Billionaire Paulson Backs MGM Management in REIT-Proxy Fight

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John Paulson, the hedge fund billionaire who made a fortune betting against the U.S. housing market, is opposing the dissident board slate pressing MGM Resorts International to create a real estate investment trust.

Paulson, who manages about $19.3 billion, said the Las Vegas-based casino operator can boost its stock by continuing its strategy to build another resort in Macau and invest in non-gaming attractions in Nevada. MGM could create a REIT with its regional casinos, including the MGM Grand Detroit and ones under construction in Springfield, Massachusetts and National Harbor, Maryland, he said.

“That is worth exploring,” Paulson said in a telephone interview. “And the company is exploring it.”

The large capital investments required to maintain MGM properties on the Las Vegas Strip, such as Bellagio and Mandalay Bay, make transferring ownership to a REIT more difficult, according to Paulson.

“Las Vegas is not done,” he said. “If you stand still you lose.”

Jonathan Litt, founder of Land & Buildings Investment Management LLC, has called on MGM, the largest owner of casinos on the Strip, to split into a separate management company and real estate investment trust. REITs can trade at higher stock market values because they don’t pay federal income tax, passing along the bulk of their earnings directly to shareholders.

MGM rose 11 percent on March 17, after Litt made his proposal public. He said the stock could be worth $33. The shares fell 5.6 percent to $21.11 at the close Wednesday in New York, weighed down by a Wynn Resorts report Tuesday that showed weak results in Macau and Las Vegas.

Land & Buildings, based in Stamford, Connecticut, has proposed four nominees to the MGM board. The company’s annual meeting is scheduled for May 28. Land & Buildings has scheduled a conference call Thursday to discuss its plan.

New York-based Paulson & Co. owns almost 7 million shares or about 1.4 percent of MGM’s stock, according to data compiled by Bloomberg.

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