Blackstone sells Bellagio stake to Realty Income for $950 million
Blackstone (NYSE: BX) Blackstone Real Estate Income Trust (BREIT) will sell its Bellagio Las Vegas Strip property to Realty Income (NYSE: O) for approximately $950 million With a 21.9% stake, the landmark site is valued at $5.1 billion.
That’s well above the $4.25 billion BREIT paid for 95% of Bellagio properties in 2019. Friday’s announcement ends months of speculation regarding BREIT’s property plans. The real estate investment vehicle has experienced investor redemptions since last year, forcing it to liquidate some holdings. The departures sparked rumors that a deal with Bellagio could be in the works.
Upon completion of the transaction, "Realty Income will invest approximately $300 million of common stock in the joint venture to acquire a 21.9% indirect interest in the property, subject to certain adjustments, and BREIT will retain a 73.1% indirect interest." statement. "Realty Income will also invest $650 million to acquire a profitable senior interest in the joint venture."
The transaction is expected to close in the fourth quarter. Bellagio operator MGM Resorts International (NYSE: MGM ) will retain a 5% stake in the hotel.
Las Vegas Strip Good for Blackstone
The price Realty Income paid for its stake in the Bellagio property assets suggests the site is currently worth 20% more than what BREIT paid in 2019.
Add that to the list of Blackstone success stories on the Las Vegas Strip. In December, the private equity firm sold its 49.9% stake in Mandalay Bay and the MGM Grand to VICI Properties (NYSE: VICI) for $4.27 billion.
In September 2021, Blackstone announced the sale of Cosmopolitan for $5.65 billion, nearly tripling its investment in the Las Vegas Strip seven years after the acquisition. MGM paid $1.6 billion for the rights to operate the casino-hotel, while a consortium consisting of Cherng Family Trust, Stonepeak Partners and Blackstone Real Estate Income Trust (BREIT) paid about $4 billion for the real estate assets.
Cosmopolitan has previously been mentioned as a possible sale candidate for BREIT. Blackstone also owns the real estate assets of Aria and Vdara, which are also operated by MGM.
Another gaming deal for real estate income
When it comes to casino properties, VICI and Gaming and Leisure Properties (NASDAQ: GLPI ) are the major players among publicly traded real estate investment trusts (REITs). However, Bellagio isn’t Realty Income’s first foray into this space.
In February 2022, the REIT announced the acquisition of Wynn Resorts' (NASDAQ: WYNN ) Encore Boston Harbor property in a deal valued at $1.7 billion. The parties have a 30-year lease on the venue, with an option to extend for a further 30 years at the end of the original lease.
“The existing triple-net lease structure for Bellagio and MGM includes annual tiered rents of 2.0% for the next six years, with 2.0% for years 7 to 16 or the Consumer Price Index (CPI) (maximum 3.0%) and the higher of 2.0% or CPI (up to 4.0%) in 17 to 26 years," the statement said. “Realty Income’s common equity interest will be subordinated to the company’s $650 million preferred equity interest.”
The venue has $3 billion in real estate debt.
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Source: www.casino.org
