MGM Resorts announced this week that it intends to outsource the real estate underlying its MGM Springfield property in western Massachusetts, but the Las Vegas gambling giant will continue to control day-to-day operations at the state’s second largest casino.
The transaction, which would require regulatory approvals – including an approval from the Massachusetts Gaming Commission – is proceeding after similar deals on the other MGM properties. The company has a strategy aimed at freeing up cash and focusing on running casinos rather than managing the land and buildings they are on.
MGM Resorts will receive approximately $ 400 million from MGM Growth Properties, a separate company formed to conduct such transactions. The casino operator pays $ 30 million annually to lease the property back from the real estate company. MGM Resorts is a 42 percent shareholder in MGM Growth Properties as of March 31. The transaction is expected to close by the end of the year.
The $ 960 million MGM Springfield, which opened in 2018, is showing early signs that its business is improving after a difficult year of shutdowns and limited operations due to the COVID-19 pandemic. The casino didn’t meet its revenue expectations 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 will serve the best interests of both companies and further fuel our commitment to light assets,” said Bill Hornbuckle, CEO of MGM Resorts, in a statement. “MGM Springfield has shown strong financial performance due to the pandemic.”
MGM Springfield sales were $ 22.1 million in March, according to the Gaming Commission. That was more than any other month since May 2019, just before Encore Boston Harbor opened in Everett. And the improved revenue came as the casino continued to struggle with capacity constraints and other health measures related to the pandemic.
Real estate transactions like the one planned for MGM Springfield are relatively common in the casino industry.
In 2019, the Gambling Commission cleared the sale of Plainville Park Casino’s Plainville real estate, which was acquired by an investment trust. Plainridge Park will continue to be operated by Penn National Gaming.
Andy Rosen can be reached at andrew.rosen@globe.com. Follow him on Twitter @andyrosen.
