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MGM clears hurdle in bid to acquire The Cosmopolitan of Las Vegas

Updated May 4, 2022 - 7:21 pm

MGM Resorts International cleared a key regulatory hurdle Wednesday in its bid to acquire operations of The Cosmopolitan of Las Vegas.

The Nevada Gaming Control Board voted unanimously to recommend approval of a transfer of interest and licensing to MGM from Nevada Property 1 LLC, a subsidiary of the company controlling The Cosmopolitan, The Blackstone Group.

The Nevada Gaming Commission will consider final approval of the $5.65 billion deal on May 19.

Under terms of the deal, MGM will acquire the operations of The Cosmopolitan for $1.625 billion, while the underlying real estate of The Cosmopolitan will be sold to a group of buyers that includes a Blackstone real estate investment trust.

‘Extremely excited by the acquisition’

The sale comes seven years after Blackstone purchased the resort for $1.73 billion and marked a major return on the $500 million the company invested into the property to renovate guest rooms, complete several high-end luxury suites and upgrade bar and restaurant offerings.

Board members approved the deal after a 45-minute hearing that MGM Chairman and CEO Bill Hornbuckle participated in via Zoom from Mississippi where company executives were meeting at its regional Gulf coast casino, Beau Rivage.

“It goes without saying, we are extremely excited by the acquisition,” Hornbuckle told regulators.

Hornbuckle said he’s always envisioned the prospect of The Cosmopolitan being considered a part of the next-door CityCenter complex.

Powerhouse property

“We’ve been interested in that for some time,” he said. “Obviously now, the marketplace has afforded us finally an opportunity to do it. It is a great property. It is massively well-branded and well-run.

“I give great credit to (Cosmopolitan President and CEO) Bill McBeath and the entire team there. They’ve taken it from a meager beginning and made it into a powerhouse in Las Vegas. And for us to get it to join our portfolio and the market mix and the customer base that it brings to us is extremely compelling.”

The biggest questions board members had involved whether adding The Cosmopolitan would create too large a market share for MGM. But executives responded that they’ll soon divest The Mirage and that the company will have fewer Strip properties than it had more than a decade ago.

Another piece of the licensing recommended by the board involves the property’s race and sportsbook. The Cosmopolitan sportsbook currently is operated by market leader William Hill. After the deal closes, sports-betting operations will be shifted to BetMGM, the sports-wagering division co-0perated by MGM and Entain Plc.

MGM executives said they plan to hire Cosmopolitan employees and allow them to keep their titles and salaries.

MGM officials said the transaction will benefit MGM customers because they will be able to enjoy Cosmopolitan amenities while Cosmopolitan customers will have access to MGM’s loyalty program and MGM properties’ amenities.

The Cosmopolitan opened in December 2010 and was built for $3.9 billion.

It has 3,027 rooms in two 603-foot towers, a 110,000-square-foot casino floor, 300,000 square feet of retail and food and beverage outlets and a 3,200-seat theater.

MGM to get $4.4B cash from transaction

MGM plans to enter into a long-term lease with the group of buyers, which also includes the Cherng Family Trust, an office investment firm from Panda Express founders Andrew and Peggy Cherng, and Stonepeak, an investment firm that specializes in infrastructure and real estate assets.

MGM expects to receive roughly $4.4 billion in cash from that transaction.

Once the transaction is closed, expected by summer, MGM Resorts will enter a 30-year lease agreement with three 10-year renewal options. MGM will pay an initial annual rent of $200 million, which will increase by 2 percent annually for the first 15 years and the greater of 2 percent or the Consumer Price Index (up to 3 percent) from then on.

MGM also is on the verge of selling The Mirage to Hard Rock International, owned by the Seminole Tribe of Florida. The $1.075 billion deal was announced in December and is expected to close by the second half of 2022.

Hard Rock officials have said they intend to remove The Mirage’s iconic volcano and build a guitar-shaped hotel tower.

MGM shares, traded on the New York Stock Exchange, closed up 18 cents, 0.4 percent, to $41.03 in average volume trading.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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