International edition
September 22, 2021

Aria and Vdara in Las Vegas

MGM's buyout of Dubai World's stake in CityCenter gets first Nevada approval

MGM's buyout of Dubai World's stake in CityCenter gets first Nevada approval
CityCenter in Las Vegas includes Aria and the nongaming Vdara hotel.
United States | 09/10/2021

Following Wednesday's recommendation from the state's Gaming Control Board, the Nevada Gaming Commission is expected to consider final approval of the deal by Sept. 23. The $2B transaction for the 50% stake is expected to close by the end of the month. MGM officials unveiled plans to create two separate property companies for Aria and Vdara, which then would be sold for $3.89B to Blackstone.

T

he partnership between MGM Resorts International and Dubai World aimed at developing the CityCenter at Las Vegas Strip is coming to an end in a further step after MGM agreed to buy the remaining half of the estate back in February. 

After a 15-minute hearing, the Nevada Gaming Control Board recommended that the Nevada Gaming Commission approve MGM’s buying out Dubai World's 50% stake in CityCenter, an investment arm of the Dubai government. The Commission is expected to consider final approval of the deal by September 23, with the transaction scheduled to close by the end of the month. 

As MGM Resorts counsel Sean McGuinness told the board, the buyout is part of a two-step transaction, with MGM acquiring Dubai World’s 50% for more than $2 billion. The purchase price represents an implied valuation of $5.8 billion based on net debt of $1.5 billion.

According to Las Vegas Review-Journal, Chief Financial Officer Jonathan Halkyard told board members the company expects to sell MGM Springfield to a REIT by the end of the year, pending approval by the Massachusetts Gaming Commission. 

MGM stated in Wednesday’s hearing that it plans to establish two separate property companies for the 4,000-room Aria and the non gaming Vdara hotel. Once that is completed, both properties would be sold for $3.89 billion to the Blackstone Group of New York, which would lease the properties back to MGM for $215 million a year. 

MGM has struck similar leaseback agreements with Blackstone in the past, including for Bellagio and MGM Grand.

The Control Board also recommended approval of terminating the registration of Dubai World and its Infinity World Holdings subsidiary. 

In questioning from board members, President and Chief Operating Officer of Infinity World Development Corp. William Grounds said, according to Las Vegas Review-Journal, that “the transaction would likely be the company’s farewell to the gaming industry”.

He also added that Dubai World will continue to hold investments in hotel properties that do not have a casino. Emerging markets in Africa and ports will also become a part of Dubai World’s portfolio. 

“In terms of gaming in the United States, I think that is fairly unlikely,” Grounds said. “They are still a major shareholder in MGM with 4.3% of the stock. I don’t see them making further gaming investments, particularly in brick-and-mortar in the U.S. at this stage. It’s not on their radar. They are looking at more investments in emerging markets like Africa and places like that.”

Dubai World, which would continue to hold a 4.3 percent stake in MGM Resorts International stock, is a partner in the Fontainebleau Miami Beach resort, which once was under consideration for a casino site when the state of Florida was exploring the expansion of gaming statewide.

The process of licensing Dubai World as co-owner of CityCenter was unprecedented in Nevada, with an investment company owned by the government of a foreign country. 

Dubai World took a 50% stake in the $9 billion CityCenter development in November 2007, plus MGM stock. 

CityCenter is a 16.8 million-square-foot complex on 76 acres that includes Aria, the 1,500-room Vdara, the 392-room Waldorf Astoria with 225 condominium units, the 674-unit Veer Towers condominium complex, and the 500,000-square-foot Crystals retail mall

In 2016, MGM Resorts and Infinity World sold off The Shops at Crystals to Simon Property Group for $1.1 billion. Mandarin Oriental was sold to Waldorf Astoria for $214 million in 2018.

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