The biggest property owner on the Las Vegas Strip is doubling down and taking full ownership MGM Grand Las Vegas and Mandalay Bay, for which the deal is worth $5.5 billion.
VICI Properties, a New York-based real estate investment trust, has agreed to buy a 49.9% stake in Blackstone in two casino resorts in Las Vegas. VICI currently owns a 50.1% stake in the property, which it acquired when it purchased MGM Growth’s assets in May.
The transaction is expected to close in early 2023.
Appearing on CNBC’s Power Lunch, VICI Properties CEO Ed Pitoniak said Blackstone approached him a few weeks ago and the deal was signed quickly.
“We’re excited about this opportunity,” said Pitoniak. Obviously it simplifies our structure, but it gives us full ownership of two of the most iconic properties. on the Las Vegas Strip are MGM Grand and Mandalay Bay”.
Blackstone Real Estate Investment Trust, known as BREIT, said on Thursday that it had decided to limit withdrawals after noticing that withdrawals in October exceeded their monthly limit. Blackstone’s shares fell nearly 10% following the news.
But the problem for Blackstone could be a blessing for VICI.
“We like the deal because it simplifies VICI’s structure and highlights VICI’s many growth paths despite the company’s larger base and rising interest rate environment,” said analyst Barry Jonas of VICI. Truist wrote in a customer note.
Gaming REITS like VICI own the buildings and land of the casinos and resorts. Gambling companies, such as Caesars and MGM Resorts – both VICI tenants – own the operations.
MGM Grand Las Vegas and Mandalay Bay, located at the southern end of the Strip, include more than 11,000 hotel rooms, 321,000 square feet of gambling floors and 3 million square feet of meeting facilities.
VICI is bringing in over $1 billion in cash and assuming more than $3 billion in Blackstone debt at a rate of 3.56% through 2032. Pitoniak calls it a good deal at a time when VICI can anticipate expected to pay 6%.
VICI’s CEO said he was optimistic about Las Vegas’ continued growth, pointing to next year’s dense conference and entertainment calendar, as well as attention-grabbing sporting events including F1 in November 2023.
Despite the sale, Blackstone COO Jay Gray said Las Vegas continues to be a highly convincing market for Blackstone, which also owns the physical assets of Cosmopolitan and Bellagio.
Many analysts and investors are also bullish on growth opportunities in Las Vegas.
October marked the 20th consecutive month that the state’s game revenue hit $1 billion or more, according to figures published by Nevada Game Control Board.
Strip casinos are seeing a 20% increase in revenue through October to $6.8 billion in gaming revenue from a year ago.
Las Vegas is also attracting a record number of visitors. Harry Reid International welcomes more than 5 million passengers for the first time in October.
“It’s further proof that Las Vegas remains one of the most in-demand destinations in the world,” said Rosemary Vassiliadis, Clark County’s aviation director.
And Las Vegas hotel revenue was up 51% in October compared to October 2019, before the pandemic, according to Las Vegas Convention and Visitors Bureau.
Deutsche Bank, which has a “buy” rating on the stock, raised its price target to $38 following the news of the trade.
