MGM Resorts to acquire operations of the Hard Rock Rocksino
MGM Resorts International (MGM Resorts) and MGM Growth Properties LLC (MGP) recently announced that they have entered into an agreement whereby MGM Resorts will acquire all of the operating assets of the Hard Rock Rocksino Northfield Park (the Rocksino) from MGP and lease the real property associated with the Rocksino from a subsidiary of MGP.
MGM Resorts will pay total consideration of approximately $275 million, subject to customary working capital and other adjustments. The Rocksino will be added to the existing master lease between MGM Resorts and MGP and the annual rent payment to MGP will increase by $60 million. Consistent with the Master Lease terms, 90 percent of this rent will be fixed and contractually grow at 2 percent per year until 2022.
"We are pleased to welcome the Hard Rock Rocksino and more than 700 employees to the MGM Resorts family and look forward to working with them during this transition," said Jim Murren, chairman & CEO of MGM Resorts International. "Since opening its doors in 2013, the Rocksino has cemented itself as the market leader in gaming and entertainment due to its superior asset quality, premium location and dedicated employees. We believe the Rocksino is a great fit for the MGM portfolio and will benefit from our capabilities as a leading global entertainment company and our award-winning M life Rewards Program. We anticipate revenue and profit growth from this combination."
"We are thrilled to have partnered with MGM Resorts for this quality asset," said James Stewart, CEO of MGP. "While there was significant third-party interest in the property, MGM Resorts offered a rental stream at the high end of our expected range and the continued security of our revenues as demonstrated by the strong rent coverage via the master lease. We expect this transaction to be accretive to AFFO, positioning the company for future dividend growth and further exhibiting our commitment to maximize shareholder value."
The Rocksino, which will be integrated into the MGM Resorts portfolio of best-in-class gaming and entertainment destinations, is a market-leading gaming, dining and entertainment facility located in Northfield, Ohio, a suburb approximately 17 miles southeast of downtown Cleveland and 18 miles north of Akron. For the last 12 months, ending June 30, 2018, the Rocksino reported approximately $293 million in net revenues and approximately $94 million in Adjusted EBITDAM. .
The property sits on 110 acres and consists of a 200,000-square-foot gaming facility with more than 2,300 video lottery terminals, and a variety of retail and food and beverage outlets, as well as entertainment venues, including a 1,900-seat music venue and a 250-seat event space. It also includes a year-round horse racetrack and a gas station and car wash.
The transaction is expected to close in the first half of 2019 and is subject to customary closing conditions and regulatory approvals.