Vici Properties is set to become full owner of the MGM Grand Las Vegas and Mandalay Bay Resort and Casino real estate, following its acquisition of the remaining interest in the properties from Blackstone Real Estate Income Trust.
Gaming real estate investment trust Vici currently holds 50.1% interest in the joint venture, which it shares with BREIT, that owns the MGM Grand Las Vegas and Mandalay Bay properties. Through this deal, Vici will acquire BREIT's 49.9% interest in the joint venture for a cash consideration of roughly $1.27 billion. It also will assume Blackstone's pro-rata share of existing property debt.
The deal values the properties at $5.5 billion and represents another step in the ownership of these Las Vegas Strip properties.
In January 2020, MGM Resorts sold the MGM Grand Las Vegas and Mandalay Bay real estate to a joint venture between its spin-off REIT, MGM Growth Properties, and BREIT. In 2021, Vici bought MGM Growth Properties for $17.2 billion, establishing its 50.1% stake in these two properties.
"When Blackstone acquired a minority stake in the two casinos in January 2020, they entered into a sale-leaseback agreement as a fixed-income strategy, collecting approximately $700 million over a 35-month hold period," said Romy Bhojwani, CoStar director of hospitality market analytics. "Selling their stake now, for a combined value of $5.5 billion, equates to a 19.5% increase in value."
This deal signals BREIT's shift from fixed income to more value-add opportunities in the current cycle, he added.
The property debt has a principal balance of $3 billion, which matures in 2032 and has a fixed interest rate of 3.558% per year through March 2030.
Both properties are subject to an existing triple-net lease agreement between the joint venture and MGM Resorts International. The lease is expected to generate an annual rent of $310 million starting with the next rental escalation on March 1, 2023, the news release states.
Vici CEO Edward Pitoniak said in the news release that MGM Grand Las Vegas and Mandalay Bay are "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 provides us with the opportunity 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, added in the release that this deal enables the company to concentrate its portfolio on the highest growth sectors such as logistics and rental housing.
The deal is expected to be completed early in the first quarter of 2023.