October 29, 2015 / 3:52 PM / 3 years ago

REFILE-UPDATE 4-MGM Resorts to form REIT with 10 properties

(Adds dropped word "chairman" in paragraph 6)
    * MGM to maintain control of new REIT
    * To contribute 7 Las Vegas, 3 other U.S. properties
    * Shares rise as much as 7.5 percent

    By Ankit Ajmera and Liana B. Baker
    Oct 29 (Reuters) - MGM Resorts International said on
Thursday that it would form a publicly traded real estate
investment trust made up of 10 properties, including the Mirage
and Mandalay Bay, and its shares rose as much as 7.5 percent. 
    MGM had been under pressure from shareholder Land and
Buildings earlier this year to convert its real estate assets
into a REIT and spin off its business in China. 
   "We wanted to create a vehicle and a financing platform by
which we could lower our cost to capital and raise funds for
future growth opportunities," Chief Executive Officer Jim Murren
said on a conference call.
    The company, whose long-term debt was $12.80 billion as of
Sept. 30, said it would transfer $4 billion of that to the new
REIT, MGM Growth Properties LLC.
    MGM, which will own about 70 percent of the REIT, said the
10 properties together have more than 24,000 hotel rooms. For
the part of the REIT it will not own, the company will offer
shares that it will list on the New York Stock Exchange, Murren
added in an interview.
    Murren will be chairman of the REIT, which will have a
separate board and CEO. 
    MGM's balance sheet has been overleveraged since the
recession, and this deal will help the company reduce debt that
would have been difficult to pay down because of its high cash
flow needs, Macquarie Research analyst Chad Beynon said.
    Apart from the Mirage and Mandalay Bay, four other Las Vegas
resorts - Monte Carlo, New York-New York, Luxor and Excalibur -
will be a part of the REIT. They accounted for about 42 percent
of MGM's wholly owned domestic resorts' revenue so far this
year.
    The REIT will also include MGM's Park entertainment district
in Las Vegas and three other U.S. resorts. 
    The company said it expected to complete the REIT
transaction in the first quarter of 2016. It plans to retain
full ownership of the Bellagio and MGM Grand Las Vegas
properties.
    MGM also reported a higher-than-expected quarterly profit.
Earnings came to 12 cents per share in the third quarter, three
times more than the analysts' average estimate. 
    The company also said it was considering selling all or part
the Las Vegas mall Crystals, which had attracted "quality"
offers. 
    "We think it is worth over $1 billion," Murren said on the
call. 

 (Reporting by Ankit Ajmera in Bengaluru and Liana B. Baker in
New York; Writing by Sayantani Ghosh; Editing by Don Sebastian
and Savio D'Souza)
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