VICI analysts say Bellagio stock sale could be a good sign for Caesars
Blackstone's Blackstone Real Estate Income Trust (BREIT) recently announced the sale of a 21.9% stake in the Bellagio Las Vegas Strip real estate assets to Realty Income (NYSE: O) for a known consideration of approximately $950 million.
The price puts the casino resort at $5.1 billion, about 20% more than the $4.25 billion BREIT paid in 2019 for 95% of Bellagio properties. Jefferies analyst David Katz said the rapid growth in value has had a positive impact on other companies on the Strip, including Caesars Entertainment (NASDAQ: CZR ), Bellagio operator MGM Resorts International (NYSE: MGM) and VICI Properties.
The property’s valuation resets to $5.1 billion from $4.25 billion when it was originally sold to Blackstone in November 2019, supporting Caesars, MGM and VICI," the analyst said in a new note to clients the report reads.
The Bellagio Equity Purchase marks Realty Income’s second foray into gaming real estate. In February 2022, the REIT announced the purchase of the Encore Boston Harbor property from Wynn Resorts (NASDAQ: WYNN ) in a deal valued at $1.7 billion.
How the sale of Bellagio could benefit Caesars and VICI
A 20% increase in Bellagio's value over about four years could benefit Caesars and VICI, the largest gaming real estate investment trust (REIT).
VICI is the largest owner of gaming properties on the Las Vegas Strip. The real estate investment trust owns most of the venues MGM operates in Sin City, Caesars Palace and the Venetian. The Bellagio deal could mean VICI Las Vegas Real Estate is worth more today than it was when the company was acquired. Katz also sees the Bellagio deal as having a positive impact on the alternative capital structure used by VICI.
The analyst added: "Validation of alternative financing structures for REITs in the gaming sector supports VICI and its development loans in the experiential leisure sector."
As for Caesars, the Bellagio's rising property values could be a sign that if Caesars decides to sell a venue on the Strip (a long-standing rumor), its price could Higher than previously expected. Additionally, Realty Income's involvement in the Bellagio deal could indicate that sellers of casino properties have access to a wider pool of potential buyers than they have in years past.
MGM also has benefits
The upside to MGM's sale of Bellagio stock is clear: The operator retains a 5% stake in the venue's real estate assets and could potentially fetch an attractive price if it decides to monetize those shares.
The deal also confirms strong demand for properties associated with MGM-operated integrated resorts in Las Vegas.
This is relevant as there has also been speculation that BREIT may seek to monetize its stake in Cosmopolitan, and Blackstone owns the MGM-operated Aria and Vdara.
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Source: www.casino.org
