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Gaming regulators agree with MGM’s $1.6 billion purchase of Cosmopolitan operations

Howard Stutz
Howard Stutz
EconomyGaming
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Photo of The Cosmopolitan Las Vegas

MGM Resorts International is one step away from controlling all of the gaming along a two-mile stretch on the west side of the Las Vegas Strip, between Flamingo Road to the north and Russell Road to the south.

The Nevada Gaming Control Board on Wednesday recommended the company’s more than $1.6 billion purchase of the operations of The Cosmopolitan of Las Vegas, sending the matter to the Nevada Gaming Commission for final approval on May 19.

MGM Resorts, which already operates seven resorts along the Strip’s west side, will pay $200 million a year to the Cosmopolitan’s landlord group to operate the property’s more than 3,000 hotel rooms and suites as well as the 110,000-square-foot casino and non-gaming amenities.

“It goes without saying that we are extremely excited by the acquisition,” MGM Resorts CEO Bill Hornbuckle said, noting the company has long envisioned adding the property to its Las Vegas portfolio, being its neighbors are the CityCenter complex and Bellagio.

“We've been interested in that site for some time,” Hornbuckle said. “Obviously, now the marketplace has finally afforded us that opportunity. It is a great property.”

Hornbuckle and other MGM Resorts executives were in Mississippi for a company board meeting and appeared at the control board hearing, which was held in Las Vegas, through a video connection.

Cory Saunders, MGM Resorts’ chief financial officer, said the Cosmopolitan employees will keep their titles, pay and benefits and some employees may transfer into corporate roles.

The only change will be in the sportsbook, with operations at the Cosmopolitan switching from William Hill to BetMGM.

“From a customer perspective, we think this is a win-win for both the Cosmopolitan of Las Vegas customers and MGM customers,” Saunders said.

The hearing took roughly 30 minutes and Control Board members had no concerns with the acquisition, including anti-trust concerns. MGM Resorts also operates MGM Grand Las Vegas but is selling the operations of The Mirage to Hard Rock International for more than $1 billion.

New York-based investment firm Blackstone, which has owned the Cosmopolitan since 2014, sold the 8.7-acre Strip land parcel and the resort complex last September for almost $4.1 billion to an investment group.

In addition to Blackstone’s real estate investment trust, the partnership included Stonepeak Partners and the Cherng Family Trust (founders of the Panda Restaurant Group that includes the Panda Express chain).

Because MGM Resorts is buying the operations, the partnership was not required to be licensed by state casino regulators.

Blackstone, which paid $1.73 billion for the Cosmopolitan, spent another $500 million on property upgrades, including renovations of the hotel rooms and suites and adding new restaurants and bars.

Hornbuckle addressed the Cosmopolitan purchase on Monday during the company’s first-quarter earnings conference call, saying the property would be “complementary” to its Strip properties.

“We've met with key leaders at the Cosmopolitan over the last weeks and months, and are impressed by the quality of their team, as well as the culture and the brand that they have built,” Hornbuckle said.

In September, Truist Securities gaming analyst Barry Jonas said the deal made sense for MGM Resorts “from a strategic perspective,” citing the Cosmopolitan’s strong brand and location.

Investment bank Deutsche Bank bought the Cosmopolitan out of foreclosure and opened the resort in December 2010. The property was the last ground-up casino-resort to open on the Strip for 11 years until Resorts World Las Vegas opened last June.

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