Last year, a San Diego-based investment firm bought the land Encore Boston Harbor sits on. Now, they are adding a small ownership stake in a Las Vegas Strip casino to its portfolio.
Realty Income Corp. purchased 21.9% of Bellagio’s real estate from Blackstone Real Estate Income Trust for $950 million. The deal will close in the fourth quarter of 2023, subject to customary closing conditions.
However, MGM Resorts International still owns and operates Bellagio’s casino business.
In other words, Realty Income became Bellagio’s second landlord. Previously, MGM was paying monthly rent to Blackstone after they sold the underlying real estate in October 2019.
“Realty Income seeks to invest in high-quality real estate at scale in partnership with operators who are leaders in their respective industries,” said Realty Income CEO and President Sumit Roy. “This transaction to acquire an interest in the Bellagio, an iconic property, represents our second investment in the gaming industry and exemplifies the advantages of our size, scale and access to capital.”
The move comes just nine months after Realty Income Corp. purchased the land of the most popular Massachusetts casino. Last December, they bought Encore Boston Harbor’s real estate for $1.7 billion.
Leaseback agreements becoming increasingly common for casinos
The 10-figure sale of Encore Boston Harbor’s land was a leaseback deal made by Wynn Resorts.
Wynn received nearly $2 billion for the real estate. But they retained ownership over the business and became tenants to Realty Income Corp.
The deal was the first time Realty Income Corp. purchased anything in the gaming industry. But they were following Blackstone’s lead.
In 2019, MGM began shopping its Las Vegas Strip casinos. Then-CEO Jim Murren was moving the company towards an “asset-light” strategy. The idea was to sell underlying real estate and rent the land the properties sit on to raise more cash on hand.
In October, it sold Bellagio to Blackstone for $4.25 billion. The deal was the blueprint for the leaseback agreement between Wynn and Realty Income Corp.
MGM went on to sell Mandalay Bay, MGM Grand, Aria, and Vdara by the end of 2021. Blackstone was involved in most of the deals.
Now, Realty Income Corp. is following Blackstone’s lead. The Encore Boston Harbor purchase was one of the first leaseback deals in a non-Las Vegas market. But the firm is starting to make these buys more common after inking the Bellagio deal.
MGM still owns its Springfield casino… kind of
MGM took its “asset light” strategy to Massachusetts in 2021 when it sold MGM Springfield’s real estate. But MGM sold the land to its real estate investment trust.
MGM Growth Properties bought the land for $400 million. MGM Resorts agreed to lease the property and continue to operate the casino business for a rent of $30 million per year.
Of the three Massachusetts casinos, MGM Springfield is the second-highest-grossing casino in the Bay State. It’s behind Encore Boston Harbor but ahead of Plainride Park.
In 2022, MGM Springfield recorded gross gaming revenue worth $259.1 million. Encore Boston Harbor nearly tripled that figure with 2022 revenue of $729.7 million.