MGM Resorts seals $275m deal for Ohio’s Hard Rock Rocksino

MGM Resorts seals $275m deal for Ohio’s Hard Rock Rocksino

Thursday, September 20, 2018 Posted by News Team
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Property was acquired by MGM Growth Partners in July this year

MGM Resorts International has finalised a deal with its sister company, real estate investment trust MGM Growth Properties (MGP) to acquire the operations of the Ohio-based Hard Rock Rocksino for $275m. 

The agreement will see MGM Resorts acquire all of the Hard Rock Rocksino Northfield Park’s operating assets, and lease the real property associated with the venue from a subsidiary of MGP.

The Rocksino will be added to the master lease between MGM Resorts and MGP, with the operator’s annual rent payment increasing by $60m as a result. Per the existing master lease terms, 90% of the rent will be fixed, and contractually grow at 2% 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," MGM Resorts chairman and chief executive Jim Murren said. "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.”

The Rocksino is to be integrated into MGM Resorts’ portfolio of gaming and entertainment destinations. It is based in Northfield, a suburb around 17 miles south-east of Cleveland, Ohio. 

For the year ended June 30th, 2018, the venue reported net revenue of $293m, despite not hosting table games, and $94m in adjusted earnings before interest, tax, depreciation and amortisation. It has generated the highest gross gaming revenue in the state’s casino industry for 35 of the last 39 months.

It hosts a 200,000 square-foot gaming facility with more than 2,300 video lottery terminals and a variety of retail, food and beverage outlets, as well as a 1,900-seat music venue and a 250-seat event space. It also features a year-round horse track, gas station and car wash. 

"The Rocksino's attractive location, market leadership, and superior non-gaming offerings complement our portfolio of quality destinations, and we believe there are significant opportunities for MGM Resorts to further drive growth through our customer loyalty program and our operating expertise and scale,”  MGM Resorts executive vice president and chief financial officer Dan D’Arrigo said. “We believe this accretive transaction will enhance our free cash flow generation and, once fully integrated, will represent a multiple of approximately six times Adjusted EBITDA, which we expect will only improve further in following years."

The venue was acquired by MGP in a $1.06bn deal from Milstein Entertainment LLC in July this year. 

"We are thrilled to have partnered with MGM Resorts for this quality asset,” MGP chief executive James Stewart said. “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 transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close during the first half of 2019.

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