MGM Growth Properties LLC agreed to form a joint venture with Blackstone Real Estate Income Trust Inc. to acquire the real estate assets of the MGM Grand-Las Vegas and Mandalay Bay casinos in Las Vegas for $4.6 billion.
The joint venture, 50.1% of which will be owned by MGM Growth, will acquire the real estate assets of MGM Grand from MGM Resorts International in a transaction valued at approximately $2.5 billion, and the real estate assets of Mandalay Bay from MGM Growth.
MGM Resorts will receive net cash proceeds of approximately $2.4 billion from the deal and about $85 million in MGM Growth operating partnership units.
As part of the agreement, MGM Growth agreed to deliver cash for up to $1.4 billion of MGM Resorts' existing operating partnership units. The agreement provides MGM Resorts with an option to redeem units for up to 24 months after the closing of the deal.
The venture simultaneously signed a long-term triple net master lease for the assets with MGM Resorts, which will continue to manage and operate the assets and pay an initial annual rent of $292 million.
MGM Resorts expects to pay a substantial portion of proceeds from the deal, along with cash proceeds from the redemptions of the operating partnership units, to its shareholders through share repurchases and dividends.
In addition, Blackstone will purchase $150 million of class A shares of MGM Growth.
The two properties comprise 9,743 rooms, about 3 million square feet of meeting space and approximately 300,000 square feet of casino space on 226 acres on the Las Vegas Strip.
This deal is expected to close in the first quarter, subject to certain customary closing conditions.
Morgan Stanley & Co. LLC and Evercore were the financial advisers to MGM Growth, and Hogan Lovells US LLP was the legal counsel. Rockefeller Capital Management was the financial adviser to the conflicts committee of the board of MGM Growth, and Potter Anderson & Corroon LLP was the legal counsel.
Citigroup Global Markets Inc. was financial adviser to Blackstone, while Citigroup Global Markets, Barclays Capital Real Estate Inc., Deutsche Bank AG and Societe General acted as its financing advisers.
Simpson Thacher & Bartlett LLP was the legal counsel to Blackstone.
PJT Partners and J.P. Morgan are financial advisers to MGM Resorts and the real estate committee of the board of directors of MGM Resorts. Weil Gotshal & Manges LLP is MGM Resorts' legal counsel.