MGM Growth Properties ‘bullish on Las Vegas’

Officials with MGM Growth Properties LLC are excited about Las Vegas’ recovery, which is shaping up faster than expected.

The MGM Resorts International-affiliated real estate investment trust has noticed a variety of positive indicators on the Strip, such as climbing occupancy rates and the impending return of major conventions like CES.

“We are very bullish on Las Vegas,” MGM Growth CEO James Stewart said. “We think that not only will the city get back to normal in the … first half of next year, but that (with) accommodation of pent-up demand, increased desire to get out there, et cetera … the upcoming year or two years is going to be really Las Vegas’ time to shine.”

REIT action on the Strip

MGM Growth’s revenue was $194.3 million in the first quarter, down 7 percent from the same period the year prior. Net income was $115.4 million, compared with a net loss of $125.3 million the year prior.

The company, which acts as landlord to a number of properties in Las Vegas and other gaming jurisdictions, is just one of a handful of REITs that have been snatching up real estate assets along the Strip in recent years. Vici Properties Inc. and Apollo Global Management announced in March that they had agreed to purchase Las Vegas Sands Corp.’s Las Vegas assets for $6.25 billion, and Gaming and Leisure Properties Inc. is expected to become the new owner of the Tropicana.

Stewart said sales involving REITs have been picking up for a number of reasons, including low interest rates, high equity valuations as well as the industry nearly being out of the woods with COVID-19.

“Those factors have played into increasing discussions in Vegas, but also in the broader space,” Stewart said. “There are a lot of people who want to get involved, one way or another. … I am confident that as time progresses all gaming operators will switch to this asset-light model.”

Outside of the Las Vegas market, Stewart hinted that a deal with MGM Springfield in Massachusetts was on the horizon.

“Given MGM’s stated asset-light goal, it would be a natural to see that one coming around,” Stewart said. “I’m not going to break the time, but I think it’s a clear one.”

MGM Resorts’ shrinking stake

As of March 31, MGM Resorts’ stake in the company was at 42 percent, down from the 53 percent reported the previous quarter.

The shift came after certain MGM Resorts subsidiaries redeemed an aggregate 37.1 million operating partnership units from certain subsidiaries.

Stewart said the timing of any future unit redemptions is up to MGM Resorts.

“It’s a balance between getting value for those shares, and progressing down the asset-light structure that (MGM Resorts executives) have discussed as a longer-term goal. And also then balancing off the high dividends they receive back from us,” he said.

MGM Growth shares closed up 0.2 percent Friday at $36.02 on the New York Stock Exchange.

The Review-Journal is owned by the family of Sheldon Adelson, the late chairman and CEO of Las Vegas Sands Corp.

Contact Bailey Schulz at bschulz@reviewjournal.com. Follow @bailey_schulz on Twitter.