MGM Growth Properties and Blackstone Real Estate Income Trust entered into a definitive agreement to form a joint venture to acquire the MGM Grand and Mandalay Bay in Las Vegas for $4.6 billion. MGP will own 50.1 percent of the JV and BREIT 49.9 percent. BREIT, which is externally managed by a subsidiary of The Blackstone Group, also will purchase $150 million in MGP Class A shares.
MGP currently owns the Mandalay Bay real estate and MGM Resorts International owns the MGM Grand real estate. Together, the two Las Vegas properties comprise 9,743 guestrooms, approximately 3 million square feet of meeting space and approximately 300,000 square feet of casino space across 226 acres on the Las Vegas Strip.
At closing, MGM Resorts International 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 JV owning the properties and receiving rent payments. MGP expects the transaction to close in the first quarter of 2020, subject to certain customary closing conditions.
“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,” James Stewart, CEO of MGP, said in a statement. “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 [adjusted funds from operations] while allowing us to maintain pro rata net leverage of 5.6 times.”
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“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,” Jon Gray, Blackstone president/COO, said in a statement.
The news comes about three months after MGM Resorts revealed plans for a separate JV with BREIT. Closed in November, that JV bought the Bellagio for $4.25 billion in a sale-leaseback transaction. The JV is split 95-5 between BREIT and MGM Resorts.
“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,” Tyler Henritze, head of U.S. acquisitions for Blackstone Real Estate, said in a statement. “We look forward to growing our partnership with MGM Resorts and MGM Growth Properties, a best-in-class company.”