MGM Resorts International said it agreed to buy the operations of The Cosmopolitan of Las Vegas for $1.62 billion to expand its customer base and provide more choice for guests in the city.
MGM is buying the operations from private equity firm, Blackstone. Following the transaction, it will enter a 30-year lease accord, with a partnership among Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate.
The operator, which has two properties in Macau, will pay an initial annual rent of $200 million, rising annually at 2 percent for the first 15 years.
“We are proud to add The Cosmopolitan, a luxury resort and casino on the Las Vegas Strip, to our portfolio,” said CEO 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.”
Chief Financial Officer Jonathan Halkyard said more than $500 million had been ploughed into the property in the form of upgrades since 2014.
Prior to the pandemic, in the trailing 12 months ending Feb. 29, 2020 The Cosmopolitan generated $959 million in net revenue and $316 million in adjusted EBITDA.
Las Vegas and the U.S. in general have seen a strong recovery due to surging pent-up demand following the pandemic, with gaming revenue at record levels in the second quarter.
MGM has been known to be seeking opportunities for expansion, although its primary focus had appeared to be in the online space. Earlier this year, it was rebuffed in an $11 billion effort to buy the U.K.’s Entain, its joint venture partner in BetMGM.