Cosmopolitan Las Vegas Now MGM Venue as Buyer Rapidly Completes Purchase

Posted on: May 17, 2022, 05:03h. 

Last updated on: May 17, 2022, 05:45h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The Cosmopolitan Las Vegas is officially part of the MGM Resorts International (NYSE:MGM) portfolio of integrated resorts, as the gaming company closed its acquisition of the Strip venue today.

Cosmopolitan Las Vegas
Cosmopolitan Las Vegas. It’s now officially under the control of MGM Resorts. (Image: YouTube)

MGM announced last September it’s paying $1.6 billion to Blackstone for Cosmopolitan’s operating rights. Earlier this year, the casino behemoth said it expected the transaction to close in the second quarter and it made good on that promise, as today marks, roughly, the midway point of the quarter.

This is a big moment for our company and for the Las Vegas Strip. The Cosmopolitan of Las Vegas has already established itself as one of the Strip’s premier resorts with an iconic brand, well-curated experiences and a loyal customer base. We couldn’t be more excited to bring them into our portfolio of world-class operations,” said MGM Resorts CEO and President Bill Hornbuckle in a statement.

As is par for the course under its asset-lite methodology, MGM doesn’t own any of Cosmopolitan’s real estate. A group comprised of the Cherng Family Trust, Stonepeak Partners, and Blackstone Real Estate Income Trust (BREIT) paid $4 billion for the integrated resort’s property assets.

MGM entered a 30-year lease agreement with that consortium at an initial annual rate of $200 million. That rises 2% per year over the first 15 years. After that, the yearly increase is 2% or whatever the rise is by the Consumer Price Index (CPI), capped at 3%. After the initial 30-year term, MGM has three 10-year renewal options.

Cosmo Is Cash Cow

With Cosmopolitan, MGM not only bolsters its footprint on the Strip, where it’s already the largest operator, it adds a highly profitable venue to its roster.

For the 12-month period ending March 31, 2022, Cosmopolitan generated earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) of $416 million on net revenue of $1.1 billion, indicating its margins are impressive among large-scale casino-hotels.

Speaking of profits, Blackstone paid $1.74 billion for the gaming venue in 2014, acquiring it from Deutsche Bank. The private equity firm poured $500 million into sprucing up the property, indicating it more than doubled its investment.

Cosmopolitan is home to 3,033 rooms and suites, which were revamped in December 2018. The gaming area is 110,000 square feet.

Answering Important Questions

Not surprisingly, Cosmo patrons and members of the MGM Rewards program want to know when Identity Points – Cosmo’s loyalty platform – will be folded into MGM Rewards. For now, the two programs remain separate, and there’s not many details as to when that will change.

“Your status in one does not reflect the other, nor can points be earned or redeemed with the other program. All Identity offers and spend are available for use at The Cosmopolitan and all MGM Rewards are available for use at MGM Resorts currently participating in MGM Rewards,” according to a frequently asked questions site set up to reflect MGM’s takeover of Cosmopolitan.

The site also confirms Identity rewards cannot be accrued at MGM venues.

For fans of hotel points, they can continue earning Marriott Bonvoy points at Cosmopolitan. How long that lasts is another matter. Hyatt is MGM’s preferred hotel partner, and it’s not immediately clear if the operator will continue Cosmopolitan’s relationship with Marriott beyond the near-term.