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Vici to acquire remaining stake in MGM Grand and Mandalay Bay JV for $1.27bn

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Casino real estate investment trust Vici Properties has agreed to require the remaining 49.9% interest in the joint venture that owns MGM Grand Las Vegas and Mandalay Bay Resort.

Vici currently holds a 50.1% majority interest in the venture and will purchase the 49.9% stake from JV partner Blackstone Real Estate Income Trust (BREIT) for approximately $1.27bn in cash.

The business will also assume BREIT’s pro-rata share of the existing property-level debt, which has a principal balance of $3.00bn and is expected to mature in 2032.

The properties, both of which are situated at the south end of the Las Vegas Strip, are subject to an existing triple-net lease agreement between the venture and MGM Resorts International. This lease will generate annual rent of approximately $310.0m upon the commencement of the next rental escalation on March 1, 2023.

Both triple-net lease arrangements have a remaining initial lease term of approximately 27 years, through to 2050, with two 10-year tenant renewal options. Rent under the lease agreement escalates annually at 2.0% through 2035 and thereafter at the greater of 2.0% or CPI, subject to a 3.0% ceiling.

Vici said it 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.

Subject to customary closing conditions, the deal is expected to be completed early in the first quarter of 2023.

“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,” Vici chief exectuive Edward Pitoniak said.

“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 capitalize on the growing vitality of the South Strip.”

BREIT president and chief operating officer Jon Gray added: “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.”

The deal comes after Vici earlier this month announced an underwritten public offering of shares with the aim of raising approximately $509.9m.

At the time, Vici said it expected to use the proceeds to support its business and operations including funding its pipeline for the acquisition, development and improvement of properties, funding loans directly or indirectly secured by real estate, and other general corporate purposes such as capital expenditures, working capital and the repayment or refinancing of indebtedness.