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MGM Real Estate Play Will Free Up Cash Flow

The MGM Springfield casino.
Hoang 'Leon' Nguyen
The Republican / masslive.com
The MGM Springfield casino.

MGM Resorts International announced plans Tuesday for a complex real estate transaction that will effectively see the company sell two of its resorts to a trust, and then lease the properties back to keep them operating as they are now. 

MGM Springfield, the company's resort casino in downtown Springfield, could be the next MGM property to undergo a change in real estate ownership or structure, the company suggested in its announcement.

MGM Resorts Chairman and CEO Jim Murren said the announcement of the sale/lease-back of MGM Grand Las Vegas and Mandalay Bay marks "a key milestone in executing the Company's previously communicated asset-light strategy" to free up cash flow for the company.

"We remain determined to prudently pursue accretive opportunities related to our remaining owned real estate assets including MGM Springfield, our 50% stake in CityCenter and our 55% economic ownership in [MGM Growth Properties]," Murren said. "Our corporate objective remains crystal clear, we will continue to monetize our owned real estate assets, which facilitates our strong focus on returning capital to our shareholders, while also retaining significant flexibility to pursue our visible growth initiatives, including Japan and sports betting."

MGM Springfield officials stressed that the transaction announced Tuesday does not involve Springfield and only involves real estate. They noted that MGM will continue to operate the properties.

The idea of MGM Resorts selling the Springfield property has floated around for a while. Last year, MGM Resorts discussed the possibility of buying Wynn Resorts' Encore Boston Harbor casino which would have required the company to sell MGM Springfield. And in November, Murren mentioned the idea of selling the Springfield land and leasing the property back on an earnings call.

A change in ownership or real estate structure would require the approval of the Massachusetts Gaming Commission, a regulatory hurdle that could complicate MGM's vision.

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