If it needs to raise cash, Blackstone Real Estate Income Trust (BREIT) could consider selling the property assets of Bellagio and/or Cosmopolitan on the Las Vegas Strip, according to a real estate research firm and asset manager.
In a new report on casino real estate investment trusts (REITs), Hoya Capital points out BREIT could consider asset sales to meet redemption requests and Strip properties could be atop the list of candidates. It did so last December when it sold its 49.9% interests in Mandalay Bay and MGM Grand to VICI Properties (NYSE: VICI) for $4.27 billion.
Seeking to raise capital to meet redemptions and keep the music playing, BREIT has quickly pivoted from buyer to seller – spawning its aforementioned deal with VICI at favorable terms for the Casino REIT — and we believe BREIT’s interest in the Cosmopolitan and the Bellagio are among the most likely assets that BREIT sells next,” noted Hoya Capital.
A report indicating Bellagio could be a BREIT divestment target surfaced earlier this month, but the real estate firm has not publicly commented on whether or not it’s mulling Las Vegas asset sales.
Bellagio, Cosmopolitan Could Fetch Big Prices
BREIT acquired the real estate of Bellagio in 2019 for $4.25 billion. Last year, a group comprised of the Cherng Family Trust, Stonepeak Partners, and BREIT paid $4 billion for Cosmopolitan’s property assets. Both casino-resorts are operated by MGM Resorts International (NYSE: MGM).
Hoya Capital pointed out that BREIT is unlikely to sell any of its holdings at a loss against the original purchase price, furthering the notion that Bellagio and Cosmopolitan are the REIT’s most likely properties to be sold if BREIT goes down that path.
Analysis conducted by Hoya indicates nine of BREIT’s 14 deals are “currently in the red based on public market comparable pricing.” In other words, BREIT’s pool of assets it can potentially sell at a profit is small.
BREIT owns other properties in Las Vegas, including residential and industrial real estate.
Potential Buyers for Bellagio, Cosmopolitan
Again, BREIT hasn’t said it’s looking to sell Bellagio or Cosmopolitan, but if it does, the potential pool of buyers, while enthusiastic, is likely to be small.
Of the two publicly traded gaming REITs, VICI Properties makes the most sense because it’s done business with BREIT and already counts MGM as one of its largest tenants. For its part, Gaming and Leisure Properties (NASDAQ: GLPI) previously mentioned a preference for regional casino real estate. Either REIT should be able to effectively access capital should it find compelling deals.
“Access to longer-term fixed-rate capital has proven to be a significant competitive advantage for public REITs and these casinos REITs’ impressive track record in capital deployment and shareholder-friendly governance justifies our willingness to ‘pay up’ at moderately elevated multiples,” concluded Hoya.
Caesars Palace owner VICI is already the largest landlord on the Strip, but the REIT signaled a willingness to expand its portfolio there, adding it’d like to add downtown Las Vegas and locals casinos to its roster.
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