Blackstone Sells the Yield, Keeps the Crown in Las Vegas
Blackstone is selling an $800 million perpetual preferred equity stake in CityCenter, Las Vegas, to Realty Income, while retaining full control of common equity. This deal aligns with Blackstone's strategy in Las Vegas, following previous investments in Bellagio and Cosmopolitan. Realty Income aims for high returns, enhancing its hospitality asset portfolio. The transaction, closing December 9, allows Realty Income a first offer right on Blackstone's common equity stake, maintaining Blackstone's strategic control.
Blackstone's latest Las Vegas deal lands with the same energy as an investor roadshow that suddenly shifts the narrative. The firm is bringing in Realty Income for an $800 million perpetual preferred equity investment in CityCenter, a move that lets Blackstone cash in on years of hospitality conviction while keeping full command of the common equity. The stake ties Realty Income to marquee assets like the Aria Resort & Casino and the Vdara Hotel & Spa, both operated by MGM Resorts International. And it fits a broader pattern: Blackstone has been a heavyweight in the Las Vegas market, following earlier bets on the Bellagio and the Cosmopolitan and a $3.89 billion acquisition of Aria and Vdara's real estate in 2021.
For Realty Income, this could be a carefully calibrated push deeper into high-traffic experiential real estate. CEO Sumit Roy's team is set to receive initial annual returns of 7.4%, stepping higher after five years, with an unlevered rate of return of at least 8.3% when the shares are redeemed. That return profile may appeal to income-driven investors, especially when backed by a complex with roughly 5,500 hotel rooms, 500,000 square feet of convention space, and luxury retail. The investment also follows Realty Income's $950 million Bellagio deal in 2023, suggesting the firm is building a portfolio around iconic hospitality assets that could offer long-duration cash flow.
The agreement, expected to close on December 9, gives Realty Income a right of first offer should Blackstone ever decide to sell its common equity stake. But the center of gravity stays with Blackstone, which retains 100% ownership of the common equity and the strategic latitude that comes with it. After years of leaning into Las Vegas, this structure possibly allows Blackstone to recycle capital without loosening its grip on one of the Strip's most influential properties. For investors watching the firm's cadence, the CityCenter transaction could be another signal that Blackstone is positioning itself for future growth while extracting value from assets it knows exceptionally well.
