Realty Income Corporation and Blackstone Real Estate Income Trust, Inc. (BREIT) have jointly announced that Realty Income has signed a definitive agreement to invest approximately US$950 million to acquire common and preferred equity interests from BREIT, in a new joint venture that owns a 95 percent interest in the real estate assets of The Bellagio Las Vegas.
Upon closing, Realty Income announced it would invest approximately US$300 million of common equity in the joint venture, subject to certain adjustments, to acquire a 21.9 percent indirect interest in the property, BREIT will retain a 73.1 percent indirect interest, and MGM Resorts International will retain a 5.0 percent interest in the property. Realty Income will also invest US$650 million to acquire a yield-bearing preferred equity interest in the joint venture.
The Bellagio, situated at the centre of the Las Vegas Strip in Las Vegas, Nevada, is subject to an existing triple net lease with approximately 26 years of remaining term and is operated and maintained by MGM. The AAA Five Diamond Resort features approximately 4,000 guestrooms and suites across two towers, 157,000 square feet of gaming space and 200,000 gross square feet of state-of-the-art meeting and event facilities. Located on a 77-acre campus, the resort is also known for the iconic Fountains of Bellagio and multiple Michelin Star restaurants.
Realty Income's President and Chief Executive Officer, Sumit Roy, said this transaction to acquire an interest in the Bellagio is represented by the company’s second investment in the gaming industry and exemplifies the advantages of its size, scale and access to capital.
“We are pleased to initiate our Credit Investment platform through a preferred equity investment in the Bellagio joint venture. Credit Investments are a natural adjacency to our traditional business, allowing us to provide additional value to our clients while leveraging our core competencies in transaction sourcing and structuring, and real estate and credit underwriting and monitoring," said Roy.
Head of Blackstone Real Estate Americas, Nadeem Meghji, said this transaction has demonstrated the strong investor demand for the high-quality assets assembled within the company.
“The Bellagio is an iconic property in the heart of the Las Vegas Strip, and we look forward to our continued ownership of this asset, now in partnership with Realty Income. This partial sale represents another terrific outcome for BREIT shareholders," said Meghji.
Realty Income's common equity ownership interest will be subordinate to its US$650 million preferred equity investment in the venture. Additionally, the Bellagio has a property-level debt with an outstanding principal balance of approximately $3.0 billion, a remaining tenor of approximately six years and a 3.67 percent (fixed) all-in interest rate.
The transaction is expected to close in the fourth quarter of 2023 and is subject to customary closing conditions.
