Vici Properties has agreed to acquire the remaining stake in MGM Grand Las Vegas and Mandalay Bay from Blackstone for $1.27bn.
US.- Blackstone and VICI Properties have entered into a definitive agreement in which VICI will acquire Blackstone’s 49.9 per cent interest in the joint venture that owns MGM Grand Las Vegas and Mandalay Bay Resort. VICI already owns 50.1 per cent of the venture.
The transaction is valued at approximately $1.27bn cash. The property-level debt has a principal balance of $3bn, matures in 2032, and bears interest at a fixed rate of 3.558 per cent 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 $310m upon the commencement of the next rental escalation on March 1, 2023.
Jon Gray, president and chief operating officer of Blackstone Real Estate Income Trust, Inc. (BREIT), said, “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.”
Edward Pitoniak, chief executive officer of VICI Properties, said, “We have been honored to be BREIT’s partner in the MGM Grand Las Vegas / Mandalay Bay joint venture and 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 provides us with the opportunity to further grow our partnership with MGM Resorts International as they look to capitalise on the growing vitality of the South Strip.”
Scott Trebilco, senior managing director of Blackstone Real Estate, said, “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.”
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 escalates annually at 2 per cent through 2035 (year 15 of the initial lease term) and thereafter at the greater of 2 per cent or CPI (subject to a 3 per cent ceiling).
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 per cent of the existing property-level debt. VICI expects the transaction to be immediately accretive to AFFO per share upon closing.
The transaction is subject to customary closing conditions and is expected to be completed early in the first quarter of 2023.
The two properties have a combined 11,000 guestrooms and suites, including the Four Season and Delano hotels and several entertainment venues. There’s 321,000 square feet of gaming space with 191 table games and 2,235 slot machines and electronic table games along with 3m square feet of exhibition and meeting facilities. MGM recently announced plans to spend $100m on a remodel of the Mandalay Convention Center.