New York & San Diego, California – Realty Income Corporation (Realty Income, NYSE: O), The Monthly Dividend Company®, and Blackstone Real Estate Income Trust, Inc. (“BREIT”) jointly announced today that Realty Income has signed a definitive agreement to invest approximately $950 million to acquire common and preferred equity interests from BREIT in a new joint venture that owns a 95% interest in the real estate assets of The Bellagio Las Vegas. Upon closing, Realty Income will invest approximately $300 million of common equity in the joint venture, subject to certain adjustments, to acquire a 21.9% indirect interest in the property, BREIT will retain a 73.1% indirect interest, and MGM Resorts International (“MGM”) will retain a 5.0% interest in the property. Realty Income will also invest $650 million to acquire a yield-bearing preferred equity interest in the joint venture.
The Bellagio, situated at the center 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 also includes the iconic Fountains of Bellagio and multiple Michelin Star restaurants.
“Realty Income seeks to invest in high-quality real estate at scale in partnership with operators who are leaders in their respective industries. This transaction to acquire an interest in the Bellagio, an iconic property, represents our second investment in the gaming industry and exemplifies the advantages of our size, scale and access to capital,” said Sumit Roy, Realty Income’s President and Chief Executive Officer. “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.”
Nadeem Meghji, Head of Blackstone Real Estate Americas said, “Where you invest matters and this transaction demonstrates the strong investor demand for the high-quality assets we have assembled within BREIT. 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.”
The existing Bellagio triple net lease structure with MGM includes 2.0% annual rent escalators for the next six years, the greater of 2.0% or CPI (capped at 3.0%) in the years 7-16, and the greater of 2.0% or CPI (capped at 4.0%) in years 17-26. Realty Income’s common equity ownership interest will be subordinate to its $650 million preferred equity investment in the venture. Additionally, the Bellagio has property-level debt with an outstanding principal balance of approximately $3.0 billion, a remaining tenor of approximately 6.2 years and a 3.67% (fixed) all-in interest rate.
The transaction is expected to close in the fourth quarter of 2023 and is subject to customary closing conditions.
PJT Partners served as lead financial advisor to BREIT, and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, SG Americas Securities, LLC, Desjardins Capital Markets, and Mizuho Securities USA LLC also served as financial advisors. Simpson Thacher & Bartlett LLP is acting as BREIT’s legal counsel.
Realty Income Investor Presentation
An investor presentation regarding the transaction will be available in the investors section of Realty Income’s corporate website.