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MGM Resorts in $850M deal to buy NY casino from Yonkers Racing

Yonkers Racing Corp. agreed to sell the real estate and operations of its Empire City Casino in Yonkers, N.Y., to MGM Resorts International for about $850 million, which includes an expected approximately $245 million of the casino's outstanding debt when the deal closes.

In addition, MGM Growth Properties LLC agreed to acquire developed properties associated with the casino from MGM Resorts for about $625 million and lease them back to a subsidiary of MGM Resorts, which will operate the property.

MGM Resorts will pay about $260 million of the total consideration in the form of its common stock, while an additional $50 million will be paid if Empire City Casino secures a license for live table games on or before Dec. 31, 2022, and the global entertainment company accepts the license by Dec. 31, 2024.

Meanwhile, MGM Growth's payment for the developed properties will include assuming the approximately $245 million refinancing from MGM Resorts, the balance of which will be settled by issuing operating partnership units to MGM Resorts based on the $29.38-per-share closing price of MGM Growth as of May 25. The casino-focused real estate investment trust also plans to fund the acquisition and assumption of debt with cash on hand and borrowings under its secured revolving credit facility.

MGM Growth will also have a right of first offer to certain undeveloped lands next to the property should MGM Resorts develop additional facilities and choose to sell those properties.

MGM Resorts is expected to pay an additional $50 million of annual rent payment to MGM Growth, with the casino added to the existing master lease between the two companies. The rent is 90% fixed, with 2% contractual annual growth until 2022.

Empire City Casino sits on 97 acres and offers more than 5,200 slots and electronic table games, dining outlets and horse racing. In its release, Yonkers Racing said it will hand over its racing and gaming property and operations to MGM Resorts, as part of the deal.

J.P. Morgan was hired by the seller in November 2017 to explore its options for the Empire City Casino.

BofA Merrill Lynch serves as MGM Resorts' exclusive financial adviser in the transaction. PJT Partners LP is the financial adviser to the conflicts committee of MGM Growth's board of directors.

Both transactions are expected to close in the first quarter of 2019, pending regulatory and other approvals.