The Seminole Tribe of Florida has reached an agreement to purchase the operations of The Mirage Hotel & Casino on the Las Vegas Strip for $1.075 billion in cash. Plans include construction a Hard Rock signature: a guitar-shaped hotel.
The deal announced late Monday by MGM Resorts International and Hard Rock International confirms the speculation that Hard Rock was looking to operate in Las Vegas. MGM had previously said the operations were for sale.
The transaction is expected to close in the second half of 2022 for the Seminole Tribe, which operates as Hard Rock International.
The Mirage opened in 1989 and was acquired by MGM Resorts in 2000. The iconic property, located at the heart of the Las Vegas Strip, is known worldwide for its 90-foot Strip-side volcano.
Under the terms of the agreement, MGM Resorts will retain The Mirage name and brand, licensing it to Hard Rock royalty free for a maximum period of three years, while it finalizes its plans to rebrand the property.
The Mirage will become the first tribal casino on the Strip. The San Manuel Band of Mission Indians is set to close on its acquisition of the off-Strip Palms from Red Rock Resorts by the end of the month. The Mohegan Sun runs the casino operations of the off-Strip Virgin Hotels Las Vegas, but doesn’t have an ownership stake.
“We are honored to welcome The Mirage’s 3,500 team members to the Hard Rock family,” said Jim Allen, Chairman of Hard Rock International. “When complete, Hard Rock Las Vegas will be a fully integrated resort welcoming meetings, groups, tourists and casino guests from around the world to its nearly 80 acre center-Strip location.”
Prior to 2020, Hard Rock International had no previous involvement with the Hard Rock Hotel & Casino in Las Vegas. HRI purchased the licensing and naming rights for Hard Rock Hotel & Casino Las Vegas in May 2020 and vowed to bring the iconic brand to the Las Vegas Strip when the right opportunity presented itself.
“This transaction is a significant milestone for MGM Resorts and Las Vegas,” said Bill Hornbuckle, CEO and President, MGM Resorts International. “As part of the team that opened The Mirage in 1989, I know firsthand how special it is and what a great opportunity it presents to the Hard Rock team.”
Paul Salem, chairman of MGM’s board of directors, said the announcement marks the culmination of a series of transformational transactions for MGM Resorts during the last several years.
“The monetization of our entire real property portfolio, together with the addition of CityCenter and our agreement to acquire The Cosmopolitan of Las Vegas, will position the company with a fortress balance sheet, premier portfolio, and significant financial resources to pursue our strategic objectives.”
MGM announced that the purchase price is 17 times multiple on its 2019 adjusted property earnings. For the 12 months ended December 31, 2019, The Mirage reported adjusted property earnings of $154 million. At the closing of the transaction, MGM Resorts’ master lease that currently includes The Mirage will be amended to reduce the annual rent by $90 million. The company expects net cash proceeds after taxes and estimated fees to be approximately $815 million from The Mirage sale.
“This is a fantastic outcome for the company, as we are able to re-prioritize future capital expenditures toward opportunities that will enhance the customer experience at our other locations in Las Vegas,” said Jonathan Halkyard, CFO & treasurer of MGM Resorts International. “We appreciate VICI, as the real estate owner of The Mirage once its acquisition of MGM Growth Properties closes, working constructively with Hard Rock to facilitate a new lease agreement.”
As it relates to use of proceeds, Halkyard said that MGM will “remain disciplined allocators of our capital to maximize shareholder value. This consists of maintaining a strong balance sheet, returning cash to shareholders, and pursuing targeted growth opportunities that advance our vision to be the world’s premier gaming entertainment company.”
Casino consultant Brendan Bussmann, a partner with Global Market Advisors, said Hard Rock has been shopping for an asset on the Strip for a significant amount of time and rumors swirled about The Cosmopolitan and the Venetian.
“Buying the operations of one of the iconic venues on the Strip and developing the (famed) guitar on some of the vacant land will make it pretty special,” Bussmann said. “It’s bringing back one big name that’s been part of Las Vegas (under a different developer at the former Hard Rock) to the Strip.”
Hard Rock has not only a domestic database, but an international one as well, Bussmann said. Hard Rock International has venues in 68 countries spanning 241 locations that include owned/licensed or managed hotels, casinos, Rock Shops, live performance venues and cafés.
“I think Hard Rock gives the image of a hip rock-and-roll type of crowd that goes across a couple of generations,” Bussmann said. “It’s more of a lifestyle brand. As you see with their property in Hollywood (Florida) and around the world, they have developed a good operating structure.”