MGM Resorts signed a definitive agreement with Blackstone to acquire the operations at The Cosmopolitan of Las Vegas for $1.625 billion in cash, the casino company announced today.
Buy the Operations, Rent the Property
The price of the transaction that is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions, is calculated as a multiple of approximately 8x adjusted EBITDA, inclusive of expected synergies and revenue growth opportunities. Subject to customary working capital adjustments, the announced price for the operations at The Cosmopolitan may change.
Upon closing the transaction, MGM Resorts and the partnership between Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust (BREIT) that will acquire the real estate assets of the property, will enter into a 30-year lease agreement, with provisions for three 10-year renewal options. Initial rent will be $200 million per year, which will increase in the first 15 years by 2% annually and for the remaining period, with the greater between 2% and the CPI increase, capped at 3%.
Bill Hornbuckle, CEO and President of MGM Resorts, expressed his content at the agreement, feeling proud to add the luxury resort and casino located on the Strip to MGM’s portfolio of properties and operations. “The Cosmopolitan brand is recognized 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 [and] entertainment company. We look forward to welcoming The Cosmopolitan’s guests and employees to the MGM Resorts family,” he stated.
Opened in December 2010 and renovated since Blackstone took charge in 2014, The Cosmopolitan features 3,032 rooms and suites, most of which with terraces overlooking The Strip. It offers a 110,000 square-foot casino with VIP areas for high-end gaming, 26 outlets offering food and beverage and a 3,200 seat theater, as well as a nightclub and dayclub that attract prominent DJs from around the world.
With over $500 million 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.”Jonathan Halkyard, CFO, MGM Resorts
The Cosmopolitan also offers 243,000 square feet of centrally located meeting space, suited to accommodate both large and small groups and featuring state-of-the-art technology, a 40,000 square foot spa and fitness facility and 21,000 square feet of leased retail space.
The Cosmopolitan recorded $959 million in net revenue and $316 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) before rent, impairment loss and pre-opening expenses and after corporate expenses in the 12 trailing months ended February 29, 2020.
In the three months ended June 30, 2021, the Strip property generated $234 million in net revenue and $92 million in adjusted EBITDA before rent, impairment loss and pre-opening expenses and after corporate expenses.
The Cosmopolitan became the latest Las Vegas acquisition of MGM Resorts after, earlier in the month, the operator agreed to acquire the share of its partner Dubai World in the CityCenter project.