The biggest property owner on the Las Vegas Strip is doubling down and taking full ownership of it MGM Grand Las Vegas and Mandalay Bay, worth $5.5 billion.
Vicky Properties, a real estate investment trust based in New York, has agreed to buy Blackstone’s 49.9% stake in two casino resorts in Las Vegas. VICI currently holds 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, Ed Pitoniak, CEO of VICI Properties, said that Blackstone approached him a few weeks ago, and the deal went through quickly.
“We were very excited about the opportunity. Obviously it simplifies our structure, but it also gives us total ownership of two of the most iconic properties on the Las Vegas strip, the MGM Grand and Mandalay Bay,” said Pitoniak.
Blackstone Real Estate Investment Trust, better known as Brett, said on Thursday it has decided to limit withdrawals in October that exceed their monthly limits. Blackstone shares fell nearly 10% on the news.
But what was a problem for Blackstone may be a good luck charm for Vici.
Truist analyst Barry Jonas wrote in a client note, “We like the deal because it simplifies VICI’s structure and highlights VICI’s many avenues for growth despite the company’s large base and rising interest rate environment.” “
Gaming REITs such as VICI own the buildings and land of the 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 at the southern 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 $1 billion in cash, and is projecting more than $3 billion in Blackstone debt through 2032 at a rate of 3.56%. Pitoniak called it a good deal at a time when VICI expected to pay 6%.
VICI’s CEO says he is bullish on the continued growth of Las Vegas, pointing to a packed convention and entertainment calendar next year, and eye-catching sporting events including F1 in November 2023.
Despite the sale, Blackstone COO Jay Gray said Las Vegas remains a high-trust market for Blackstone, which also owns the physical assets of the Cosmopolitan and Bellagio.
Many analysts and investors are also bullish on the growth opportunities in Las Vegas.
October is the 20th consecutive month of $1 billion or more in state gaming revenue, according to data released by Nevada Gaming Control Board.
Strip Casino is seeing a 20% increase in revenue during October, to $6.8 billion in gaming revenue from a year ago.
Las Vegas is also attracting visitors in record numbers. Harry Reid International sees over 5 million passengers for the first time In October.
“This is further proof that Las Vegas is one of the most sought-after destinations in the world,” said Rosemary Vasiliadis, Clark County’s director of aviation.
Hotel revenue in Las Vegas was up 51% in October compared to October 2019 before the pandemic. 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.