UPDATE: MGM to sell The Mirage on Vegas Strip, reports gains for third quarter

UPDATE: MGM to sell The Mirage on Vegas Strip, reports gains for third quarter

  • Rege Behe, CDC Gaming Reports
November 4, 2021 3:05 PM
  • Rege Behe, CDC Gaming Reports
  • Other

For the second consecutive investor’s call, MGM Resorts International broke news beyond its financial updates.

During its second quarter review, MGM announced that real estate investment trust Vici Properties was acquiring MGM Growth Properties for $17.2 billion.

During Wednesday’s investors call, MGM CEO Bill Hornbuckle announced that the gaming operator was in the early stages of selling the operations of The Mirage, which opened on the Vegas Strip in 1989.

“Doing so will allow us to maintain our existing Las Vegas exposure while focusing on the complementary and diverse nature of our offerings in our hometown,” Hornbuckle said. “It’s a storied property with great brand recognition and a strong customer  base and loyal following. Mirage has served us well over the years, and we’re certain it will remain a success with a new operator in the future.”

No potential buyers or deadline for the sale of the Mirage were mentioned.

During a question-and-answer session, Hornbuckle stated that the Mirage’s central location on the Strip and its 77 acres – ‘’much of it’s really undeveloped in the context of what could be there,” he added – makes it a valued property.

“But as we looked at capital allocation, and we looked at the notion of diversification, we have enough of Las Vegas,” Hornbuckle said. “And we’re looking at the marketplace right now. Obviously, we’re buying and selling at the same time, so we understand the marketplace. We think there is an opportune time, and we think this might be it to sell an asset in Las Vegas. So [the Mirage], for us, became the obvious one.”

“It’s an amazing property,” Hornbuckle added. “I’m excited for somebody to come in and make it their marquee property.”

The news of the pending sale of the Mirage is the latest in a flurry of activity for the gaming operator. In September 2021, MGM announced a definitive agreement with Blackstone to acquire the operations of The Cosmopolitan of Las Vegas for cash consideration of $1.625 billion.  MGM also faced a  proposed bid by DraftKings to acquire Entain, its partner in BetMGM.

DraftKings recently decided not to follow through on its $22 billion bid for the U.K.-based gambling group.

“Obviously, we were an insider to a certain degree to the experience DraftKings and Entain just went through,” Hornbuckle said. “Time will tell where that all goes, if it goes anywhere. We enjoy our partnership (with Entain). We do well by it.  We’ve been good partners as it relates to the day-to-day activity,

“We’d like to do more domestically, and whether we do more internationally or not, with or without (Entain), time will tell.”

In an analyst’s statement, Barry Jonas of Truist Securities wrote of the possible Mirage sale that “We could see the property operations garnering material interest given recent Strip transactions and the prime ~77 acres it currently sits on.”

For the third quarter, MGM Resorts reported net revenue of $2.7 billion, a year-over-year increase of 140%. Las Vegas Strip properties accounted for $1.8 billion in revenue, an increase of 187% over the second quarter of 2020.

MGM’s regional properties generated revenue of $925 million, a year-over-year increase of 66%, while MGM China had revenue of $289 million, an increase of 517% compared to the prior year quarter and a decrease of 61% compared to the third quarter of 2019.

Income for the third quarter was $1.9 billion compared to a loss of $495 million in the prior year quarter.

Analyst David Katz of Jeffries wrote that the stronger than expected third quarter results and the proposed sale of the Mirage “should be positive for the shares. The results in total support our view of the multiple growth avenues and building capital position that should continue to drive progressive upside. We raise our estimates and price target to reflect the results and improving outlook and reiterate our Buy.”

Hornbuckle also was bullish on the prospects for BetMGM despite the online sportsbook posting losses of $49 million for the quarter.

BetMGM recently launched in  Arizona, South Dakota and Wyoming within a nine-day period, and is now live in 16 markets.

“(It’s) well on its way to 20 by the end of the first quarter of 2022,” Hornbuckle said. “In the three months ending August, BetMGM commanded 23% share nationwide in both U.S. sports and betting and iGaming.”

Rege Behe is lead contributor to CDC Gaming Reports. He can be reached at rbehe@cdcgaming.com. Please follow @RegeBehe_exPTR on Twitter.