Blackstone Secures $800M Investment From Realty Income Corp. Into Las Vegas Portfolio

Blackstone Real Estate just scored a major equity investment into one of its prime assets in Las Vegas, according to law firm Simpson Thacher, which represented Blackstone in the deal.  

The private equity giant announced Monday that it secured an $800 million preferred equity investment from Realty Income Corporation, a publicly traded real estate investment trust (REIT) that specializes in single-tenant commercial properties like Walgreens, 7Eleven and Dollar Tree, into its ownership portion of CityCenter, the 18-million-square-foot mixed-use urban campus on the Las Vegas Strip.

Blackstone owns Aria Resort & Casino and Vdara Hotel & Spa, two hospitality, retail and entertainment complexes managed by MGM Resorts International that feature a total of 5,500 rooms and 500,000 square feet of convention space in the greater CityCenter development, which spans 67 acres and includes six buildings. 

The deal allows Blackstone to retain 100 percent common equity ownership of the properties, but carries with it the stipulation that Realty Income Corporation expects to receive an annual unlevered rate of return of 7.4 percent on the two assets that hold a 26-year triple-net lease (with MGM covering operational costs). The lease comes with annual rent escalators (capped for Realty Income after five years), and carries three 10-year extension options. 

The deal also includes the carve-out that once Realty Income has redeemed the $800 million common equity investment, if it has not received an 8.32 percent unlevered return on that same amount, it will receive a make-whole payment from Blackstone for the total owed. 

Sumit Roy, Realty Income’s president and CEO, in a statement called the deal an “immediately accretive investment … with a favorable initial yield and IRR profile,” and added that it reflects his firm’s size, scope and diversified portfolio.

“We are pleased to build on our strategic relationship with Blackstone Real Estate to invest in one of the Las Vegas Strip’s iconic properties,” he added. 

Jacob Werner, co-head of Americas acquisitions for Blackstone Real Estate, noted that his firm had previously secured a preferred equity investment from Realty Income on a joint venture to acquire the Bellagio Las Vegas in 2023

“This preferred equity investment is a terrific outcome for our investors as it returns significant capital while preserving our ownership in a world-class resort at the heart of the Las Vegas Strip,” said Werner. 

The deal is expected to close Dec. 9. 

Brian Pascus can be reached at bpascus@commercialobserver.com.