Bellagio $4.2B sale may be most expensive Las Vegas resort deal

When the Bellagio was developed more than 20 years ago, it was the world’s most expensive hotel ever built.

When it sold last week for more than $4 billion, the deal was, by all appearances, the most expensive sale ever of a Las Vegas resort.

“I would say that’s the largest single trade in the history of the Strip,” said CBRE Group broker Michael Parks, a hotel-casino specialist.

Bellagio owner MGM Resorts International announced Oct. 15 that it reached a deal with New York financial giant The Blackstone Group that calls for their joint venture to acquire the Bellagio’s real estate and lease it back to MGM for an initial annual rent of $245 million.

MGM will receive a 5 percent ownership stake in the joint venture and around $4.2 billion in cash, the casino operator said. The deal is expected to close this quarter.

Known for its outdoor fountain shows and the crowds of tourists who gather to watch them, the Bellagio is a top moneymaker for MGM, and its sales price dwarfs other high-priced hotel- casino deals in Las Vegas.

The closest competitor appears to be the $1.73 billion purchase, in 2014, of The Cosmopolitan of Las Vegas — also by Blackstone, which has been on a real estate buying binge in Southern Nevada for years.

MGM did not respond to a request Monday to confirm whether the Bellagio deal is the most lucrative ever.

Parks noted that other hotel-casino deals of the Bellagio’s magnitude were corporate buyouts involving multiple properties. The Bellagio, however, is a “trophy” resort and one of best-performing properties on the Strip, he said.

It generated more than $405 million in operating income last year, by far the highest among MGM’s Las Vegas properties, according to a securities filing.

Mike Mixer, executive managing director of brokerage firm Colliers International’s Las Vegas office, said, “It’s hard to find something that traded higher” in Las Vegas than the Bellagio.

Real estate rumors are always buzzing around Las Vegas, including chatter that megaresorts are for sale, but Mixer said he believed the Bellagio had been deemed in the past as more of a “sacred” asset and would be one of the last to sell because of its importance to MGM.

Still, industry analyst David Katz, of Jefferies, said there were expectations that MGM would sell a property or two, and given the changes at the company, “we had to imagine it was not going to be something small.”

The Bellagio, at Las Vegas Boulevard and Flamingo Road, features more than 3,900 rooms and 155,000 square feet of casino space and sits on 77 acres of land.

It opened in 1998, cost around $1.6 billion to develop and was acquired in 2000 by the company now known as MGM Resorts International as part of its $4.4 billion buyout of casino developer Steve Wynn’s company Mirage Resorts.

Last week, MGM announced the Bellagio deal just minutes after it said it is selling Circus Circus for $825 million to Treasure Island owner Phil Ruffin.

Jim Murren, MGM’s chairman and CEO, said in an interview last week that, with these sales, MGM can reduce debt and “redeploy capital to higher-return investments,” such as its pursuit of a project in Japan, sports betting and nongaming entertainment, adding the company is moving toward a “more nimble, asset-light” operation.

The company also eliminated more than 1,000 jobs as part of its MGM 2020 cost-cutting plan earlier this year.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.