Blackstone Real Estate Income Trust Inc., a publicly registered non-traded REIT sponsored by private equity giant The Blackstone Group (NYSE: BX), and VICI Properties Inc. (NYSE: VICI) announced jointly that they have entered into a definitive agreement in which VICI will acquire the entirety of the joint venture that owns MGM Grand Las Vegas and Mandalay Bay Resort.
VICI, which currently owns a 50.1% interest in the joint venture that owns the properties, will acquire BREIT’s 49.9% interest in the joint venture for cash consideration of approximately $1.27 billion 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 $3.0 billion, matures in 2032, and bears interest at a fixed rate of 3.558% 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 (NYSE: MGM). The lease will generate annual rent of approximately $310 million upon the commencement of the next rental escalation on Mar. 1, 2023.
“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 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 2.0% through 2035, year 15 of the initial lease term, and thereafter at the greater of 2.0% or CPI, subject to a 3.0% ceiling.
“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.”
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% of the existing property-level debt. VICI expects the transaction to be immediately accretive to AFFO per share upon closing.
MGM Grand Las Vegas and Mandalay Bay are comprised of an aggregate 18 million square feet, approximately 11,000 guestrooms and suites (including Four Seasons and Delano hotels), 321,000 square feet of gaming space, 3.0 million gross square feet of exhibition and meeting facilities, multiple restaurants, The Mansion at MGM Grand, numerous entertainment venues, the MGM Grand Garden Arena with approximately 17,000 seat capacity, Hakkasan Night Club, Topgolf, and pools and spas. The properties are situated on 226 acres on the Las Vegas Strip.
The transaction is subject to customary closing conditions and is expected to be completed early in the first quarter of 2023.
PJT Partners and Barclays are serving as BREIT’s financial advisors, and Simpson Thacher & Bartlett LLP is acting as BREIT’s legal counsel. Morgan Stanley & Co. LLC is acting as exclusive financial advisor to VICI Properties, and Hogan Lovells is serving as legal advisor to VICI Properties.
As the DI Wire reported earlier this week, Blackstone REIT’s redemptions have swelled during the second and third quarters of 2022, while their equity raise has declined significantly during the same time.
Blackstone Real Estate Income Trust’s initial offering launched in August 2016 and has raised approximately $60 billion in three public offerings as of June 2022. The current offering has raised $6.6 billion, and as of Sept. 30, 2022, its aggregate NAV was $70.4 billion.