MGM Resorts International announced that the company has entered into a definitive agreement with Blackstone to acquire the operations of The Cosmopolitan of Las Vegas for cash consideration of $1.625 billion, subject to customary working capital adjustments.
The purchase price represents a multiple of approximately eight times adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), inclusive of expected operational synergies and identified revenue growth opportunities.
Following the close of the transaction, MGM Resorts will enter into a 30-year lease agreement, with three 10-year renewal options, with a partnership among Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust, Inc. (“BREIT”), which will acquire The Cosmopolitan’s real estate assets. MGM Resorts will pay an initial annual rent of $200 million, escalating annually at 2% for the first 15 years and the greater of 2% or the CPI increase (capped at 3%) thereafter.
“We are proud to add The Cosmopolitan, a luxury resort and casino on the Las Vegas Strip, to our portfolio,” said MGM Resorts CEO & President Bill Hornbuckle. “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 entertainment company. We look forward to welcoming The Cosmopolitan’s guests and employees to the MGM Resorts family.”
“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,” said MGM Resorts CFO Jonathan Halkyard. “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.”
Prior to the COVID-19 pandemic in the trailing 12 months ended February 29, 2020, The Cosmopolitan generated $959 million of net revenue and $316 million of adjusted EBITDAR (EBITDA before rent, impairment loss and pre-opening expenses, and after corporate expenses). In the second quarter ended June 30, 2021, the property generated $234 million of net revenue and $92 million of adjusted EBITDAR.
The Cosmopolitan, a world-class contemporary luxury resort and casino, opened in December of 2010 and underwent significant capital improvements since Blackstone acquired the property in 2014. The Cosmopolitan was built between two MGM properties — the Bellagio and City Center, which contains the ARIA. The acquisition gives MGM a strip of connected properties running along much of the West side of Las Vegas Boulevard — Mandalay Bay, Luxor, Excalibur, New York-New York, MGM Grand, Park MGM, ARIA, Vdara at ARIA, The Cosmopolitan and Bellagio. The Cosmopolitan features:
- 3,032 rooms and suites that were renovated in December of 2018, most of which feature a terrace that overlooks the iconic Las Vegas Strip,
- a 110,000 square-foot casino, with high-end gaming areas for VIP guests,
- 26 on-trend food and beverage offerings, with 19 new concepts introduced in the last four years,
- a 3,200 seat theater (The Chelsea),
- Marquee nightclub and dayclub that hosts top DJs from around the world,
- 243,000 square feet of centrally located meeting space, featuring state-of-the-art technology to accommodate both large and small groups,
- 21,000 square feet of leased retail space, and
- a 40,000 square foot spa and fitness facility.
The transaction is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions.
