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US – Realty Income to buy 21.9 per cent of the Bellagio Las Vegas for $950m

By - 29 August 2023

Realty Income Corporation, The Monthly Dividend Company, and Blackstone Real Estate Income Trust have jointly announced that Realty Income has signed a definitive agreement to invest approximately $950m to acquire common and preferred equity interests from BREIT in a new joint venture that owns a 95 per cent interest in the real estate assets of The Bellagio Las Vegas.

Upon closing, Realty Income will invest approximately $300m of common equity in the joint venture, subject to certain adjustments, to acquire a 21.9 per cent indirect interest in the property, BREIT will retain a 73.1 per cent per cent indirect interest, and MGM Resorts International will retain a five per cent interest in the property. Realty Income will also invest $650m to acquire a yield-bearing preferred equity interest in the joint venture.

The Bellagio, situated at the center of the Las Vegas Strip in Las Vegas, Nevada, is subject to an existing triple net lease with approximately 26 years of remaining term and is operated and maintained by MGM. The AAA Five Diamond Resort features approximately 4,000 guestrooms and suites across two towers, 157,000 square feet of gaming space and 200,000 gross square feet of state-of-the-art meeting and event facilities. Located on a 77-acre campus, the resort also includes the iconic Fountains of Bellagio and multiple Michelin Star restaurants.

“Realty Income seeks to invest in high-quality real estate at scale in partnership with operators who are leaders in their respective industries. This transaction to acquire an interest in the Bellagio, an iconic property, represents our second investment in the gaming industry and exemplifies the advantages of our size, scale and access to capital,” said Sumit Roy, Realty Income’s President and Chief Executive Officer. “We are pleased to initiate our Credit Investment platform through a preferred equity investment in the Bellagio joint venture. Credit Investments are a natural adjacency to our traditional business, allowing us to provide additional value to our clients while leveraging our core competencies in transaction sourcing and structuring, and real estate and credit underwriting and monitoring.”

Nadeem Meghji, Head of Blackstone Real Estate Americas said, “Where you invest matters and this transaction demonstrates the strong investor demand for the high-quality assets we have assembled within BREIT. The Bellagio is an iconic property in the heart of the Las Vegas Strip and we look forward to our continued ownership of this asset, now in partnership with Realty Income. This partial sale represents another terrific outcome for BREIT shareholders.”

The existing Bellagio triple net lease structure with MGM includes two per cent annual rent escalators for the next six years, the greater of two per cent or CPI (capped at three per cent) in years seven -16, and the greater of two per cent or CPI (capped at four per cent) in years 17-26. Realty Income’s common equity ownership interest will be subordinate to its $650m preferred equity investment in the venture. Additionally, the Bellagio has property-level debt with an outstanding principal balance of approximately $3bn, a remaining tenor of approximately 6.2 years and a 3.67 per cent (fixed) all-in interest rate.

The transaction is expected to close in the fourth quarter of 2023 and is subject to customary closing conditions.

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