VICI Properties has agreed to acquire Blackstone’s share in a couple of major properties in Las Vegas, Nevada such as MGM Grand Las Vegas and Mandalay Bay, strengthening its presence in the gambling hotspot. 

The transaction is anticipated to close by the beginning of the first quarter of 2023 with a value of $5.5 billion.

On Thursday, it was revealed that VICI, which presently has a 50.1% ownership in the joint venture that runs MGM Grand Las Vegas and Mandalay Bay, would buy the remaining portion. The New York-based company is purchasing Blackstone Real Estate Income Trust’s (BREIT) 49.9% stake for around $1.27 billion in cash.

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Regarding the Partnership, Both Firms Remain Optimistic

Both businesses remain optimistic about the Las Vegas market. Jon Gray, President and Chief Operating Officer of Blackstone, said that VICI Properties has been an incredible partner on these properties and that they are ecstatic to have generated such fantastic returns for its BREIT investors. Las Vegas remains a market of high conviction for Blackstone.

Edward Pitoniak, CEO of VICI Properties, added that the business is proud to be BREIT’s partner in the MGM Grand Las Vegas / Mandalay Bay joint venture and that this deal reflects Blackstone and VICI’s capacity to work together successfully in the present.

Existing between the joint venture and MGM Resorts International is a triple-net leasing agreement for the properties located at the southern end of the Las Vegas Strip in Nevada. Upon the beginning of the subsequent rental escalation on March 1, 2023, the yearly rent will increase to about $310 million.

A Fantastic End To The Company’s Strongest Growth

Scott Trebilco, Senior Managing Director of Blackstone Real Estate, said that the sale of these properties is “an outstanding conclusion” for BREIT investors and allows the company to further focus BREIT’s portfolio in sectors with the strongest growth, such as logistics and rental housing.

The remaining original lease period for the MGM Grand Las Vegas / Mandalay Bay triple-net lease is about 27 years (expiring in 2050), with two ten-year tenant renewal options. The yearly rent increase under the lease agreement is 2% until 2035 (the 15th year of the first lease term) and afterward is the greater of 2% or CPI (subject to a 3% cap).

The Acquisition Will Be Financed from Forward Stock Sale Agreements

The REIT said that VICI Properties aims to finance the deal using cash on hand, proceeds from the settlement of current outstanding forward equity sale agreements, and the assumption of the remaining 49.9% of the existing property-level debt. VICI anticipates that the deal will contribute immediately to AFFO per share upon closure.

Establishment Overview of MGM Grand Las Vegas and Mandalay Bay

MGM Grand Las Vegas and Mandalay Bay are AAA Four Diamond resorts with over 18 million building square feet, approximately 11,000 guestrooms and suites between the two properties, nearly 321,000 square feet of gaming space, 191 table games, 2,235 slot machines, and electronic table games, and approximately 3 million gross square feet of exhibition and meeting space.

The hotels include Michelin-starred restaurants, The Mansion at MGM Grand, entertainment venues, the MGM Grand Garden Arena (with a capacity of about 17,000 seats), Hakkasan Nightclub, Topgolf, and destination pools and spas.

The land and structures of casinos and resorts are owned by gaming REITs like VICI. The businesses are owned by gambling corporations like as Caesars and MGM Resorts, both of which are tenants of VICI. In the last several years, Las Vegas has seen a flurry of transactions involving resort property ownership, with billions of dollars changing hands. This recent transaction solidifies VICI’s position as the largest property owner in the renowned Las Vegas casino sector.

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