Blackstone May Sell Its Las Vegas Casinos, Say Analysts

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Blackstone, one of the world’s largest investment firms, may soon look to sell off its investments in Las Vegas casinos, claims a new report from real estate investment analysts Hoya Capital.

The report points out worrying figures for Blackstone Real Estate Investment Trust, or BREIT. Analysts suggest it is in some difficulties with its portfolio.

Its two Las Vegas casino properties, the Bellagio and The Cosmopolitan, may be its more attractive properties. The news follows a leaked note that emerged earlier this year from Deutsche Bank analyst Carlo Santarelli. It suggested an unnamed major casino property in Las Vegas could be up for sale this year.

In The Red

Hoya Capital’s projections for an imminent sale were based on the current state of BREIT’s investments. Analysts determined that “9 of the 14 deals are currently ‘in the red’ based on public market comparable pricing.”

The company also sold off its 49.9% shares in Mandalay Bay and MGM Grand last year. VICI Properties was the winning bidder on that deal at $4.27 billion.

As part of the deal, VICI assumed a share of Blackstone’s $3 billion debts on the properties. Hoya analysts said that “underscores the large debt load of BREIT.”

BREIT’s woes could see VICI interested in any favorable deal for the Bellagio and the Cosmopolitan. MGM currently operates both of VICI’s properties and BREIT’s – so any deal would have less administration involved for all parties.

“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,” Hoya analysts wrote.

REITs Here to Stay

Despite the pessimistic outlook on Blackstone, the Hoya report was bullish about VICI Properties and its Las Vegas investments. They also looked at the Casino REIT sector in general, claiming it was the best performing property sector of 2022.

Casino REITs are investment firms that buy up the land underneath casino properties, and then leases them back to operators. They have been “delivering steady and consistent outperformance and high-single-digit FFO growth” for the past several years, the report says.

They pointed out VICI’s 5x market capitalization since its initial public offering in 2018 as one major success story.

Analysts also had a positive view of casino owner Penn Entertainment’s spin-off REIT, Gaming and Leisure Properties, Inc., or GLPI.

They said that GLPI has been an “active and successful consolidator of regional casino assets” since it was formed in 2016. It now owns 57 casino properties across the US, including the land under the Tropicana in Las Vegas.

The Right Properties

Meanwhile, VICI has also confirmed earlier this month that it wouldn’t turn down more investments in Las Vegas. It currently owns 10 casino properties, operated by various tenants, including Caesars and MGM.

That’s 47% of its portfolio, with 50 other casinos across the US and Canada.

“If the right properties came available with the right operators, at the right prices, we’d of course be interested,” VICI CEO Ed Pitoniak told The Las Vegas Review Journal.

This all seems to be adding up in terms of the potential for Blackstone to sell the Bellagio and the Cosmopolitan properties. However, for the moment, any deal remains just a prediction, even if the analysts’ case looks compelling.

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