MGM Resorts To Buy Operations Of The Cosmopolitan Of Las Vegas

MGM Resorts International has announced that it 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, 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., 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.

Blackstone implemented significant operational changes and invested over $500 million into the property to renovate nearly 3,000 guestrooms, build 67 new rooms and suites, enhance the food and beverage offerings and improve the gaming amenities and common areas. Blackstone also reached agreements with unions at the property and secured approximately 3,000 stable jobs for professionals that will continue to serve guests of the hotel.

"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," MGM Resorts CFO Jonathan Halkyard said in a press release. "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 EBITDAR1 (calculated as 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 EBITDAR1.

The Cosmopolitan opened in December 2010 and underwent significant capital improvements since Blackstone acquired the property in 2014. The property has 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 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; 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.

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