If necessary, Blackstone Real Estate Income Trust (BREIT) may look at offloading the property assets of Bellagio and/or Cosmopolitan on the Las Vegas Strip to raise funds, according to a real estate research agency and asset manager.
Hoya Capital has mentioned that BREIT could consider selling assets to meet redemptions and Strip properties may be at the top of the list. This follows their sale of their 49.9% interests in Mandalay Bay and MGM Grand to VICI Properties (NYSE: VICI) for $4.27 billion last December.
To satisfy demands for redemptions and continue operations, BREIT has transformed from a buyer to a seller – resulting in the aforementioned arrangement with VICI on favorable terms for the Casino REIT – and it is believed BREIT’s interests in Cosmopolitan and Bellagio are amongst the most likely assets that BREIT will sell next.
Bellagio was acquired by BREIT in 2019 for $4.25 billion and last year, a group consisting of the Cherng Family Trust, Stonepeak Partners, and BREIT paid $4 billion for Cosmopolitan’s property assets. Both casinos are operated by MGM Resorts International (NYSE: MGM).
Hoya Capital has pointed out that BREIT is not likely to sell any of its holdings at a loss compared to the original purchase price, which furthers the assumption that Bellagio and Cosmopolitan are the REIT’s most likely properties to be sold if BREIT goes ahead with this.
Analysis conducted by Hoya reveals that nine of BREIT’s 14 deals are “currently in the red based on public market comparable pricing”. This means that BREIT’s pool of assets it can potentially sell at a profit is limited. BREIT owns other properties in Las Vegas, including residential and industrial real estate.
Should BREIT decide to sell Bellagio or Cosmopolitan, the prospective pool of buyers, while enthusiastic, is likely to be small. Of the two publicly traded gaming REITs, VICI Properties makes the most sense due to their previous dealings with BREIT and MGM being one of their largest tenants. Gaming and Leisure Properties (NASDAQ: GLPI) has stated they would rather invest in regional casino real estate. Both REITs have the ability to access capital should they find compelling deals.
Hoya Capital added that the public REITs have an advantage when it comes to accessing long-term fixed-rate capital and the casinos REITs’ positive record in capital deployment and shareholder-friendly governance has earned them the right to pay moderately high multiples.
Caesars Palace owner VICI has already established itself as the largest landlord on the Strip, and they have expressed a desire to add downtown Las Vegas and locals casinos to their portfolio.