MGM Resorts is buying the operations of The Cosmopolitan of Las Vegas from Blackstone for $1.625bn, subject to customary working capital adjustments.
The purchase price represents a multiple of approximately eight times adjusted EBITDA, 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 (BREIT), which will acquire The Cosmopolitan’s real estate assets. MGM Resorts will pay an initial annual rent of $200m, escalating annually at two per cent for the first 15 years and the greater of two per cent or the CPI increase (capped at three per cent) 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 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.”
“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 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 $959m of net revenue and $316m of adjusted EBITDAR1. In the second quarter ended June 30, 2021, the property generated $234m of net revenue and $92m of adjusted EBITDAR1.
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 property 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 and a 110,000 square-foot casino, with high-end gaming areas for VIP guests.