MGM Contemplates Potential Sale of Massachusetts and Ohio Locations

Posted on: March 20, 2024, 02:45h. 

Last updated on: March 21, 2024, 12:08h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

MGM Resorts International (NYSE: MGM) is rumored to be mulling sales of the operating rights to its regional casinos in Massachusetts and Ohio.

MGM Springfield Massachusetts casinos gambling
A sign outside MGM Springfield. Operator MGM is rumored to be evaluating sales of operating rights for that venue and an Ohio casino. (Image: MassLive)

Citing unidentified sources with knowledge of the matter, Bloomberg reported the news earlier Wednesday, noting the sources said talks are in the early stages and may not lead to transactions. The Las Vegas-based gaming company took over management of MGM Northfield Park, a racino near Cleveland, from Hardrock International in 2019. MGM Springfield opened in August 2018 as the first traditional casino in Massachusetts. That venue, which generated $278 million in sales in 2023, hasn’t lived up to the operator’s expectations.

Our original valuation of this market simply was off — full stop,” said MGM CEO Bill Hornbuckle in a press briefing with Springfield media outlets last year.

The Massachusetts venue cost the operator $960 million to build. MGM sold the real estate assets to MGM Growth Properties (MGP) for $400 million in 2021. VICI Properties (NYSE: VICI) acquired MGP for $17.2 billion that same year, gaining control of the property assets of MGM Northfield Park and the Springfield casino, among other MGM venues.

MGM Regional Casinos Lagging

While MGM’s fourth-quarter results were broadly solid, that was a function of strength on the Las Vegas Strip where the company is the largest operator, and the ongoing rebound in Macau.

Citing labor issues at MGM Grand Detroit and reduced levels of VIP play at MGM National Harbor in Maryland, the gaming company said regional casino net revenue fell $873 million from $991 million. In New England, Wynn Resorts’ Encore Boston Harbor is the gross gaming revenue (GGR) king, easily outpacing MGM Springfield.

As measured by revenue per square foot, MGM Northfield Park was merely the ninth-best casino in Ohio for much of 2023. MGP paid about $1 billion to acquire that venue in 2018, with MGM paying $275 million later that year for the operating rights.

That implies MGM’s costs for the Massachusetts and Ohio casinos were $1.22 billion, of which $400 million was offset via the sale of MGM Springfield’s real estate. It’s not yet clear how much of the remainder the operator could recoup in potential sales.

Potential Buyers Not Yet Named

Likely because talks are in the early stages, potential buyers for the operating rights of the pair of MGM casinos haven’t been publicly floated.

While the venues have struggled under MGM’s stewardship, either could be appealing to smaller regional casino operators looking to gain footholds in the Massachusetts/New England market, as well as in Ohio. On that note, Penn Entertainment (NASDAQ: PENN) is unlikely to be a suitor for either MGM venue, because it’s already one of the dominant operators in Ohio and runs Plainridge Park Casino in Massachusetts.

As for VICI, the real estate investment trust (REIT) didn’t comment on the MGM rumor. But if those operating rights are sold, it’s likely the landlord would simply ink leases with the new tenants.