The transaction between the gaming operator, MGM, and the real estate investment trust, MGP, is expected to be accretive for both parties within the first year of operations.
In the agreement, MGM will acquire all of the operating assets of the Hard Rock Rocksino Northfield Park from MGP, and lease the property from a subsidiary of MGP.
Rocksino is a 200,000 square foot gaming facility with over 2,300 video lottery terminals and a 1,900 seat music venue, with reported net revenues of $293m in H1 2018.
Despite not having table games, the property's “superior non-game offerings” and “attractive location” were both cited as reasons behind the deal.
Jim Murren, Chairman & CEO of MGM Resorts International, said: “We believe the Rocksino is a great fit for the MGM portfolio and will benefit from our capabilities as a leading global entertainment company and our award-winning M life Rewards Program. We anticipate revenue and profit growth from this combination."
The deal is in line with previous acquisitions and leases that MGM and MGP have entered into over the last few years, with the Rocksino added to an existing master lease, increasing it by $60m annually.
As consistent with master leases terms, 90% of the rent is fixed and will increase by 2% a year until 2022, with this transaction expected to close in the first half of 2019.
James Stewart, CEO of MGP, added: “While there was significant third-party interest in the property, MGM Resorts offered a rental stream at the high end of our expected range and the continued security of our revenues as demonstrated by the strong rent coverage via the master lease.
“We expect this transaction to be accretive to AFFO, positioning the company for future dividend growth and further exhibiting our commitment to maximise shareholder value."
When MGP was established in 2015, it began to acquire MGM properties such as The Mirage, Mandalay Bay and Luxor Las Vegas before leasing them back to MGM via NNN leases.
The Hard Rock Rocksino Northfield Park was acquired by MGP in 2018 for $1.02bn from operator Hard Rock International.
