Gold Strike Tunica in Mississippi sold to Cherokee Nation by MGM Resorts International

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MGM Resorts International is selling its Tunica, Mississippi property to Cherokee Nation Entertainment Gaming Holdings for $450 million.

The 32-story Gold Strike Tunica, which MGM has operated since the company bought it in 2005, is one of two resorts the Las Vegas company has in Mississippi. The company said Thursday it will continue to operate Beau Rivage, its Mississippi Gulf Coast resort in Biloxi.

Based in Catoosa, Oklahoma, Cherokee Nation Entertainment, a subsidiary of Cherokee Nation Businesses, operates 10 casinos in northeast Oklahoma, including Hard Rock Hotel & Casino, Tulsa.

“The Bright Future Ahead”

The deal is expected to close in the first half of 2023 and is subject to regulatory approvals and customary closing conditions.

“Gold Strike is a wonderful property with a bright future ahead of it,” MGM Chairman and CEO Bill Hornbuckle said in a statement announcing the sale. “Strategically, however, we have decided to focus on one resort Mississippi – Beau Rivage – and devote more time and resources to continuing to ensure the success of this world-class resort and casino.

Gold Strike is technically owned by real estate investment trust Vici Properties Inc. and operated by MGM. Vici was asked to modify the rental agreement with Cherokee Nation Entertainment, which will include a rent reduction of $40 million per year. MGM expects net cash proceeds after estimated taxes and fees to be approximately $350 million.

“This is a great result for the business as we are able to redirect future capital expenditures to opportunities that will improve the customer experience at our other locations,” said Jonathan Halkyard, Chief Financial Officer and treasurer of MGM. “We appreciate Vici, as Gold Strike’s property owner, working constructively with CNE to facilitate a new lease agreement.”

MGM said that for the 12 months ending Dec. 31, Gold Strike reported net income of $81.1 million and adjusted real estate cash flow of $115 million, reflecting benefits from market-specific factors. market over the past year. Pre-pandemic, Gold Strike reported adjusted real estate cash flow of $67 million in 2019.

Circus Circus Enterprises opened the Gold Strike in August 1994 as Circus Circus Tunica. Like the Circus Circus property in Las Vegas, the Mississippi property, located about 20 minutes south of Memphis, Tennessee, was themed around a giant circus tent.

Once the tallest building in Mississippi

In 1997, Circus Circus invested $125 million in the property, adding a hotel tower and renaming the casino Gold Strike.

When MGM, then known as MGM Mirage, acquired the property, it poured more money into it, building 1,133 rooms and 125 suites, a conference and convention center, a high-limit gaming area, and several restaurants.

When it was built, the hotel, known as the “Tower of Gold”, was the tallest building in Mississippi.

Today, the property houses a spa and salon; the 800-seat Millennium Theater; and 50,000 square feet of gaming space with 52 table games and over 1,400 slot machines.

Cherokee Nation Entertainment is the gaming and hospitality company of the Cherokee Indian Tribe. The company owns and operates the Hard Rock Hotel & Casino Tulsa and nine tribal casinos, including a racetrack, three resort hotels, three golf courses and other retail operations.

Cherokee Nation Businesses is the tribal-owned holding company of the largest Indian nation in the United States. The Cherokee Nation and its businesses employ 11,000 people. CNB owns businesses in consulting, health sciences, hospitality, real estate, technology, distribution and logistics, engineering, manufacturing, construction and environmental services.

MGM moves

MGM is in the midst of several real estate transactions.

It recently acquired The Cosmopolitan of Las Vegas from the Blackstone Group for $1.625 billion in a deal completed on May 17.

MGM sells The Mirage to Hard Rock International, operated by the Seminole Indian Tribe of Florida. MGM announced in December that Hard Rock would buy The Mirage for $1.075 billion and convert it into a Hard Rock property, with a guitar-shaped hotel tower replacing the resort’s iconic volcano.

Carlo Santarelli, a gaming industry analyst at Deutsche Bank’s New York office, said he viewed the Gold Strike Tunica transaction as “largely neutral in terms of stock value.

“Compared to 2021 results, the sale will extract approximately $115 million in cash flow, $40 million in annual rent and $320 million in capitalized lease debt,” Santarelli said in a statement to investors.

When the transaction is reviewed in full, in exchange for the $115 million in cash flow, Santarelli said, MGM gets $450 million in gross cash proceeds ($350 million in net cash proceeds) and relief. debt (capitalized rent) of $320 million, for total gross proceeds of $770 million.

“So in its entirety, based on 2021 results, which have been inflated, MGM is exiting the asset at a multiple of 6.7 times 2021 cash flow, or 8.5 times cash flow average of 2019 and 2021,” Santarelli said.

Contact Richard N. Velotta at [email protected] or 702-477-3893. Follow @RickVelotta on Twitter.

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