MGM Resorts said this week that it intends to spin off the real estate underlying its MGM Springfield property in Western Massachusetts, but the Las Vegas gambling giant will continue to control day-to-day business operations at the state’s second-largest casino.
The transaction, which would require regulatory approvals ― including a sign-off from the Massachusetts Gaming Commission ― comes after similar deals at MGM’s other properties. The company has been following a strategy intended to free up cash and help it focus on operating casinos, rather than managing the land and buildings where they are based.
MGM Resorts will receive about $400 million in the deal from MGM Growth Properties, a separate company set up to carry out such transactions. The casino operator will pay $30 million annually to lease the property back from the real estate firm. MGM Resorts is a part owner of MGM Growth Properties, with a stake of 42 percent as of March 31. The deal is expected to close by the end of the year.
The $960 million MGM Springfield, which opened in 2018, is starting to show signs that its business is improving after a difficult year of closures and limited operations because of the COVID-19 pandemic. The casino had not been meeting its revenue expectations even before the health crisis, but executives now say they are seeing better results.
“We are pleased to announce today’s transaction with MGM Growth Properties, which we believe serves the best interests of the shareholders of both companies and further advances our asset-light commitment,” Bill Hornbuckle, chief executive of MGM Resorts, said in a statement. “MGM Springfield has exhibited strong financial performance as it emerges from the pandemic.”
Revenue at MGM Springfield was $22.1 million in March, according to the gaming commission. That was more than in any other month since May 2019, just before the opening of Encore Boston Harbor in Everett. And the improved revenue came as the casino continued to contend with capacity restrictions and other health measures related to the pandemic.
Real estate transactions such as the one planned for MGM Springfield are relatively common in the casino industry.
In 2019, the gaming commission approved selling the Plainridge Park Casino’s Plainville real estate, which was acquired by an investment trust. Plainridge Park continues to be operated by Penn National Gaming.