Vici Properties is to acquire the remaining 49.9 per cent interest of a joint venture that owns MGM Grand Las Vegas and Mandalay Bay Resort from Blackstone.
The pair of real estate investment trust’s detail that the purchase of Blackstone’s share of the JV will be for $1.27bn and Vici’s assumption of the pro-rata share of the existing property-level debt.
This debt has a principal balance of $3bn, matures in 2032, and bears interest at a fixed rate of 3.558 per cent per annum through March 2030.
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.”
Scott Trebilco, Senior Managing Director of Blackstone Real Estate, noted: “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.”
The properties, situated at the south end of the Las Vegas Strip, are subject to an existing triple-net lease agreement between the JV and MGM Resorts International. This will generate annual rent of approximately $310m upon the commencement of the next rental escalation on March 1, 2023.
The MGM Grand Las Vegas and Mandalay Bay 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 two per cent until 2035, and at the greater of two per cent or CPI (subject to a three per cent ceiling) from that point on.
Vici gained its 51.1 share in the JV in August 2021 following the acquisition of MGM Growth Properties for a total consideration of $17.2bn.
Edward Pitoniak, Chief Executive Officer of VICI Properties, explained: “We have been honoured 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.
“This transaction also provides us with the opportunity to further grow our partnership with MGM Resorts International as they look to capitalise on the growing vitality of the south Strip.”