- The Cosmopolitan of Las Vegas is being sold to a group of buyers including MGM Resorts.
- MGM Resorts will take over operations at the Cosmopolitan in a 30 year lease deal worth a minimum of $200 million USD annually.
- The Cosmopolitan has been very popular since it opened in 2010 though it has suffered through a fair share of financial issues
MGM Resorts is extending its presence on the Las Vegas Strip with the purchase of a popular resort that has never been able to fully find financial traction. The Cosmopolitan of Las Vegas has been sold to a group of investors that includes MGM Resorts and the Blackstone Real Estate Investment Trust. The most visible public facing change will be the takeover of operations by MGM Resorts. The exceedingly complex transaction is expected to close in early 2022 subject to the usual regulatory approvals.
The Cosmopolitan opened in 2010 and quickly became a popular resort for tourists and locals alike. Despite its popularity it struggled to find financial footing early on and lost hundreds of millions during the first few years of operation. It was purchased by The Blackstone Group in 2014 and they improved the balance sheet along with putting over $500 million USD into property upgrades. Tyler Henritze, head of acquisitions, Americas, for Blackstone Real Estate, looked back on what his company had done with The Cosmopolitan in a press release announcing the deal:
“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.”
The deal to purchase The Cosmopolitan is very complex but here’s the important metrics: the entire transaction will be worth $5.65 billion USD. MGM Resorts is paying $1.625 billion for the operations of the property with the underlying real estate being sold to a group of investors that include Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust. Once the transaction closes in early 2022, MGM Resorts will enter into 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 Resorts CEO & President Bill Hornbuckle is thrilled to add The Cosmopolitan to his company’s portfolio of Las Vegas Strip properties:
“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 added his thoughts:
“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. 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.”
UNLV hospitality professor Amanda Bellarmino said that some type of deal for The Cosmopolitan was expected though MGM being involved in the purchase was a bit of a surprise:
“The benefits of the merger are that it is a well-established Strip company with a proven record of success. The acquisition could help MGM to target younger travelers by acquiring this successful and attractive property.”
MGM Resorts has been very busy of late. Just last week they received approval to acquire Dubai World’s 50 percent stake in CityCenter for approximately $2.1 billion, giving MGM full ownership of the Aria and Vdara resorts. After the deal closes, MGM will sell both properties to Blackstone for $3.89 billion USD and lease them back, with MGM paying $215 million in rent annually.
For the time being it will be business as usual at The Cosmopolitan. After MGM takes over operations upon the closing of the deal it’s doubtful that they’ll make any wholesale changes to a property product mix that–for the most part at least–has been very successful.