MGM Resorts International has reached an agreement with Blackstone to purchase The Cosmopolitan of Las Vegas’ operations.
Putting forward a $1.625 billion cash payment, subject to typical working capital adjustments. MGM Resorts will sign a 30-year leasing deal with three 10-year renewal options if the purchase closes.
MGM Resorts will pay an initial yearly rent of $200 million, with annual increases of 2percent for the first 15 years and then the greater of 2percent or the CPI increase (maximum at 3percent).
MGM Resorts CEO and president, Bill Hornbuckle said: “We are proud to add The Cosmopolitan, a luxury resort and casino on the Las Vegas Strip, to our portfolio.
‘world’s premier gaming entertainment company’
“The Cosmopolitan brand is recognised around the world for its unique customer base and high-quality product and experiences, making it an ideal fit with our portfolio and furthering our vision to be the world’s premier gaming entertainment company.
“We look forward to welcoming The Cosmopolitan’s guests and employees to the MGM Resorts family.”
The purchase price is based on an adjusted EBITDA multiple of almost eight times, including estimated operational synergies and revenue growth potential.
Real estate assets
MGM will also work with Stonepeak Partners, Cherng Family Trust, and Blackstone Real Estate Income Trust to acquire The Cosmopolitan’s real estate assets as part of the deal.
Jonathan Halkyard, CFO of MGM Resorts added: “With over $500m of capital invested to upgrade the property since 2014, The Cosmopolitan offers an incredible opportunity to expand our customer base and will provide greater depth of choices for our guests in Las Vegas.
“We believe that we can leverage MGM Resorts’ expertise, operating platform and other highly achievable synergies to continue providing best-in-class service, while driving growth for the property.”
The Cosmopolitan generated $959 million in net revenue and $316 million in adjusted EBITDAR1 in the 12 months prior to the COVID-19 pandemic, which concluded February 29, 2020.
Subject to regulatory clearances and other usual closing conditions, the transaction is scheduled to close in the first half of 2022.