Hard Rock coming to Vegas Strip after iconic deal
Hard Rock International will make its way to the Las Vegas Strip after spending $1.075 billion for the operating rights to the Mirage.
MGM Resorts International confirmed in November that it was selling off the gaming rights to the venue, which it acquired in 2000 as part of a broader $4.4 billion transaction that also includes the Bellagio, Treasure Island and several other Nevada properties and casinos in Australia, Detroit and Mississippi.
THe real estate assets of the Mirage are owned by MGM Growth Properties, which is being acquired by VICI Properties.
Hard Rock, the gaming arm of the Seminole Tribe, “will enter into a long-term lease agreement with VICI Properties for the real estate property of The Mirage.”
Financial terms of that arrangement weren’t disclosed, but MGM was paying $90 million in annual rent on the Mirage.
Hard Rock beats out rivals to get valuable Strip exposure
Hard Rock has long been attached to rumours involving Las Vegas Strip assets and the company hasn’t shied away from that speculation.
“Prior to 2020, Hard Rock International had no previous involvement with the Hard Rock Hotel and Casino in Las Vegas,” the operator said in a statement.
“HRI purchased the licensing and naming rights for Hard Rock Hotel and Casino Las Vegas in May 2020 and vowed to bring the iconic brand to the Las Vegas Strip when the right opportunity presented itself.”
Hard Rock’s Las Vegas entry increases the presence of tribal operators in the largest domestic casino centre.
Mohegan Gaming and Entertainment runs the gaming operations at Virgin Hotels Las Vegas and earlier this year, Red Rock Resorts sold the Palms Casino Resort to the San Manuel Band of Mission Indians of California for $650 million.
Neither the Palms nor Virgin are on the Strip, indicating Hard Rock is beating rivals to the most desirable stretch of gaming assets in the US.
Hard Rock confirmed it will build a guitar-shaped hotel at the Mirage property and that the venue will be renamed Hard Rock Las Vegas.
MGM is retaining rights to the Mirage name, licensing it to Hard Rock for three years up to the official name change. That agreement is royalty-free.
The transaction is a position one for MGM, as it adds to the company’s burgeoning cash stockpile and exceeds some analysts’ estimates in terms of price.
Previously, there was sell-side chatter that selling the Mirage gaming rights would result in proceeds of $500 million to $600 million, but after taxes and fees, MGM estimates it will clear $815 million.
The price for the Mirage operating rights was below the $2.25 billion Apollo Global Management paid for the Venetian and Sands Convention rights in early 2021.
In September, MGM shelled out $1.6 billion to acquire Cosmopolitan’s operating rights from Blackstone.
In 2019, Mirage generated earnings before interest, tax, depreciation, amortisation and restructuring or rent costs of $154 million, according to MGM.
MGM sell off praised by investors
In an earnings call to investors after its third quarter results in November, MGM chief executive officer Bill Hornbuckle said the Mirage was in the centre of the Strip and built to last.
“But as we look at capital allocation and we look at the notion of diversification, we have enough of Las Vegas.”
Bernstein Research said the sale would be a good thing.
The property had $150 million of earnings before interest, tax, depreciation and amortisation in 2019 and therefore a sale price of $600 million would be conservative the firm said, adding that management had given no guidance on timing or price.
“The property is not adjacent to any other MGM properties and needs capital investment to stay competitive,” the note said.
“MGM has other uses for its capital and is looking to reduce slightly its LV Strip exposure during a good valuation period.”
MGM also has a renewed focus on building its digital assets.
Bernstein said BetMGM, its joint venture with Entain, was the market leader in the combined sports betting and iGaming market in the United States, with a 23 per cent share.
