MGM Growth Properties REIT Announced

MGM Resorts International reported third quarter 2015 results earlier today. While the numbers were good, especially in Las Vegas, the big news was MGM's announcement that they are creating a REIT.

MGM Growth Properties (MGP) will consist of seven Las Vegas properties (Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor, Excalibur, and The Park) along with three regional properties (MGM Grand Detroit, Beau Rivage in Biloxi, and Gold Strike Tunica).

Notably excluded from the REIT are Bellagio, MGM Grand, and Circus Circus along with MGM's joint ventures including CityCenter, MGM China, Borgata, and the new Las Vegas Arena.

The parent company MGM Resorts International will own approximately 70% of the REIT. This is a big difference from the Penn National / Gaming and Leisure Properties REIT conversion from a few years ago which resulted in a complete and total split of those two companies.

Keeping 70% of the REIT will give MGM more control, but will also limit the potential sale price of the planned MGP IPO which will supposedly take place early in 2016 (that timetable seems ambitious).

Further tampering the REIT's potential is the $4 billion of debt which will be piled on to MGP's books. There are definitely questions about whether the ten properties included in the transaction can generate enough income to support that kind of debt.