MGM Resorts Sells Bellagio to Blackstone Group

MGM Resorts has sold the iconic Bellagio resort in Las Vegas to Blackstone Group (technically, Blackstone Real Estate Income Trust) for $4.2 billion.

The Bellagio sale is what’s called a “lease-back” deal.

While Blackstone owns Bellagio, MGM Resorts will continue to manage it and will pay Blackstone $245 million a year in what amounts to “rent.” MGM Resorts will get a 5% ownership stake in Bellagio as well.

Bellagio art

For $4.2 billion, you also get some sweet artwork.

The sale of Bellagio is believed to be the biggest sale in Las Vegas history.

There are a couple of questions most people seem to ask about the sale of Bellagio.

First question, why did MGM Resorts sell Bellagio?

Answer: It’s a lot of money. The sale will allow MGM Resorts to pay down some of its massive debt.

Second question, how will the sale affect the typical guest?

Answer: Not at all, really.

MGM Resorts announced the sale of Bellagio at around the same time it announced the sale of Circus Circus for $825 million to TI owner Phil Ruffin.

Circus Circus Lucky clown

MGM Resorts has sold off its pride and joy as well as its red-headed stepchild.

The sales of Bellagio and Circus Circus are expected to close by the end of 2019.

That’s a lot of change in Las Vegas casinoland in a relatively short period of time, but even more Las Vegas resorts are expected to change hands in the near future.

It’s been reported MGM Grand is also likely to sell (another leaseback), and MGM Resorts has also said it’s considering selling Aria and Vdara.

Strap in, there’s more to come.

9 thoughts on “MGM Resorts Sells Bellagio to Blackstone Group

  1. Andrew

    Third question : why did MGM Resorts sell Bellagio take two ?

    MGM is venturing in Japan and they will need a shitload of money even to build the smallest hen house there.

    What it’s not entirely clear to me it’s retaining that 5% ownership. I mean..what gives ?

    Reply
  2. JeffinOKC

    I think most American businesses don’t own their property. It takes up a lot of money that could be used in areas with a higher return. The recent laws creating the REIT property ownership structure have it even more attractive to sell of real estate, IMO.

    I wonder if the Mob origins of the casino business have made it slower to embrace the REIT model? That reputation have kept casinos from being an attractive investment for so many “clean” funds (something like public employee pension funds, etc.) even to this day.

    I’m guessing the 5% ownership retention is a type of link to MGM having a first right of refusal if the property were to be sold, and provides the appearance for investors that MGM still has “skin in the game” as it relates to owning and maintaining real estate.

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  3. Dave

    The big question is the arrangement for upkeep of the building. Our office building was purchased and added to a REIT. Now decisions on fixes and upgrades go through a process for improvement and maintenance has fallen off. Vegas hotels aren’t cheap to maintain and refresh. We will see.

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    1. alex

      From the press release:

      “MGM Resorts will sign a long-term lease and continue to be responsible for all operations and capital expenditures of the Bellagio, with the joint venture owning the property and receiving rent payments.”
      https://www.businesswire.com/news/home/20191015006088/en/Blackstone-Real-Estate-Income-Trust-Acquire-Bellagio

      I’m pretty sure improvement and maintenance fall under capital expenditures.

      From the outside, it does seem like an odd set-up. But, it’s not without precedent. I currently rent a condo. My lease says I’m responsible for everything: appliances, HVAC system, plumbing, painting, etc. That’s not something you’d see in “normal” apartment leases. But as long as all parties thoroughly understand the contract, it’s not inherently bad or wrong.

      Reply
  4. JeffinOKC

    I am not a commercial real estate expert, but I do know there is a type lease called “triple net”, and the landlord pays nothing. The tenant pays all taxes, insurance, upkeep and any improvements. I’m guessing that is the case in this Bellagio lease.

    Reply
  5. Ike Angon

    A pre-renovation Tropicana room was my first.
    A swanky fountain-view Bellagio suite was my best.
    They say: You never forget your first. Will we, one day, forget the best?

    Reply

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