MGM Growth Properties and Blackstone Real Estate Income Trust announce that they have formed a new joint venture to acquire the Las Vegas strip assets of the MGM Grand and Mandalay Bay for $4.6 billion.
Blackstone’s REIT will also purchase $150 million in MGM Growth Properties Class A shares, owning 49.9% of shares. Blackstone’s real estate business was founded in 1991 and has approximately $157 billion in investor capital under management.
According to a press announcement, MGM Resorts International will enter into a long-term triple net master lease for both properties and provide a full corporate guarantee of rent payments. MGM Resorts will continue to manage, operate and be responsible for all aspects of the properties on a day-to-day basis, with the joint venture owning the properties and receiving rent payments.
MGM Resorts’ initial annual rent will be $292 million.
According to Blackstone President & COO Jon Gray, the transaction reflects the firm’s continuing strong conviction in Las Vegas. Blackstone recently acquired the Bellagio for $4.25 billion.
“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,” said Tyler Henritze, head of U.S. acquisitions for Blackstone Real Estate. “We look forward to growing our partnership with MGM Resorts and MGM Growth Properties, a best-in-class company.”
Along with the contemplated cash redemption of $1.4 billion of MGM’s operation partnership units as announced by MGM, James Stewart, CEO of MGP, said the company expects the transaction to be accretive and allow them to maintain pro rata net leverage of 5.6 times.
The MGM Grand and Mandalay Bay comprise 9,743 rooms, approximately three million square feet of meeting space and approximately 300,000 square feet of casino space across 226 acres on the Las Vegas Strip.
This transaction is expected to close in the first quarter of 2020, subject to certain customary closing conditions.