Las Vegas: VICI to acquire remaining MGM Grand and Mandalay Bay stake in $1.3B cash deal

Real estate investment trust VICI Properties – already Las Vegas Strip’s biggest property owner – has agreed to buy Blackstone’s stake in MGM Grand Las Vegas and Mandalay Bay, further expanding its footprint in the gambling mecca. The deal values the two properties at $5.5 billion and is expected to be completed early in the first quarter of 2023.

The definitive agreement through which VICI, currently the owner of a 50.1% interest in the joint venture that owns MGM Grand Las Vegas and Mandalay Bay, will acquire the remaining stake was announced Thursday. The New York-based firm is buying Blackstone Real Estate Income Trust’ (BREIT) 49.9% interest for cash consideration of approximately $1.27 billion.

Both companies remain bullish on the Las Vegas market. Jon Gray, President and Chief Operating Officer of Blackstone, said: “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.”

Edward Pitoniak, Chief Executive Officer of VICI Properties, added: “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.”

“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,” Pitoniak further commented. “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 properties, situated at the south end of the Las Vegas Strip in 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 $310 million upon the commencement of the next rental escalation on March 1, 2023.

Scott Trebilco, Senior Managing Director of Blackstone Real Estate, noted that the sale of these assets is “an excellent outcome” for BREIT investors and enables the firm to further concentrate BREIT’s portfolio in its highest growth sectors, including logistics and rental housing.

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% through 2035 (year 15 of the initial lease term) and thereafter at the greater of 2% or CPI (subject to a 3% ceiling).

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, noted the REIT. VICI expects the transaction to be immediately accretive to AFFO per share upon closing.

The AAA Four Diamond resorts MGM Grand Las Vegas and Mandalay Bay feature over 18 million building square feet; approximately 11,000 guestrooms and suites across the two properties; nearly 321,000 square feet of gaming space and 191 table games and 2,235 slot machines and electronic table games; and about 3 million gross square feet of exhibition and meeting facilities.

Amenities to be found within the properties include Michelin Star winning restaurants, The Mansion at MGM Grand, entertainment venues, the MGM Grand Garden Arena (with approximately 17,000 seat capacity), Hakkasan Night Club, Topgolf, and destination pools and spas.

Gaming REITS such as VICI own the buildings and the land of casinos and resorts. Gambling companies, such as Caesars and MGM Resorts − both tenants of VICI − own the operations. Las Vegas has seen a burst of deals the past few years that have shuffled resort property ownership around, with billions of dollars changing hands. This latest agreement confirms VICI as the biggest property owner in Las Vegas’ famed casino corridor.