MGM acquires 14th Las Vegas casino with deal for The Cosmopolitan

New York-listed casino and sportsbook operator MGM Resorts International has entered into a definitive agreement to acquire the operations of The Cosmopolitan of Las Vegas.

The agreement with Blackstone will see MGM Resorts acquire The Cosmopolitan for a cash consideration of $1.625bn, subject to customary working capital adjustments.

The deal represents a multiple of approximately eight times adjusted EBITDA, inclusive of expected operational synergies and identified revenue growth opportunities.

The Cosmopolitan will become MGM Resorts’ 14^th casino resort in Las Vegas, alongside other leading properties including Bellagio, MGM Grand, Mandalay Bay and ARIA, among others.

“We are proud to add The Cosmopolitan, a luxury resort and casino on the Las Vegas Strip, to our portfolio,” said MGM Resorts CEO and 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.”

Following close of the transaction, MGM Resorts will enter into a 30-year lease agreement, including three 10-year renewal options, with a partnership among Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust (BREIT), which will acquire The Cosmopolitan's real estate assets.

MGM Resorts will pay an initial annual rent of $200m, escalating annually at 2 per cent for the first 15 years, and between 2 per cent and 3 per cent thereafter.

“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," said MGM Resorts chief financial officer 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.”

The Cosmopolitan opened in December of 2010 and features 3,032 rooms and suites, and a 110,000 square-foot casino with high-end gaming areas for VIP guests.

Prior to the Covid-19 pandemic in the trailing 12 months ended February 29^th 2020, The Cosmopolitan generated net revenue of $959m and $316m of adjusted EBITDAR. In the second quarter of this year, the property generated $234m of net revenue and $92m of adjusted EBITDAR.

“This transaction underscores Blackstone’s ability to acquire and transform large, complex assets,” said Tyler Henritze, head of acquisitions Americas for Blackstone Real Estate. “As owners of The Cosmopolitan, we invested strategic capital and brought our expertise and experience in the lodging space to create the most dynamic destination on the Las Vegas Strip.

“The management team and employees at The Cosmopolitan, led by CEO Bill McBeath, flawlessly executed an ambitious business plan, including navigating a challenging period for the entire industry, to position the property for such a high level of success.”

Including The Cosmopolitan's real estate, the transaction is worth $5.65bn and is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions.

Shares in MGM Resorts International (NYSE:MGM) closed at $44.62 per share in New York Friday.