The largest property owner on the Las Vegas Strip is doubling down and taking full ownership of the MGM Grand Las Vegas and Mandalay Bay, which the deal values at $5.5 billion.
JOKE Properties, a real estate investment trust based in New York, has agreed to buy Blackstone’s 49.9% stake in the two Las Vegas casino resorts. VICI currently owns a 50.1% stake in the property, which it acquired when it bought MGM Growth properties 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 just a couple of weeks ago, and that the deal came together quickly.
“We were very excited about the opportunity. Obviously it simplifies our structure, but it gives us total ownership of two of the most iconic assets on the Las Vegas strip the MGM Grand and Mandalay Bay,” Pitoniak said.
Blackstone Real Estate Investment Trust, known as BREIT, said Thursday that it decided to limit withdrawals after it saw redemptions in October that exceeded their monthly limits. Blackstone shares dropped almost 10% on the news.
But what was a problem for Blackstone may be a piece of good luck for VICI.
“We like the deal as it simplifies VICI’s structure and highlights VICI’s multiple paths for growth despite the company’s larger base and a rising interest rate environment,” Truist analyst Barry Jonas wrote in a client note.
Gaming REITS such as VICI own the buildings and the land of casinos and resorts. Gambling companies, such as Caesars and MGM Resorts − both tenants of VICI − own the operations.
MGM Grand Las Vegas and Mandalay Bay, located on the south end of the Strip, include more than 11,000 hotel rooms, 321,000 square feet of gaming floor, and 3 million square feet of meeting facilities.
VICI is putting in more than a $1 billion in cash, and assuming more than $3 billion of Blackstone debt at a 3.56% rate through 2032. Pitoniak called that a good deal at a time when VICI might have expected to pay 6%.
VICI’s CEO says he’s bullish on Las Vegas’s continued growth, pointing to a packed convention and entertainment calendar next year, and attention-getting sports events including F1 in November 2023.
Despite the sale, Blackstone COO Jay Gray said Las Vegas continues to be a high conviction market for Blackstone, which also owns the physical property of the Cosmopolitan and Bellagio.
Many analysts and investors are also bullish on the opportunities for growth in Las Vegas.
October marked the 20th straight month of $1 billion or more in state gaming revenue, according to figures released by the Nevada Gaming Control Board.
Strip casinos are seeing a 20% surge 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 saw more than 5 million passengers for the first time ever in October.
“It’s further evidence that Las Vegas remains among the most in-demand destinations in the world,” said Rosemary Vassiliadis, Clark County’s director of aviation.
And hotel revenue in Las Vegas was up 51% in October compared with October 2019, before the pandemic, according to the Las Vegas Convention and Visitors Authority.
Deutsche Bank, which has a “buy” rating on the stock, raised its price target to $38 following news of the transaction.