MGM Resorts Shells Out $1.625bn To Run Operations For The Cosmopolitan
- MGM Resorts acquires right to operate The Cosmopolitan Las Vegas
- MGM reported to have paid Blackstone $1.625 billion
- MGM will look to attract a younger demographic to the casino
MGM Resorts International bought the operations of The Cosmopolitan of Las Vegas from the Blackstone Group on 17 May, 2022 for $1.625 billion. The purchase is a part of a leasing contract of $5.65 billion, where MGM pays $200 million as rent annually to Cosmo’s real estate investors.
The current purchase aligns with MGM’s aim to attract younger visitors aged between 26 to 41.
MGM CEO Hornbuckle Calls Deal Momentous
MGM CEO Bill Hornbuckle applauded the purchase and was eager to collaborate with Cosmo, a popular resort on the Las Vegas strip. Hornbuckle said that MGM would extend its exclusive amenities to Cosmo’s customers and make Vegas more appealing, even though the company didn’t cater to high-spending millennials. Casino consultant Josh Swissman acknowledged the deal and said that it was positive for Cosmo’s branding image.
Cosmo had generated $1.1 billion in net revenue and about $416 million of adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) during the 12-month period that ended on March 31. Emphasizing its importance for MGM, casino consultant Brendan Bussman said that after the agreement, MGM will be able to integrate Cosmo with the other two resorts on the strip and offer guests another choice.
Swissman agreed that the addition of Cosmo and the younger demographic would be great for MGM. Aside from landing a great asset, MGM earned other benefits, such as linking the resort to its loyalty scheme and saving on purchasing power while fusing the two enterprises’ back-office functions. Swissman said that MGM might cross-market their other properties via Cosmo, thus retaining its revenue.
MGM COO Corey Sanders said that integrating Cosmo with MGM’s loyalty program will yield benefits for both the brands’ young customers as they will be able to avail several facilities, along with the vibrant dining and nightlife scene that thrives on irreverent branding.
Cosmo Continues to Function Under Marriott
Despite the purchase, the resort will continue to be a part of Marriott International’s Autograph Collection. Cosmo will still have access to the latter’s reservation and rewards scheme, while the existing William Hill sportsbook on its premises will be changed into a BetMGM facility, scheduled in the late summer of 2022.
The 30-year lease contract between MGM and the investor group comprising Cherng Family Trust, Stonepeak, and Blackstone Real Estate Income will see the former pay $200 million in rent annually, which will grow at 2% per year for the first half of the term. Thereafter, MGM will pay 2% or the Consumer Price Index increase capped at 3%, whichever is greater.
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