MGM Resorts International and MGM Growth Properties LLC will acquire all of the operating assets of the Hard Rock Rocksino Northfield Park 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 and CEO of MGM Resorts International, in a statement. "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." James Stewart, CEO of MGP, said in a statement, "We are thrilled to have partnered with MGM Resorts for this quality asset. 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, has for the last 12 months, ending June 30, 2018, reported approximately $293 million in net revenues and approximately $94 million in Adjusted EBITDAM. The Rocksino has led the Ohio gaming market in total Gross Gaming Revenue for 35 of the last 39 months. Dan D'Arrigo, executive vice president CFO of MGM Resorts International, said in a statement, "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. 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 transaction is expected to close in the first half of 2019, later than was originally announced, and is subject to customary closing conditions and regulatory approvals.
