The Nevada Gaming Commission on Thursday unanimously approved a transfer of interest that will enable MGM Resorts International to acquire The Cosmopolitan of Las Vegas for $5.65 billion.
The deal is expected to close by Tuesday.
Commission approval was the last regulatory hurdle for MGM to clear in its bid to take over the 3,027-room Strip resort located between two other MGM properties, Bellagio to the north and CityCenter’s Vdara and Aria to the south.
The Nevada Gaming Control Board gave unanimous recommendation of approval on May 4, and the Federal Trade Commission review regarding anti-competitive issues involving the number of Strip properties MGM owns ended Monday. Executives noted that the company has divested several Southern Nevada properties over the years and that The Mirage is expected to be sold to Hard Rock International later this year.
‘Tough act to follow’
The commission’s approval came a day after more than 5,000 Cosmopolitan employees were told that each will receive a $5,000 bonus for their work.
“That,” Nevada Gaming Commission Chairwoman Jennifer Togliatti said during the meeting, “will be a tough act to follow.”
MGM Chairman and CEO Bill Hornbuckle concurred.
“It was exciting to see that they took care of their employees yesterday,” Hornbuckle said of The Cosmopolitan’s action Wednesday. “To your comment, it does set a high bar, but we will try to live up to it in many ways. (The Cosmopolitan) has been and is a great icon in Las Vegas at this point.”
Hornbuckle participated in the 45-minute hearing online, disclosing that he didn’t attend in person because he was suffering COVID-19 symptoms.
Under terms of the deal, MGM will acquire the operations of The Cosmopolitan for $1.625 billion, while the underlying real estate of The Cosmopolitan will be sold to a group of buyers that includes a Blackstone real estate investment trust.
In addition to the transfer of interest approved by commissioners, the licensing of the property’s race and sportsbook was resolved. The Cosmopolitan book, now operated by William Hill, will shift ownership to BetMGM, the sports-wagering division co-operated by MGM and Entain Plc. executives said they expect the transition to take 90 days.
Cosmopolitan’s Identity loyalty program also will be integrated into MGM Rewards and executives told commissioners that point values earned in the Cosmopolitan program would be converted equivalently to the MGM program.
The sale comes seven years after Blackstone purchased the resort for $1.73 billion and marked a major return on the $500 million the company invested into the property to renovate guest rooms, complete several high-end luxury suites and upgrade bar and restaurant offerings.
Hornbuckle said The Cosmopolitan will be a great addition to MGM.
“I think people have always thought it was a part of CityCenter, but ultimately they’ve been invited into the MGM family,” he said. “We’re very excited by the co-stars, the senior management and all of the management has done an amazing job in the last several years. The property has done exceptionally well, so we’re excited for that.”
Like Control Board members last week, the biggest questions commissioners faced involved whether adding The Cosmopolitan would create too large a market share for MGM. But executives responded that they’ll soon divest The Mirage and that the company will have fewer Strip properties than it had more than a decade ago.
Hard Rock International, operated by the Seminole Tribe of Florida, and MGM announced in December that Hard Rock would buy The Mirage for $1.075 billion and convert it to a Hard Rock property, complete with a guitar-shaped hotel tower replacing the resort’s signature volcano.
MGM executives said they plan to hire Cosmopolitan employees and allow them to keep their titles and salaries. The Cosmopolitan will have its own executive management team, which will report to Anton Nikodemus, the president and chief operating officer of CityCenter.
Executives said they expect some of the Cosmopolitan workers would eventually be transferred to other MGM properties and be considered for management roles.
MGM officials said the transaction will benefit MGM customers because they will be able to enjoy Cosmopolitan amenities while Cosmopolitan customers will have access to the MGM Rewards loyalty program and other company properties’ amenities.
The Cosmopolitan, opened in December 2010, has 3,027 rooms in two 603-foot towers. It also has a 110,000-square-foot casino floor, 300,000 square feet of retail and food and beverage outlets, a 3,200-seat theater and was built for $3.9 billion.
MGM plans to enter into a long-term lease with the group of buyers, which also includes the Cherng Family Trust, an office investment firm from Panda Express founders Andrew and Peggy Cherng, and Stonepeak, an investment firm that specializes in infrastructure and real estate assets.
MGM expects to receive roughly $4.4 billion in cash from that transaction.
Once the transaction is closed, expected by summer, MGM Resorts will enter 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.
Prior to the panel’s unanimous vote, Commissioner Steven Cohen said he’s happy about the transaction.
“I think it’s a wonderful opportunity for you,” Cohen told MGM executives. “I’ve always thought that Cosmopolitan should be a part of MGM. It’s wonderful for the state, it’s wonderful for the Strip and it’s wonderful for the employees.”