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MGM Proxy Battle? Latest Letter From Land & Buildings

MGM Proxy Battle? Latest Letter From Land & Buildings

Casinos own a lot of expensive real estate in order to entice customers to stay, gamble, eat and party, and recently many of them have either spun out these assets to take advantage of a REIT structure or are seriously considering the proposal.

Activist investor and Land and Buildings Investment Management LLC (L&B) Founder and CIO Jonathan Litt, drafted such a proposal for MGM Resorts International (NYSE: MGM) back on March 17, following which MGM shares spiked up approximately 10.5 percent on the news.


During the past two weeks of trading, MGM shares have slid back down, reflecting the chilly reception by MGM management regarding the L&B proposals.

Related Link: Activist Investor Explains Why Converting Into A REIT Is The Right Thing For MGM To Do

On March 20, MGM filed a proxy statement rejecting the L&B slate of four independent board nominees and also stated that the board of directors had previously considered the initiatives proposed by Litt.

Related Link: Is MGM Heading For A Proxy Fight?

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On April 1, Litt drafted a letter to MGM's lead independent director, Roland Hernandez, urging him to form a special committee and hire an independent financial advisor "to evaluate options to enhance shareholder value."

Additionally, Litt presented a slate of candidates for the MGM board, including himself.

"Land and Buildings slate of proposed nominees possess track records that speak for themselves:

  • Matthew J. Hart: Former CFO and COO, Hilton Corporation, and former CFO, Host Marriott Corporation
  • Richard Kincaid: Former President and CEO of Equity Office Properties Trust
  • Jonathan Litt: Founder and CIO of Land and Buildings
  • Marc Weisman: Former Partner of Weil Gotshal & Manges, and former CFO of Oppenheimer & Co., Inc."

Litt – Alleges MGM Underperformance

The L&B letter pointed out what it believes to have been a history of significant underperformance by MGM versus its peer group.



Related Link: MGM May Soon Open The Biggest Regional Casino In The U.S.

Land & Buildings' Rationale – MGM REIT 'Now'

  • MGM is going to be a taxpayer for the first time in 2015
  • Las Vegas fundamentals are especially strong
  • There is an opportunity for significant debt repayment with no penalty
  • Recent examples of REIT conversions that have provided significant benefits to shareholder return

Litt also urged Hernandez to include members of his proposed slate of directors as observers "to the special committee on an interim basis before the 2015 Annual Meeting on May 28th."

Key To Proxy Fight?

Litt concluded, "Chairman and CEO Jim Murren last week have demonstrated that MGM and its Chairman and CEO are steadfastly opposed to L&B's proposed new directors despite the Company's poor performance and the undeniable track records of our nominees."

Notably, billionaire Kirk Kerkorian is the company's largest shareholder, with 19 percent, according to data compiled by Bloomberg.


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