VICI Properties will take over full ownership of MGM Grand Las Vegas and Mandalay Bay Resort after reaching a definitive agreement with Blackstone Real Estate Income Trust (BREIT).
Under the terms of the deal, VICI, who currently owns a 50.1% interest in the MGM Grand Las Vegas and Mandalay Bay Resort joint venture, would acquire BREIT’s 49.9% interest for cash consideration of approximately $1.27bn and VICI’s assumption of BREIT’s pro-rata share of the existing property-level debt.
Maturing in 2032, the debt has a principal balance of $3bn and bears interest at a fixed rate of 3.558% per annum through March 2030.
“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,” commented Edward Pitoniak, CEO 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.”
Both properties are located at the south end of the Las Vegas Strip in Las Vegas, Nevada, and are subject to an existing triple-net lease deal between the joint venture and MGM Resorts International, which will generate approximately $310m in annual rent once the next rental escalation begins on March 1, 2023.
Jon Gray, President and COO of Blackstone, stated: “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.”
The MGM Grand Las Vegas/Mandalay Bay triple-net lease has approximately 27 years remaining on its initial lease term with two ten-year tenant renewal options. Rent under the lease deal rises annually at 2.0% through 2035 and thereafter at the greater of 2.0% or CPI (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,” added Scott Trebilco, Senior Managing Director of Blackstone Real Estate.