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MGM Resorts to acquire operations of Cosmopolitan of Las Vegas

Boulevard Pool 3_Courtesy of The Cosmopolitan of Las Vegas.jpg
Posted at 6:52 AM, Sep 27, 2021

LAS VEGAS (KTNV) — MGM Resorts International announced an agreement with Blackstone to acquire the operations of The Cosmopolitan of Las Vegas.

The company reported the deal Monday that is for cash consideration of $1.625 billion.

“Well, this is the general trend we saw starting in the 90s toward more consolidation, fewer operators on the strip,” said David G. Schwartz, a gaming historian at the University of Nevada-Las Vegas.

“Caesars no longer owns Rio, but they operate it,” said Dr. Amanda Belarmino, asst. professor at UNLV’s William F. Harrah College of Hospitality. “In order to get capital, MGM sold the Bellagio, but they operate it. So, I think that we’ve seen a lot of that happening.”

And despite a change in who is running the show, it is expected to maintain its uniqueness amongst the Strip.

“When MGM purchased Bellagio, it’s still the Bellagio,” said Dr. Belarmino. “We still have the fountains. We still have some of the outlets that were there back when it was owned by Wynn. So, I think that MGM has done a good job of folding properties into their brand without necessarily taking away what makes them unique.”

Long-term changes are anyone’s guess, but the expectation for guests is greater use of perks like the MLife rewards card.

“The more competition you have, a lot of people believe that’s going to be better for players, for employees, for suppliers, for a lot of those folks,” said Schwartz. “Some players may find they like having a couple big companies because they can then accrue and spend loyalty points at more properties.”

As far as jobs go, Geoconda Argüello-Kline, Secretary-Treasurer for the Culinary Workers Union, said: "The Culinary and Bartenders Unions have been the bargaining representative for 2,000 unionized workers at the Cosmopolitan of Las Vegas ever since a union contract was negotiated in December 2015.

Union workers at the Cosmopolitan are protected by a strong union contract, which ensures that workers are retained and their jobs are protected, even if owners or operators change.

Culinary Union contracts include innovative successorship language which mandates that a union contract is in place so that workers have job security, fair wages, the best health benefits, and many more union benefits, regardless of if the property is ever sold.

Culinary Union looks forward to continue working with MGM Resorts to ensure hospitality workers are protected and the contract is followed."

“I think, perhaps, this might cause less disruption than other acquisitions have simply because we’re coming out of COVID, we’ve already gone through a lot of these other things," said Dr. Belarmino. "The changes they’re going to implement aren’t going to be nearly the pantheon of changes that we’ve all gone through in the last year.”

"We are proud to add The Cosmopolitan, a luxury resort and casino on the Las Vegas Strip, to our portfolio," said MGM Resorts CEO & President 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. We look forward to welcoming The Cosmopolitan's guests and employees to the MGM Resorts family."

Following the close of the transaction, MGM Resorts will enter into a 30-year lease agreement, with three 10-year renewal options, with a partnership among Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust, Inc. which will acquire The Cosmopolitan's real estate assets.

MGM Resorts reports it will pay an initial annual rent of $200 million, escalating annually at 2% for the first 15 years and the greater of 2% or the CPI increase (capped at 3%) thereafter.

"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," said MGM Resorts CFO Jonathan Halkyard. "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."

“I think they have been pivoting towards an asset-lite strategy, so they own less stuff and operate more places," said Schwartz. "You’ll see the casino operators moving out of real estate and into just operating, so I wouldn’t be surprised to see more deals on the Strip.”

The Cosmopolitan, a world-class contemporary luxury resort and casino, opened in December of 2010 and underwent significant capital improvements since Blackstone acquired the property in 2014. The property features:

  • 3,032 rooms and suites that were renovated in December of 2018, most of which feature a terrace that overlooks the iconic Las Vegas Strip,
  • a 110,000 square-foot casino, with high-end gaming areas for VIP guests,
  • 26 on-trend food and beverage offerings, with 19 new concepts introduced in the last four years,
  • a 3,200 seat theater (The Chelsea),
  • Marquee nightclub and dayclub that hosts top DJs from around the world,
  • 243,000 square feet of centrally located meeting space, featuring state-of-the-art technology to accommodate both large and small groups,
  • 21,000 square feet of leased retail space, and
  • a 40,000 square foot spa and fitness facility.

The transaction is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions.