INTRODUCTORY NOTE
As previously disclosed, on September 26, 2021, MGM Resorts International, a Delaware corporation (the “Company”), entered into a Purchase Agreement (together with the exhibits and schedules attached thereto, the “Purchase Agreement”) by and among the Company, BRE Spade Parent LLC, a Delaware limited liability company, BRE Spade PropCo Holdings LLC, a Delaware limited liability company, BRE Spade Mezz 1 LLC, a Delaware limited liability company and BRE Spade Voteco LLC, a Delaware limited liability company. The Purchase Agreement provides for the acquisition of the equity interests of NP1 Hong Kong Limited, a Hong Kong limited company (“NP1HK”), NP1 Pegasus LLC, a Delaware limited liability company (“NP1 Pegasus”), and Nevada Property 1 LLC, a Delaware limited liability company (“Opco”), collectively, the operating component of The Cosmopolitan of Las Vegas (the “Interests”), on the terms and subject to the conditions of the Purchase Agreement (the “Transaction”).
The Transaction closed on May 17, 2022 (the “Closing Date”). Pursuant to the Purchase Agreement, the Company purchased all of the Interests for cash consideration of $1.625 billion plus customary purchase price adjustments (the “Interests Purchase”). As a result of the Interests Purchase, Opco, NP1HK and NP1 Pegasus have become wholly-owned subsidiaries of the Company. TCOLV Propco LLC, a Delaware limited liability company (“Propco”), which leased the Real Property (as defined in the Purchase Agreement) to Opco prior to the closing of the transactions contemplated under the Purchase Agreement (the “Closing”) conveyed the Real Property to Marker LV Propco LLC, a Delaware limited liability company (the “Landlord”), which now leases the Real Property to Opco pursuant to the Lease by and between the Landlord and Opco (the “New Lease”).
The foregoing description of the Purchase Agreement is included to provide you with information regarding its terms. It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 28, 2021, and is incorporated herein by reference.
Item 1.01 Entry into a Material Definitive Agreement.
The disclosure under the Introductory Note is incorporated herein by reference.
New Lease
Pursuant to the Purchase Agreement, the Real Property was leased by the Landlord to Opco pursuant to the New Lease with an initial base rent of $200 million per annum (the “Rent”) for a term of 30 years with three 10-year renewal options. The Rent will escalate annually throughout the term of the New Lease at a rate of 2% per annum for the first 15 years and thereafter equal to the greater of 2% and the CPI increase during the prior year subject to a cap of 3%. In addition, the New Lease requires that Opco be obligated to spend a specified percentage of net revenues over a rolling five-year period at the Real Property on capital expenditures and for Opco and the Company to comply with certain financial covenants, which, if not met, will require Opco to maintain cash security or provide one or more letters of credit in favor of the Landlord in an amount equal to the rent for the succeeding one year period. The Company provided a guarantee of Opco’s obligations under the New Lease. The representations, warranties and covenants contained in the New Lease were made only for purposes of the New Lease and as of the specific date (or dates) set forth therein and were solely for the benefit of the parties to such agreement and are subject to certain limitations as agreed upon by the contracting parties. In addition, the representations, warranties and covenants contained in the New Lease may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries of the New Lease and should not rely on the representations, warranties and covenants contained therein, or any descriptions thereof, as characterizations of the actual state of facts or conditions of the Company, Opco or any other parties thereto.
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