Blackstone Real Estate Income Trust, a publicly registered non-traded REIT sponsored by private equity giant The Blackstone Group (NYSE: BX), has formed a joint venture with MGM Resorts International (NYSE: MGM) to purchase the real estate assets of The Bellagio Las Vegas for $4.25 billion in a sale-leaseback transaction. Blackstone REIT will own 95 percent of the joint venture, while MGM Resorts will own the remainder.
As part of the transaction, MGM Resorts will lease the property from the joint venture and continue to manage, operate and be responsible for all aspects of the property on a day-to-day basis.
MGM Resorts will sign a long-term lease and continue to be responsible for all operations and capital expenditures of the Bellagio, with the joint venture owning the property and receiving rent payments.
The Bellagio is a luxury resort located on 77 acres at the center of the Las Vegas strip, with 3,933 hotel rooms, an approximately 155,000 square feet gaming floor, 94,000 square feet of retail space and 200,000 square feet of meeting and ballroom space.
The lease is expected to have an initial annual rent of $245 million with an initial term of 30 years with two 10-year extension options for MGM. For 2018, MGM reported earnings before interest, taxes, depreciation and amortization for the Bellagio of nearly double the expected initial annual rent under the lease agreement. The rent will escalate annually at a rate of 2 percent per year for the first 10 years.
The sale is expected to close by year-end and is subject to customary closing conditions.
Last month, Blackstone REIT completed the purchase of a 316-property, 64 million-square-foot industrial portfolio from global investment manager GLP for approximately $5.3 billion.
The transaction was part of a larger $18.7 billion acquisition where Blackstone purchased assets from three of GLP’s U.S. funds. The entire transaction totals 179 million square feet of urban, infill logistics assets, nearly doubling the size of Blackstone’s existing U.S. industrial footprint. Blackstone said that the deal will be the largest-ever private real estate transaction globally.
Blackstone Real Estate Income Trust is a perpetual life, monthly NAV REIT that invests in stabilized income-oriented commercial real estate in the United States and real estate-related securities. The company is headquartered in New York City and externally managed by BX REIT Advisors, a subsidiary of Blackstone.
Blackstone Real Estate Income Trust originally registered $5 billion in shares and accepted gross offering proceeds of $4.9 billion from January 1, 2017 to January 1, 2019. The company later registered a $12.0 billion follow-on offering. As of June 30, 2019, the company had received net proceeds of $6.8 billion from selling shares in both offerings.
As of the second quarter of 2019, the REIT owned 652 properties purchased for $14.3 billion and had 163 positions in real estate-related securities and loans totaling $3.5 billion. The company currently invests in multifamily, industrial, hotel, and retail properties, and real estate-related securities and loans.