VICI Buying Remaining Stakes in Mandalay Bay, MGM Grand from Blackstone

Posted on: December 1, 2022, 04:01h. 

Last updated on: December 1, 2022, 05:00h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

VICI Properties (NYSE: VICI) announced Thursday it’s acquiring the 49.9% of the Mandalay Bay and MGM Grand on the Las Vegas Strip it doesn’t currently own. That will solidify its status as the largest owner of gaming real estate on the Strip.

MGM Grand
MGM Grand on the Las Vegas Strip. VICI Properties is acquiring 49.9% interest in that venue and Mandalay Bay. (Image: Eater Vegas)

The gaming real estate investment trust (REIT) is paying $4.27 billion to Blackstone Real Estate Income Trust (BREIT) to buy the 49.9% stakes in the venues. That figure includes a cash consideration of $1.27 billion and the assumption of $3 billion in BREIT 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,” according to a statement. “The lease will generate annual rent of approximately $310 million upon the commencement of the next rental escalation on March 1, 2023.”

Both venues are operated by MGM Resorts International (NYSE: MGM). VICI said it intends to fund the transaction through a combination of cash on hand and the assumption of debt. The REIT added the deals will be immediately accretive to acquired funds from operations (AFFO).

How VICI Came to Own Mandalay Bay, MGM Grand

In January 2020, MGM announced the sale of Mandalay Bay and MGM Grand to a joint venture controlled by MGM Growth Properties (MGP) and BREIT for $4.6 billion. At that time, the breakdown was a 50.1% stake to MGP, with BREIT owning the remainder.

That 50.1% was inherited by VICI when it closed its $17.2 billion acquisition of MGM Growth in April — a transaction that created the largest gaming REIT in the US, as well as the largest landlord on the Strip. That all-stock deal was announced in August 2021.

Prior to announcing the purchase of MGP, VICI owned the property assets of some of the most venerable Strip venues, including Caesars Palace, the Venetian, and the Venetian Expo and Convention Center.

“VICI now owns 10 premier resorts on the Las Vegas Strip, consisting of 1.2 million square feet of gaming space, approximately 40,775 hotel rooms, and 5.9 million square feet of meeting and convention space,” VICI COO John Payne said when the MGP acquisition closed.

Blackstone Still Active in Las Vegas

BREIT is realizing profits on Mandalay Bay and MGM Grand, and that could be the impetus for the sale.

“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,” said President and COO Jon Gray in the statement.

Indeed, the private equity behemoth remains a major player in Strip real estate. BREIT owns the property assets of the Bellagio and is part of a consortium that earlier this year paid $4 billion for the real estate of the Cosmopolitan. MGM operates both of those casino resorts.