Blackstone has agreed to sell its 49.9% stake in two Las Vegas hotels in a deal that values the properties at $5.5bn, according to people familiar with the matter, marking one of the largest US casino transactions this year.

The New York investment firm is selling its stake in the MGM Grand Las Vegas and the Mandalay Bay to Vici Properties, which owns the other 50.1% stake in the properties. Blackstone would receive $1.27bn in cash, and Vici would assume Blackstone’s share of some $3bn in debt, these people said.

The sale, which is expected to close early in the first quarter, would bring a profit of more than $700m for Blackstone in less than three years, including rent from the operator, according to the people familiar with the matter.

Blackstone has been reacting to the sharp increase in interest rates this year in part by exiting real estate investments that have fixed returns and focusing on those that have more growth potential.

MGM Resorts International ‘s rent is currently about $300m and increases about 2% annually, according to people familiar with the properties. Blackstone can use the proceeds from the sale to buy higher-returning assets, including rental apartments and industrial properties, the people said.

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Additionally, Blackstone can build up its cash position to cover a rise in redemptions by investors in Blackstone Real Estate Income Trust, its nontraded real estate investment trust, which is selling the stake in the two properties, the people said.

Blackstone purchased the properties in 2020 from MGM Resorts in a complicated transaction in which MGM Resorts continued to own the casino businesses, and a venture of Blackstone and MGM Growth Properties, a spinoff, acquired the underlying real estate. The Blackstone venture collected rent from MGM Resorts. MGM Growth Properties was subsequently acquired by Vici, a real estate investment trust.

Las Vegas is enjoying increased tourism and gambling. Hotel revenue in Las Vegas was up 51% in October compared with October 2019, according to the Las Vegas Convention and Visitors Authority.

Blackstone’s investments in Las Vegas have been a big money-maker for the firm. Earlier this year, Blackstone sold the Cosmopolitan casino and hotel on the Las Vegas Strip for $5.65bn. It was the firm’s most profitable sale of a single asset ever, according to a letter Blackstone sent to investors.

Blackstone has said it remains bullish on the city because of its high growth, low taxes and popularity as a leisure travel destination.

Write to Peter Grant at peter.grant@wsj.com

This article was published by The Wall Street Journal, a fellow Dow Jones Group title

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