MGM Resorts International (NASDAQ;MGM) sells Bellagio to Blackstone Group (NASDAQ;BX) with a Lease-to-Buy Back Option

SOLD! BlackStone Acquires the Quintessential Iconic Las Vegas Casino - The Bellagio

The Bellagio Fountains at Sunset 10-5-2019. Photo credit: Jedi Rich Lightowler.

LAS VEGAS, NV - It’s unannounced, but sources say it’s a done deal. MGM Resorts Intl sold the Bellagio. But they only sold the real estate, not the gaming. The buyer is a corporate mega fund from New York: Blackstone Group (NASDAQ; BX). MGM Resorts Intl will continue to operate the gaming and will lease-back the gaming portion of their business with an option to buy-back the casino when MGM settles their cash flow issues. That will probably be in about 50 to 100 years or so. (NASDAQ; MGM)

Now that gaming is becoming less of the draw to Vegas, there is the question of what will happen to the fountains.”

This is the opposite of the El Dorado acquisition of Caesars Gaming (NASDAQ:CZR). Caesars sold their gaming portion of the business portfolio to El Dorado Resorts (NASDAQ: ERI) while maintaining the investment of the real-estate. Two weeks ago, Caesars sold the Rio All Suites Hotel to Imperial Group - a real estate company from New York. This may be an indicator that Caesars Gaming will begin liquidating other assets, such as Planet Hollywood and The Cromwell.

Let’s hope El Dorado Resorts enjoys their new landlords; a bunch a real estate brokers from New York with limited or no experience in gaming.

As more casinos dissolve into this new “leaseback” arrangement with large financiers, I would expect room rates to soar in the upcoming years.

Now that gaming is becoming less of the draw to Vegas, there is the question of what will happen to the fountains. The fountains were to attract gamblers. Apparently, gambling in Las Vegas is on the decline as New Jersey and California legalize sports action. The fountains are a massive peice of the most expensive real estate in Nevada. The fact is that prime real estate on the Las Vegas Strip could make more money as a mall than as a free attraction. It's a simple equation of economics that an accountant in New York could calculate.

​Therefore, if the Bellagio proves to be more profitable without the fountains, then away they will go.

You Can’t Believe They Will Turn The Fountains Into A Mall?

When you are a publicly traded mega fund, like Blackstone, your primary customers are your stockholders. Stockholders have one objective: to make more money. Usually, stockholders want 10% or more return on their investment; each year. So if Blackstone acquires a hotel, the hotel guests are the means by which Blackstone serves their primary customer.

The hotel guests are not Blackstone’s primary customers; the hotel guests are Blackstone's secondary and tertiary customers. So if you lease a nightclub from MGM today, there’s a good chance that you will have a new landlord within the next year or two. The word on the street is that The MGM Grand and The Mirage are next. (Source: Vital Vegas)

Just so you know; the primary investor doesn’t care how you make 10% return on their investment. If the Bellagio can make more money without the fountains, then it would be a disservice to their stockholders to keep them.

Here are some of the core beliefs that Blackstone promotes on their website to attract investors:

• Opportunistic: Our opportunistic platform employs a straightforward investment strategy. We seek to acquire high quality, well located assets at discounts to replacement cost, address any property or business issues through aggressive asset management, and sell the assets once Blackstone Real Estate’s objectives are accomplished.

1. Buy it: We acquire high-quality, income-producing assets at discounts to replacement cost.
2. Fix it: We unlock value by proactively addressing any physical or operating issues through aggressive asset management (such as the Bellagio fountains).
3. Sell it: Once assets are stabilized we sell the investments to long term real estate holders and return capital to our investors. For example: Blackstone will sell the Bellagio back to MGM at a profit with or without the fountains. 

Are you beginning to see the New Vegas business methodology? Scam the investors, the employees, and the artists.. oh yea... and don’t forget to scam the tourists, too. Then it’s back to New York for Peach Bellinis.

You can read about the new owner of The Bellagio on the Blackstone Group website here.