Real estate investors in California may be able to own a small part of the Las Vegas Strip by purchasing shares in a new real estate investment trust. On Oct. 29, MGM Resorts International announced that it would be spinning off 10 of its casino resorts to create a REIT called MGM Growth Properties LLC.
MGM Growth Properties LLC will own several iconic Las Vegas properties including Excalibur, Luxor, Monte Carlo, Mandalay Bay, The Mirage and New York-New York. The Park pedestrian mall in Las Vegas and three properties in Michigan and Mississippi will also be owned by the REIT. According to MGM Resorts CEO Jim Murren, MGM Resorts will own around 70 percent of MGM Growth Properties LLC after the REIT goes public during the first quarter of 2016.
MGM Resorts will retain some of its Las Vegas properties that have a lower property tax base. Bellagio, Circus-Circus and MGM Grand will remain the property of MGM Resorts. Murren said that the idea of spinning off all of the properties owned by MGM Resorts that had been proposed by a small investor was an ill-conceived plan. By retaining some of its properties, MGM Resorts can keep sufficient cash flow needed for the development of current and future projects.
Companies that own a lot of commercial real estate can sometimes benefit from spinning off their properties into a REIT. While companies use the profits from a REIT to pay off debt and make new investments, small investors can purchase shares in the REIT and essentially own a piece of a large company. A commercial real estate attorney may be able to help a company to set up a REIT.