MGM Growth Properties LLC (MGP) and Blackstone Real Estate Income Trust, Inc. (BREIT) have entered into a definitive agreement to form a new joint venture to acquire the Las Vegas real estate assets of the MGM Grand and Mandalay Bay for $4.6 billion.
In addition, BREIT will purchase $150 million in MGP Class A shares. MGP will own 50.1% of the joint venture, and BREIT will own 49.9%.
At closing, MGM Resorts International (MGM Resorts) 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.
“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,” said James Stewart, CEO of MGP. “Along with the contemplated cash redemption of $1.4 billion of MGM’s operating partnership units as announced by MGM, we expect this transaction to be accretive to AFFO while allowing us to maintain pro rata net leverage of 5.6x.”
Jon Gray, Blackstone President & COO, said, “This transaction reflects our continuing strong conviction in Las Vegas. We are pleased to once again partner with MGM Resorts, a world-class operator, as well as MGM Growth Properties.”
Tyler Henritze, Head of U.S. Acquisitions for Blackstone Real Estate, said, “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. We look forward to growing our partnership with MGM Resorts and MGM Growth Properties, a best-in-class company.”
Together, 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. MGM Resorts’ initial annual rent will be $292 million. MGP currently owns the Mandalay Bay real estate, and MGM Resorts currently owns the MGM Grand real estate.
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MGP is a REIT focused on the acquisition, ownership and leasing of large-scale destination entertainment and leisure resorts. Blackstone Real Estate has a deep history and expertise in the Las Vegas real estate market across office, hospitality and residential asset classes, including BREIT’s recent acquisition of the Bellagio for $4.25 billion.
This transaction is expected to close in the first quarter of 2020, subject to certain customary closing conditions.
Morgan Stanley & Co. LLC and Evercore served as financial advisors to MGM Growth Properties, and Hogan Lovells US LLP served as legal counsel. Rockefeller Capital Management acted as financial advisor to the conflicts committee of the MGP Board of Directors, and Potter Anderson & Corroon LLP served as legal counsel. Citigroup Global Markets Inc. served as financial advisor to BREIT. Citigroup Global Markets Inc., Barclays Capital Real Estate Inc., Deutsche Bank AG, and Societe General served as BREIT’s financing advisors. Simpson Thacher & Bartlett LLP served as legal counsel to BREIT.