MGM Resorts creates REIT for hotels to cut debt, boost value

MGM Resorts International, the Las Vegas casino owner that’s been under pressure from an activist investor, said it will put its properties into a real estate investment trust to help cut debt and boost the stock price.
MGM Resorts will contribute the real estate associated with 10 of its properties, including than 24,000 hotel rooms, and the REIT will assume approximately USD4 billion of debt, according to a statement yesterday. The shares rose 8.5 percent to $23.60 yesterday in early trading.
The casino owner is joining companies including Penn National Gaming Inc., Caesars Entertainment Corp. and Pinnacle Entertainment Inc. in creating a REIT. Land & Buildings Investment Management LLC, an activist investor, has been pushing MGM Resorts to restructure, and Chairman and Chief Executive Officer Jim Murren had said a decision would come this year.
The company is in the middle of an effort to boost profit by $300 million annually through a combination of cost-cutting and steps to increase revenue. MGM Resorts has had to cope with a steep drop in business from the Chinese enclave of Macau, one of its largest markets, as well as weak betting at home.
MGM Resorts also reported third-quarter earnings that beat analysts’ estimates after reducing expenses. Profit totaled 12 cents a share, excluding items, compared with a loss of 4 cents a year earlier. Analysts were forecasting profit of 4 cents, the average of 17 estimates compiled by Bloomberg. Christopher Palmeri, Bloomberg