The state Gaming Control Board on Wednesday recommended approval of a corporate reorganization of MGM Resorts International to enable formation of a real estate investment trust that will oversee some MGM properties.
Jim Murren, chairman, president and CEO of MGM Resorts, said the move “creates two strong and stable companies” that will enable continued investment in new Las Vegas amenities and properties worldwide through tax advantages under the trust structure. MGM Resorts will continue to control the new entity, which will be publicly traded.
Customers and employees won’t see any difference in the day-to-day operations of MGM properties as a result of the new structure.
The recommendation, approved unanimously, will be considered Thursday by the Nevada Gaming Commission.
MGM Resorts, in essence, becomes a landlord for the new trust company.
The new real estate investment trust will be called MGM Growth Properties and it will oversee Mandalay Bay, Luxor, Excalibur, New York-New York, the Monte Carlo, MGM Detroit, the Beau Rivage in Biloxi, Mississippi, the Gold Strike in Tunica, Mississippi, and the company’s new outdoor venue, The Park, north of New York-New York.
Murren said it was Penn National Gaming that “cracked the code” in determining how to best enable properties and take advantage of real estate investment and tax benefits with a strategy known as “triple-net leasing.”
Under a triple-net lease agreement, a tenant or lessee — the nine properties, in this case — agrees to pay real estate taxes, building insurance and maintenance on the property in addition to rent, utilities and other fees providing some tax savings.
Murren said the trust company is in a “quiet period,” but it is expected to register securities with the Securities and Exchange Commission within the next few weeks.
Murren said there was no urgency in getting the matter on the agenda despite the quick turnaround to the commission and it gave him the opportunity to update the board on the company on its stellar 2015 performance.
In a 30-minute presentation, Murren said MGM had its best domestic cash flows since 2008, highlighted by strong performances by its Las Vegas properties.
Net revenue was up 3 percent and cash flow increased by 11 percent. It also was a record year for the company’s CityCenter property, which came on line just as the recession hit.
Knowing that Las Vegas is poised for record visitation this year, that passenger counts at McCarran International Airport are soaring and that Las Vegas convention attendance was up by 13 percent last year, MGM opted to expand its convention space with additional capacity at Mandalay Bay and Aria. Murren hinted that the company could announce additional capacity later this year.
The company has invested $1 billion in Las Vegas in the past three years and will open The Park and T-Mobile Arena in early April.
Contact Richard N. Velotta at email@example.com or 702-477-3893. Find him on Twitter: @RickVelotta.