Blackstone Real Estate Income Trust and VICI Properties announced that they have entered into a deal involving MGM Grand Las Vegas and Mandalay Bay.
VICI, owner of a 50.1% interest in the joint venture that owns MGM Grand Las Vegas and Mandalay Bay Resort, will acquire BREIT’s 49.9% interest in the joint venture for cash consideration of approximately $1.27 billion. VICI assumes BREIT’s pro-rata share of the existing property-level debt.
The property-level debt has a principal balance of $3 billion, matures in 2032, and bears interest at a fixed rate of 3.558% per annum through March 2030.
The properties, situated at the south end of the Las Vegas Strip, are subject to an existing triple-net lease agreement between the joint venture and MGM Resorts International. The lease will generate annual rent of approximately $310 million upon the commencement of the next rental escalation on March 1, 2023.
Jon Gray, President and Chief Operating Officer of Blackstone, said in a statement: “VICI Properties has been an outstanding partner on these assets, and we are incredibly pleased to have delivered such exceptional returns for our BREIT investors. Las Vegas continues to be a high conviction market for Blackstone.”
“We have been honored to be BREIT’s partner in the MGM Grand Las Vegas / Mandalay Bay joint venture,” Edward Pitoniak, Chief Executive Officer of VICI Properties, said. “This transaction further demonstrates the ability of Blackstone and VICI to work together productively, now and in the future. We’re excited to further our investment in MGM Grand Las Vegas and Mandalay Bay, two of the largest and highest-quality resorts in what we believe is the leisure and convention destination with the most compelling future demand outlook. This transaction also allows us to further grow our partnership with MGM Resorts International as they look to capitalize on the growing vitality of the South Strip.”
Scott Trebilco, Senior Managing Director of Blackstone Real Estate, said that his company will focus on other areas.
“The sale of these assets is an excellent outcome for our BREIT investors and enables us to further concentrate BREIT’s portfolio in its highest growth sectors, including logistics and rental housing,” Trebilco said.
The MGM Grand Las Vegas / Mandalay Bay triple-net lease has a remaining initial lease term of approximately 27 years (expiring in 2050) with two ten-year tenant renewal options. Rent under the lease agreement will grow slightly annually.
VICI Properties intends to fund the transaction through a combination of cash on hand, proceeds from the settlement of existing outstanding forward equity sale agreements and assumption of the remaining 49.9% of the- existing property-level debt.