Blackstone wants to buy and lease back Bellagio and MGM Grand Las Vegas

Blackstone Group is discussing with owner MGM Resorts International a transaction that could see Blackstone buy and lease back the iconic Bellagio and MGM Grand Las Vegas casinos from the gambling giant, Bloomberg reports.

They have yet to agree on a deal and one may not be reached, Bloomberg said, and the terms of the potential deal couldn’t be learned.

MGM Resorts shares rose as much as 5% before settling up 1.4% to $29.47 at 12:06 p.m. in New York.

The company has been exploring selling and leasing back the properties individually or bundled together, Bloomberg News reported in July. Property sales-free up cash for casino companies to expand while letting them continue to manage their resorts.

Bellagio

The Las Vegas-based company in January formed an independent committee to evaluate ways to extract value from its real estate portfolio. Activist investor Starboard Value built a position in the company with plans to push for changes, Bloomberg News reported that month.

“A Blackstone deal to buy and lease back Bellagio and MGM Grand -- in advanced talks, Bloomberg reports -- could raise $6.5-$7 billion for a $10 billion resort in Osaka, Japan, where MGM will vie for a license,” said Brian Egger, Bloomberg Intelligence gaming analyst.

MGM Resorts expects to share the results of the review in early fall, Chief Executive Officer Jim Murren said in a conference call with analysts in July.

The Bellagio and MGM Grand Las Vegas are two of the crown jewels in MGM Resorts’ portfolio of gaming resorts in the U.S. and China. Together, the properties have more than 10,000 rooms and about 315,000 square feet of casino space, according to the company’s most recent annual report.

MGM Resorts could receive proceeds of up to $4 billion selling the Bellagio and nearly $3 billion from a sale of MGM Grand, analysts with Bloomberg Intelligence said in July.

Blackstone, a New York-based private equity firm, has built up a hefty war chest for real estate transactions. Last week, it said it raised $20.5 billion for its ninth real estate fund, topping the $15.8 billion it raised for its predecessor vehicle.

The firm has a history in the gaming sector. It’s holdings include Spain’s Cirsa Gaming Corp., which it acquired last year for about $1.8 billion, and the Cosmopolitan of Las Vegas, which it acquired in 2014 for $1.7 billion.