MGM Resorts International has struck a deal to sell its MGM Grand and Mandalay Bay properties on the Las Vegas Strip to private equity giant Blackstone Group in a $4.6bn deal.
The transaction will see the Blackstone Real Estate Income Trust (BREIT) strike a joint venture with real estate investment trust MGM Growth Properties (MGP) to acquire the real estate assets. MGP will own 50.1% of the joint venture, with BREIT, which will also purchase $150m in MGP Class A shares, to hold the remaining 49.9%.
Once the deal closes, MGM Resorts will enter into a long-term, triple-net master lease for both properties. The operator will continue to hold responsiblity for the day-to-day management of each property, while paying annual rent of $292m to the JV.
The MGM Grand and Mandalay Bay combined comprise 9,743 rooms, approximately 3m square feet of meeting space, and around 300,000 square feet of casino space on the Las Vegas Strip.
“We are pleased to announce this partnership with BREIT, which illustrates the numerous opportunities available to grow our business and emphasizes the strong institutional demand for gaming real estate assets,” MGP chief executive James Stewart said.
Blackstone president and chief operating officer Jon Gray added he was pleased to once again partner MGM Resorts and MGP, and that the deal reflected the private equity firm’s belief in Las Vegas’ prospects.
A similar deal struck in October 2019 saw BREIT form a joint venture with MGM Resorts, and acquire its iconic Bellagio property on the Strip for $4.25bn, continuing to operate the property on a lease agreement. MGM Resorts holds a 5% stake in JV formed to complete the deal, and will pay annual rent of $245m on the property.
“Similar to the Bellagio, owning these two premier Las Vegas assets under a long-term lease with MGM provides stable cash flow and excellent downside protection for our BREIT investors,” BREIT head of US acquisitions Tyler Henritze explained.
“We look forward to growing our partnership with MGM Resorts and MGM Growth Properties, a best-in-class company.”
The MGM Grand and Mandalay Bay transaction is expected to close in the first quarter of 2020, subject to customary closing conditions. Should it be completed as expected, MGM Resorts would only own three real estate assets: MGM Springfield in Massachusetts, a 50% stake in the Strip’s MGM CityCenter, and a 56% stake in MGM Macau.
Announced alongside the Bellagio deal was the $825m sale of Las Vegas’ Circus Circus to an affiliate of real estate tycoon and Treasure Island owner Phil Ruffin.