MGM Resorts International MGM
MGM's US real estate is buried inside a 10x-EBITDA C-corp; a REIT conversion plus lodging-C-corp spin and MGM China dividend can lift NAV from $33 to $55 per share.
Thesis
Land and Buildings argues MGM Resorts' high-quality US real estate is trapped inside a 10x EBITDA C-corp, well below the 15-16x paid for hotel and net lease REITs and the 17x Blackstone paid for the Cosmopolitan. A tax-free spin-off of a lodging C-corp and election of REIT status, combined with an MGM China special dividend and asset sales, would unlock this gap without breaching debt covenants. Litt pegs base-case NAV at $33 per share (70% upside) with a bull case of $55 (180% upside), citing Penn National Gaming's 77% rally and Pinnacle Entertainment's 34% rally after similar REIT conversions. The urgency stems from MGM becoming a US tax payer in 2015 and $5B+ of debt maturing in 2015/2016 that can be repaid penalty-free. Land and Buildings is nominating four directors with deep real estate and lodging finance experience.
SCQA
MGM Resorts International owns premier Las Vegas Strip real estate inside a gaming C-corp, with ~85% of EBITDA from domestic operations and a 51% stake in publicly listed MGM China.
MGM trades at only 10x EBITDA versus 15-16x for hotel/net lease REITs and 17x for the Cosmopolitan sale, while becoming a US tax payer in 2015 and facing $5B+ of debt maturities in 2015/2016.
Elect a REIT, tax-free spin off a lodging C-corp, monetize or spin MGM China, deleverage via asset sales, and seat four Land and Buildings real-estate/finance nominees on the board.
Base-case NAV of $33 per share — 70% upside — with a bull case of $55 (180% upside), consistent with the 77% Penn National and 34% Pinnacle rallies after announcing REIT conversions.
The three reasons
- 1
MGM US trades at 10x EBITDA vs. 15-16x for hotel/net lease REITs and 17x for Cosmopolitan
- 2
$5B+ of debt maturing in 2015/2016 opens a penalty-free window to deleverage now
- 3
Penn National +77% and Pinnacle +34% show the REIT-conversion playbook works in gaming
Primary demands
- Convert MGM's US real estate into a REIT via tax-free spin-off of a lodging C-corp
- Reduce leverage through asset sales and an MGM China special dividend
- Elect four Land and Buildings nominees (Hart, Kincaid, Litt, Weisman) to the MGM board
- Spin out or monetize MGM China to focus investors on domestic lodging/gaming trends
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Penn National Gaming / Gaming and Leisure Properties (GLPI) REIT spin-off (2012)
- Pinnacle Entertainment REIT conversion announcement (2014)
- GLPI offer for Pinnacle real estate at ~50% premium (March 2015)
- Blackstone acquisition of Cosmopolitan of Las Vegas at 17x EBITDA
Notable slides (2)
Notes
Press release accompanying a same-day investor presentation (not the deck itself). Collaborative-but-firm posture: Litt notes MGM CEO Jim Murren is 'open to considering' a REIT conversion while simultaneously announcing four board nominees — a soft-activist, governance-nudge posture rather than a full adversarial campaign. Stake not disclosed in this document (referenced as available in the forthcoming Schedule 14A Exhibit 4). Real thesis visuals would live in the companion investor presentation, not this text release. Sector coded as consumer (gaming/hospitality) but real-estate-heavy given REIT-conversion framing.