Blackstone Real Estate Income Trust, Inc. and VICI Properties Inc. announced jointly today that they have entered into a definitive agreement in which VICI, currently owner of a 50.1 per cent interest in the joint venture that owns MGM Grand Hotel & Casino Las Vegas and Mandalay Bay Resort and Casino, will acquire BREIT’s 49.9 per cent interest in the joint venture for cash consideration of approximately $1.27bn and VICI’s assumption of BREIT’s pro-rata share of the existing property-level debt. 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.
“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,” said Jon Gray, President and Chief Operating Officer of Blackstone. “Las Vegas continues to be a high conviction market for Blackstone.”
The properties, situated at the south end of the Las Vegas Strip in Las Vegas, Nevada, 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.
“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,” said Edward Pitoniak, Chief Executive Officer of VICI Properties. “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 capitalize on the growing vitality of the South Strip.”
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 two per cent through 2035 (year 15 of the initial lease term) and thereafter at the greater of two per cent or CPI (subject to a 3.0% ceiling).
“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,” said Scott Trebilco, Senior Managing Director of Blackstone Real Estate.
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.