Blackstone doubled down on its bet on real estate in the US gambling capital on Tuesday, agreeing to partner with an affiliate of casino operator MGM Resorts to buy the flagship MGM Grand property on the Las Vegas Strip for $ 2.5bn.
The deal comes just months after the New York-based private equity and real estate group acquired MGM Resorts ’Bellagio Hotel and Casino for $ 4.25bn, in a bet on the economic future of gaming – and Las Vegas in particular.
“This transaction reflects our continuing strong conviction in Las Vegas,” said Jon Gray, president and chief operating officer of Blackstone.
Blackstone will become an ever larger landlord in Las Vegas once completing the transaction, which includes a joint venture with MGM Growth Properties, the real estate investment trust spun off from MGM in 2016. MGM Growth Properties will contribute the Mandalay Bay casino property to the joint venture as part of the deal, giving the new enterprise from Blackstone and MGM Growth Properties ownership of nearly 10,000 rooms in Las Vegas.
MGM Resorts will continue to operate the properties, which include about 3m sq ft of meeting space and approximately 300,000 sq ft of casino space across 226 acres of land.
MGM Growth Properties said it would own 50.1 per cent of the joint venture, with Blackstone’s Real Estate Income Trust controlling the remaining 49.9 per cent.
MGM Resorts has been under pressure from investors to sell its casino assets. When it agreed to sell the Bellagio Hotel to Blackstone in October, it also agreed to sell Circus Circus to Phil Ruffin, a business partner of US president Donald Trump. Combined with the previously announced transactions, MGM Resorts said it stood to net about $ 8.2bn from the sales of its casino assets.
MGM Resorts will pay an initial rent of $ 292m a year to the Blackstone-MGM Growth joint venture to operate the two properties in Las Vegas.
Shares in MGM Resorts fell 0.5 per cent in early trading on Tuesday to $ 33.21, while Blackstone and MGM Growth Properties stock both climbed less than 1 per cent.
“These announcements represent a key milestone in executing the company’s previously communicated asset-light strategy, one that enables a best-in-class balance sheet and strong free cash flow generation to provide MGM Resorts with meaningful strategic flexibility to create continued value for our shareholders , ”Said Jim Murren, chairman and chief executive of MGM Resorts.
The transactions comes less than a year after MGM agreed to pay $ 800m to survivors and the families of victims killed in a 2017 mass shooting in Las Vegas, the deadliest ever on American soil.