MGM Resorts International (NYSE: MGM) said it has agreed to form a joint venture with Blackstone Real Estate Income Trust (BREIT) that will acquire MGM’s Bellagio real estate assets. MGM will receive a 5% stake in the joint venture and cash of approximately $4.2 billion.
MGM Resorts is a tenant of MGM Growth Properties LLC (NYSE: MGP).
The joint venture will lease the Bellagio assets back to a subsidiary of MGM Resorts for an initial annual rent of $245 million.
“As big believers in MGM Resorts and Las Vegas, we are thrilled to partner with MGM to acquire the Bellagio on behalf of our BREIT investors. We look forward to a long and productive partnership with this world-class company,” said Jon Gray, Blackstone president and COO.
Jim Murren, chairman and CEO of MGM Resorts, said proceeds from the sale, together with proceeds from the pending sale of Circus Circus Las Vegas, will be used to build a fortress balance sheet and return capital to shareholders.
“These transactions enhance the company’s strategic and operational flexibility and reinforce its commitment to targeted new growth opportunities, including securing and investing in one of the integrated resort licenses in Japan and becoming an industry leader in sports betting in the U.S.,” Murren said.
The company noted that it is evolving its business model away from primarily a capital intensive, brick and mortar real estate business, toward a developer, manager, and operator of leading gaming, hospitality, and entertainment properties. The strategy is designed to accelerate top line growth and result in a “more financially robust, global enterprise that is best positioned to take advantage of future growth opportunities.”
The transaction is expected to close in the fourth quarter of 2019, subject to certain closing conditions.
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