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Realty Income's $800M CityCenter Bet: Will Diversification Pay Off?
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Key Takeaways
Realty Income is investing $800M in preferred equity tied to CityCenter Las Vegas assets.
The deal offers a 7.4% initial return with escalators and an 8.325% IRR make-whole clause.
CityCenter's long-term triple net lease and strong cash flow underpin the investment's appeal.
Realty Income (O - Free Report) is expanding its reach with an $800 million perpetual preferred equity investment in the CityCenter Las Vegas assets, giving the REIT exposure to the ARIA Resort & Casino and Vdara Hotel & Spa, currently owned by funds affiliated with Blackstone Real Estate. The move reflects a shift beyond its traditional net-lease retail and industrial strategy. Blackstone Real Estate keeps the common equity, while MGM Resorts International continues operating the properties, allowing Realty Income to earn yield without taking on hospitality management risk.
The transaction, expected to close on Dec. 9 pending customary conditions, also marks Realty Income’s second partnership with Blackstone after their Bellagio Las Vegas venture in 2023. Along with CityCenter investment, the company now expects to deploy more than $6.0 billion in 2025, a sign that the company is actively expanding its acquisition appetite beyond its traditional footprint.
The preferred equity terms offer a 7.4% initial unlevered return, with annual, capped escalators beginning in year five. A make-whole clause guarantees an 8.325% IRR if the investment is redeemed early. This structure lets Realty Income participate in a major hospitality asset while avoiding the volatility tied to full property ownership.
CityCenter sits under a long-term triple net lease with about 26 years remaining and three 10-year extension options. With 5,500 rooms, gaming areas, retail, dining and 500,000 square feet of convention space, the assets produce strong cash flow coverage.
Beyond this deal, Realty Income continues expanding globally, investing $3.9 billion through the third quarter of 2025, led by Europe’s attractive yields and lighter competition. Its diversification into industrial, gaming, data centers and European markets further broadens its growth path beyond core U.S. freestanding retail.
Where Do Other Retail REITs See Growth Opportunities?
Simon Property Group (SPG - Free Report) is expanding its portfolio through development, redevelopment and acquisitions. Recently, Simon Property acquired Phillips Place in the heart of the SouthPark neighborhood of Charlotte, NC, which is an open-air retail center with nearly 134,000 square feet of space. It is well known for its specialty retail and restaurants. Earlier, Simon Property acquired the remaining 12% interest in the Taubman Realty Group.
Kimco Realty (KIM - Free Report) is driving growth through redevelopments, selective acquisitions and asset recycling. During the third quarter, Kimco acquired the remaining 85% ownership interest in Tanasbourne Village for a pro-rata purchase price of $65.9 million. Kimco sold two shopping centers, namely Gresham Town Fair, located at Gresham, OR, for $31.8 million, and Southfield Plaza, located at Southfield, MI, for $14.4 million. For 2025, Kimco plans total acquisitions (including structured investments), net of dispositions, of $100-$125 million.
O’s Price Performance, Valuation and Estimates
Shares of Realty Income have risen 7.5% year to date against the industry’s decline of 6.4%.
Image Source: Zacks Investment Research
From a valuation standpoint, O trades at a forward 12-month price-to-FFO of 13.03, below the industry but close to its one-year median of 13.11. It carries a Value Score of D.
Image Source: Zacks Investment Research
While the Zacks Consensus Estimate for O’s 2025 FFO per share has been revised southward, the same for 2026 has been tweaked northward over the past 30 days.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Realty Income's $800M CityCenter Bet: Will Diversification Pay Off?
Key Takeaways
Realty Income (O - Free Report) is expanding its reach with an $800 million perpetual preferred equity investment in the CityCenter Las Vegas assets, giving the REIT exposure to the ARIA Resort & Casino and Vdara Hotel & Spa, currently owned by funds affiliated with Blackstone Real Estate. The move reflects a shift beyond its traditional net-lease retail and industrial strategy. Blackstone Real Estate keeps the common equity, while MGM Resorts International continues operating the properties, allowing Realty Income to earn yield without taking on hospitality management risk.
The transaction, expected to close on Dec. 9 pending customary conditions, also marks Realty Income’s second partnership with Blackstone after their Bellagio Las Vegas venture in 2023. Along with CityCenter investment, the company now expects to deploy more than $6.0 billion in 2025, a sign that the company is actively expanding its acquisition appetite beyond its traditional footprint.
The preferred equity terms offer a 7.4% initial unlevered return, with annual, capped escalators beginning in year five. A make-whole clause guarantees an 8.325% IRR if the investment is redeemed early. This structure lets Realty Income participate in a major hospitality asset while avoiding the volatility tied to full property ownership.
CityCenter sits under a long-term triple net lease with about 26 years remaining and three 10-year extension options. With 5,500 rooms, gaming areas, retail, dining and 500,000 square feet of convention space, the assets produce strong cash flow coverage.
Beyond this deal, Realty Income continues expanding globally, investing $3.9 billion through the third quarter of 2025, led by Europe’s attractive yields and lighter competition. Its diversification into industrial, gaming, data centers and European markets further broadens its growth path beyond core U.S. freestanding retail.
Where Do Other Retail REITs See Growth Opportunities?
Simon Property Group (SPG - Free Report) is expanding its portfolio through development, redevelopment and acquisitions. Recently, Simon Property acquired Phillips Place in the heart of the SouthPark neighborhood of Charlotte, NC, which is an open-air retail center with nearly 134,000 square feet of space. It is well known for its specialty retail and restaurants. Earlier, Simon Property acquired the remaining 12% interest in the Taubman Realty Group.
Kimco Realty (KIM - Free Report) is driving growth through redevelopments, selective acquisitions and asset recycling. During the third quarter, Kimco acquired the remaining 85% ownership interest in Tanasbourne Village for a pro-rata purchase price of $65.9 million. Kimco sold two shopping centers, namely Gresham Town Fair, located at Gresham, OR, for $31.8 million, and Southfield Plaza, located at Southfield, MI, for $14.4 million. For 2025, Kimco plans total acquisitions (including structured investments), net of dispositions, of $100-$125 million.
O’s Price Performance, Valuation and Estimates
Shares of Realty Income have risen 7.5% year to date against the industry’s decline of 6.4%.
Image Source: Zacks Investment Research
From a valuation standpoint, O trades at a forward 12-month price-to-FFO of 13.03, below the industry but close to its one-year median of 13.11. It carries a Value Score of D.
Image Source: Zacks Investment Research
While the Zacks Consensus Estimate for O’s 2025 FFO per share has been revised southward, the same for 2026 has been tweaked northward over the past 30 days.
Image Source: Zacks Investment Research
At present, Realty Income carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.