MGM to Acquire The Cosmopolitan for $1.625B

MGM Resorts International has agreed to shell out $1.625 billion to acquire the Cosmopolitan of Las Vegas from Blackstone. As part of the deal, 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., which will acquire The Cosmopolitan's real estate assets. 

MGM Resorts will pay an initial annual rent of $200 million, escalating annually at 2 percent for the first 15 years and the greater of 2 percent or the CPI increase (capped at 3 percent) thereafter.

An incredible opportunity

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. 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."

MGM Resorts CFO Jonathan Halkyard said the deal “offers an incredible opportunity to expand our customer.”

“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,” said Halkyard.

Phill Solomond, Head of Real Estate at Stonepeak, said: “Stonepeak, in partnership with the Cherng Family Trust, believes this transaction represents a fantastic opportunity to invest in the underlying real estate of The Cosmopolitan of Las Vegas, a solid asset with an irreplaceable location, durable cash flows and the potential for additional upside.”

Massive return on investment

Blackstone bought the resort on the Las Vegas Strip for $1.73 billion seven years ago. Blackstone invested $500 million in renovating nearly 3,032 guest rooms.

The Cosmopolitan has a 110,000 square-foot casino, 26 restaurants and bars, a 3,200-seat theater, a nightclub and 243,00 square feet of meeting space. The property is next to other properties MGM operates, including the Bellagio, the Aria, Park MGM and the MGM Grand. 

The transaction, which in total is worth 5.65 billion, is expected to close in the first quarter of 2022.

“This transaction underscores Blackstone’s ability to acquire and transform large, complex assets. 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,” said Tyler Henritze, Head of Acquisitions Americas for Blackstone Real Estate.

MGM expansion

MGM has been looking to grow its footprint in the U.S., with its eye firmly on the growing gambling market.

MGM’s betting operation BetMGM Sportsbook agreed to a deal with Gold Strike Casino Resort in Tunica, Mississippi, to offer sports wagering there. The deal is for both retail and mobile betting, though mobile bets can only be placed inside the casino per Mississippi regulations. BetMGM is also set to launch a sportsbook at the Casino del Mar at La Concha Resort in San Juan, Puerto Rico, pending the launch of sports betting in the U.S. territory. Sports betting has been legalized in Puerto Rico but has yet to be implemented, it was reported.

BetMGM is a big player in online casinos.