The Blackstone Group has decided to accept a deal from MGM Resorts International involving the operations of the Cosmopolitan casino in Las Vegas, Nevada. The operator will take over the property, paying over $1.6 billion based on a newly signed agreement. A 30-year lease has been agreed to that has three 10-year renewal options for the property.
Details of the Transaction
In total, the Blackstone Group will receive $1.625 billion in cash considerations for providing MGM Resorts with operations control. The Cosmopolitan Casino first opened in 2010 and remains a popular property on the Las Vegas Strip. Back in 2014, the Blackstone Group paid $1.7 billion to purchase the property from Deutsche Bank after the property was subject to foreclosure.
MGM Resorts sees the potential in the casino and looks forward to taking over. CEO of MGM Resorts, Bill Hornbuckle, commented that the company is proud to add the casino to its portfolio of gaming venues.
Mr. Hornbuckle stated that the Cosmopolitan brand is recognized around the world for its high-quality product, experiences, and customer base. It is an ‘ideal fit’ with the company’s portfolio and vision to become the premier gaming entertainment company in the world.
Blackstone is selling the real estate of the hotel and casino property for $5.65 billion. MGM will pay annual rent starting at $200 million and each year, the amount will increase by 2%. The increase will continue for 15 years and then will increase to 3% annually after that.
It is expected that the real estate and operations deals will end by next year. Regulator approval is still required. MGM and Blackstone look forward to working together on this deal and have done so amicably in the past. MGM sold the real estate holdings for MGM Grand, the Bellagio, Mandalay Bay, and the Aria to Blackstone and in exchange, was able to lease the properties back to continue operating them.
Potential Sale Talk Started in 2019
Talk of the potential sale of the Cosmopolitan started in mid-2019 when the Blackstone Group reportedly hired financial service experts to explore the option to sell. At the time, it was expected that major players in the gambling world would be interested in acquiring the property.
It seems the pandemic caused a slow down in the sale consideration and now Blackstone Group has decided to go with a leaseback agreement of sorts. It works out well for both parties, as Blackstone still owns the property and MGM Resorts is able to cash in on the operation side of the Las Vegas Strip property.