[BBMW]

MGM just redid all the rooms in the Bellagio.

Originally Posted by demoknite

I think a lot of the mega resorts built in the late 90s or so are starting to show their age, at least in the hotel part. Stayed at the venetian with the couches that were missing buttons and with sex stains. Also finding a stray hair in the bathroom. Not a huge deal all things considered, but the lack of attention to detail is very appearant.
Stayed at the Bellagio, and while the room was very clean and nice, the TV system didnt work and I had egineers coming in and out of my room all afternoon.
So I would assume they are robbing Peter to pay Paul when it comes to paying for very nice restaurants and clubs but are slacking on the hotel hospitality portion.

[Mike from back east]

The hotel is partly for sale, again. Bloomberg is reporting Blackstone is weighing offers for half of its stake in the hotel.

Excerpts:

"Blackstone Inc. is fielding offers for half of its interest in the real estate of the Bellagio hotel in Las Vegas, a property purchased almost four years ago for $4.25 billion."

"The New York-based investment firm is considering its options and hasn’t committed to a sale, according to people with knowledge of the matter who asked not to be identified because the deliberations are private."

"Blackstone has been looking to cash out on some of its real estate positions. On Monday, the company announced plans to sell warehouses and industrial properties to Prologis Inc. for $3.1 billion."


I wonder what's pushing Blackstone to sell what seem to be valid, going businesses, i.e., it's the office building market where the concerns are given that office occupancy rates are way down and there's mounting distress that holders of such mortgages may default. Perhaps Blackstone wants a pot of money to buy up prime office towers when they go bust, just as big firms bought up millions of SFHs at greatly reduced prices in the aftermath of the Great Recession. Any guesses?

[moguldreamer]

Originally Posted by Mike from back east

I wonder what's pushing Blackstone to sell what seem to be valid, going businesses, i.e., it's the office building market where the concerns are given that office occupancy rates are way down and there's mounting distress that holders of such mortgages may default. Perhaps Blackstone wants a pot of money to buy up prime office towers when they go bust, just as big firms bought up millions of SFHs at greatly reduced prices in the aftermath of the Great Recession. Any guesses?

BREIT is the Blackstone Real Estate Investment Trust, and it owns a tremendous amount of real estate. Since about November 2022, it has been hit with redemption requests. This is not a publicly traded REIT, so investors each month basically ask to be cashed out - at first, Chinese investors, and then a broader redemption request. Asking for your money back puts you in the queue for that month, but does not guarantee you'll get any money back. Investors typically get just a small fraction of their request honored that month. The real estate held inside the trust is not liquid.

My guess is the redemption requests have warranted trying to generate some liquidity within the trust to pay out some $$ to investors.

[Svoboda]

Originally Posted by Mike from back east

I wonder what's pushing Blackstone to sell what seem to be valid, going businesses, i.e., it's the office building market where the concerns are given that office occupancy rates are way down and there's mounting distress that holders of such mortgages may default. Perhaps Blackstone wants a pot of money to buy up prime office towers when they go bust, just as big firms bought up millions of SFHs at greatly reduced prices in the aftermath of the Great Recession. Any guesses?

CRE is in really bad shape. So maybe both provided their books are in order and they aren't holding onto a lot of bad RE themselves.

Was listening to a podcast on this recently and one of the speakers said that there are expectations that up to 40% of the commercial mortgage-backed securities loans will be going into default next year and that is already on top of the securities themselves holding property that is in default because of bad occupancy rates. They also said that a big chunk of the actual debtors have just given up and handed the properties back over to the banks.

So if you have defaulted properties turned back over to the bank that are sitting in these security products owned by these REITs and investment firms. Sounds like a recipe for ruin. Only way I see this being avoided is if the G turns back on the money printer and lowers rates so a lot of these folks can refinance their loans and kick the can down the road.

[longviewJoe]

Originally Posted by Svoboda

CRE is in really bad shape. So maybe both provided their books are in order and they aren't holding onto a lot of bad RE themselves.

Was listening to a podcast on this recently and one of the speakers said that there are expectations that up to 40% of the commercial mortgage-backed securities loans will be going into default next year and that is already on top of the securities themselves holding property that is in default because of bad occupancy rates. They also said that a big chunk of the actual debtors have just given up and handed the properties back over to the banks.

So if you have defaulted properties turned back over to the bank that are sitting in these security products owned by these REITs and investment firms. Sounds like a recipe for ruin. Only way I see this being avoided is if the G turns back on the money printer and lowers rates so a lot of these folks can refinance their loans and kick the can down the road.

That sounds like office space more than hotels.

[Svoboda]

Originally Posted by longviewJoe

That sounds like office space more than hotels.

Most of these REITs are diversified into every commercial type of property including hotels, retail, office, data centers, etc. At least the good ones are.

[Mike from back east]

People are traveling like gangbusters, thus I assume hotel REITs are fairly safe, so maybe the Bellagio property will bring a solid price, maybe a premium, but almost certainly no loss.

Meanwhile, some large office-focused REITs are down double digits this year. Some are selling properties, probably to generate cash to prevent default on other properties. Have to guess, they won't come right out and say it. REITs are quivering with fear over occupancy rates in major cities which, on average, are 37% below pre-pandemic levels for coastal cities and 14% lower for Sunbelt and secondary office markets. That's an average. NYC has about a 50% office occupancy rate which is a rebound from even worse numbers. The office market has a way to go and until then those firms owning office buildings will live lives of quiet desperation.

My supposition was that Blackstone is selling part of a premier hotel property at a high point to generate cash to have in-hand should some prime office buildings go on the block at fire-sale prices. A Japanese firm, Mori Trust, just paid $2B to SL Green for a 49.9% interest in 245 Park Avenue at a gross asset valuation of $2.0 billion - nearly double the valuation implied by public market pricing of office REITs. Perhaps the Japanese didn't learn their lesson about overpaying as they did in the 1980s when they bought the Pebble Beach golf property at a high price and then sold it years laters for half that.

Blackstone seems to be playing the usual stock market game of buy low, sell high and are building up a cash stash to have in the bank when great deals occur in any potential CRE debacle.

[Svoboda]

Just looked up Blackstone's REIT:

- 56% Rental Housing
- 23% Industrial
- 6% Net Lease
- 4% Data Centers
- 3% Hospitality
- 3% Self Storage
- 3% Retail
- 2% Office

https://www.breit.com/portfolio/

[Mike from back east]

Originally Posted by Svoboda

Just looked up Blackstone's REIT:

- 56% Rental Housing
- 23% Industrial
- 6% Net Lease
- 4% Data Centers
- 3% Hospitality
- 3% Self Storage
- 3% Retail
- 2% Office

https://www.breit.com/portfolio/

Thanks for that info.

Looks like I was wrong on my earlier posts. They are selling to raise cash to pay off investors seeking to redeem shares. My apologies for being wrong.

Blackstone (BX) runs a private REIT (BREIT) that is selling off properties to cover redemptions from stockholders; they received redemption requests for $4.4B in May, and $4.5B in April. These are requests, the actual payouts are capped, thus only $1.3B of redemption requests were honored. BREIT has paid out $7.5B to redeeming shareholders since Nov. 30, 2022 as investors feared the net asset value of BREIT would continue to decline as higher interest rates pressured the real estate industry.

Meanwhile, casino REIT VICI is snapping up properties, such as $5.5B to BREIT for MGM Grand and Mandalay Bay, which BREIT bought in 2020 for $4.6B. I wonder who might buy half of the Bellagio from BREIT.

Musical chairs in the casino REIT business.

[Svoboda]

Originally Posted by Mike from back east

Thanks for that info.

Looks like I was wrong on my earlier posts. They are selling to raise cash to pay off investors seeking to redeem shares. My apologies for being wrong.

Blackstone (BX) runs a private REIT (BREIT) that is selling off properties to cover redemptions from stockholders; they received redemption requests for $4.4B in May, and $4.5B in April. These are requests, the actual payouts are capped, thus only $1.3B of redemption requests were honored. BREIT has paid out $7.5B to redeeming shareholders since Nov. 30, 2022 as investors feared the net asset value of BREIT would continue to decline as higher interest rates pressured the real estate industry.

Meanwhile, casino REIT VICI is snapping up properties, such at $5.5B to BREIT for MGM Grand and Mandalay Bay, which BREIT bought in 2020 for $4.6B. I wonder who might buy half of the Bellagio from BREIT.

Musical chairs in the casino REIT business.

Make sense. The redemptions are likely people trying to front run the anticipated CRE issues and build dry powder so they can buy distressed assets on the cheap things hit the fan.

Shocked the Bellagio is what they're swapping out of within their fund. Then again, it's probably one of the few assets that people are willing to buy right now.