estate investment trust confirms interest in MGM Grand

MGM Resorts International is in preliminary discussions with real estate investment trust MGM Growth Properties regarding the potential sale-leaseback of the MGM Grand, according to a Tuesday filing with the Securities and Exchange Commission.

MGM Growth, which spun off of the casino operator more than three years ago, already owns the real estate for 13 Las Vegas resorts and metropolitan assets, including Mandalay Bay. MGM still owns a 68 percent stake in the trust.

According to the documents, MGM Growth would likely work with the casino operator and an unaffiliated third party to create a joint venture that would acquire the real estate assets of both MGM Grand and Mandalay Bay. If a joint venture were to come through, one or more of MGM’s subsidiaries would lease MGM Grand and Mandalay Bay from the joint venture, which would “assume a portion of (MGM Growth’s) indebtedness.”

Both MGM and MGM Growth have been in discussions with prospective third-party investors, but none have been selected as of yet.

MGM Growth also announced Tuesday that it plans to sell 24 million shares to help fund potential deals with MGM. Half will be sold directly to underwriters J.P. Morgan Securities, Morgan Stanley & Co. and BofA Securities, with MGM Growth receiving the proceeds. As of Tuesday evening, 12 million MGM Growth shares were worth nearly $390 million.

MGM Growth said the sale “will well-position it” to close a joint venture transaction with MGM.

These talks come after MGM split apart the Bellagio’s assets and sold off its real estate to The Blackstone Group for $4.2 billion this week. MGM has leased back the Strip property and continues to operate it.

These sale-leaseback deals have been on the rise in recent years in the casino market. Over the past seven years, 90 casino properties across the U.S. have been involved in about $22 billion of real estate investment trust transactions, according to an October report from Macquarie Research.

MGM Growth shares closed down 1.1 percent Tuesday, down $0.37 to $32.49.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.

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