Blackstone Sells a Chunk of Bellagio, Here’s the Skinny

The owner of Bellagio, Blackstone, sold 22% (21.9%, to be precise) of the Strip resort to Realty Income.

No, MGM Resorts doesn’t own Bellagio.

No, this sale won’t affect you or your next visit in any way.

No, this isn’t headline news, but it’s been a slow news month, so we’re forced to mainsplain this situation, despite the fact it’s boring AF.

MGM Resorts pays $245 million a year to Blackstone, so don’t complain about your rent.

While there are a couple of marginally interesting things about this transaction, it’s mostly moving numbers around on spreadsheets. Good times.

Blackstone Real Estate Income Trust is a REIT. We always thought REIT stands for “real estate investment trust,” but REIT works for “income” and “investment.”

Blackstone owns Bellagio, MGM Resorts is basically a tenant, paying rent to the “public non-listed REIT designed to provide individual investors with access to Blackstone’s leading institutional real estate investment platform.”

So, this fund is a “retail fund,” meaning any schmo can invest in it (in the parlance of the business, it’s for less sophisticated investors). Regular people invest in this fund because of its dividend payout.

When interest rates rise, as they have recently, investors can get the same rate of return from government securities (safer investments, akin to keeping your money under your mattress). As investors pull their funds, Blackstone has to sell assets to meet the redemptions.

In this case, Blackstone found a buyer with an interest in casino assets.

Late last year, Realty Income Corp. acquired Encore Boston Harbor in a sale-leaseback deal worth $1.7 billion. Wild, right? Wynn Resorts doesn’t even own its own resort in Boston Harbor, wherever that might be. We trust it’s somewhere near Boston. We went to public school.

Realty Income’s investment in Bellagio will cost $950 million.

Realty Income will pony up $300 million of common equity and another $650 million to buy a yield-bearing preferred equity interest in the joint venture. You will want to dive headlong down the “Rabbit Hole of Mind-Numbing Tedium” to learn more about common equity and preferred equity, naturally.

Realty Income paid more than Blackstone did for this sliver of Bellagio, so Blackstone gets to register a win for investors, and Realty Income gets more casino real estate in Las Vegas.

Essentially, MGM Resorts has two landlords now.

MGM Resorts doesn’t really own much in Las Vegas—it does hold a 5% stake in Bellagio, so it owns all the door handles, the piano at Petrossian lounge and three of the water jets in the fountains—and that’s intentional. They call it an “asset-light” strategy, which looks brilliant on paper, but when business flattens or decreases, the rent is still due and hoards of bankruptcy lawyers are likely to start snarling and salivating.

We apologize for this characterization of lawyers. Notice, we didn’t say “mischaracterization.”

The sale of the oddly-specific 22% of Bellagio means the resort is valued at $5.1 billion.

Blackstone acquired Bellagio for $4.25 billion.

Blackstone used to be a bigger player in Las Vegas, but Vici Properties (another REIT) is the real whale, or as we’ve described it, “the Strip’s landlord.”

Vici owns 43 casino resorts, including Caesars Palace, Park MGM, Excalibur, Luxor, New York-New York and Harrah’s Las Vegas.

The major casino operators are MGM Resorts and Caesars Entertainment, of course.

We hope this painfully granular overview of the sale of a stake in Bellagio has managed to give you all the useless information you can stomach for today.

What else do you have to do? Work? Please. Care for an elderly parent? Please!

Deals involving millions and billions of dollars is a reminder you are a commoner, and there’s nothing wrong with that, probably. Your desire to actually “own assets” is utterly quaint, by the way.

Despite your lowly status, Bellagio will still welcome you with open arms. Hit the fountains, of course, and the Conservatory & Botanical Gardens (still free) and all the other wonders of the MILF of the Las Vegas Strip! Our term, not Bellagio’s, sadly.