Murren says the focus is on MGM 2020, downplays any deal for the Cosmopolitan By Howard Stutz, Executive Editor, CDC Gaming Reports April 30, 2019 at 5:00 pm Jim Murren attempted on Monday to stamp out speculation that MGM Resorts International wants to acquire the Cosmopolitan of Las Vegas, which was put up for sale two weeks ago. I’m not sure he succeeded. Jim Murren, right, appears with NHL Commissioner Gary Bettman at the AGA Sports Betting Summit in March. MGM’s CEO would rather have the investment community focus on the MGM 2020 corporate restructuring program, which the company expects will result in $300 million of additional cash flow by 2021. “The standard answer is not to comment on M&A (mergers and acquisitions),” Murren said in response to an analyst question on Monday’s first quarter earnings conference call. “I want to be clear that our path to creating shareholder value does not depend on M&A.” Murren never mentioned the Cosmopolitan by name during the call, instead referring obliquely to it as “a luxury property that is being marketed for sale.” MGM currently operates 10 resorts on the Strip and, to paraphrase a line from This Is Spinal Tap, Murren isn’t sure he’s ready to go to 11. There might even be a subtraction at some point. In January, MGM Resorts formed an ad-hoc board committee to appraise the company’s expansive real estate portfolio, which includes vacant parcels on both the north and south ends of Las Vegas Boulevard. “(The committee) made progress in evaluating numerous strategies to maximize the value of our assets, and working with outside advisers, has narrowed their analysis to a small handful of options,” Murren said. “While there’s no fixed timetable for their recommendation to the board, I expect it will take months, not quarters.” Murren, who is also MGM’s chairman, added, “We’re going to let the committee continue to do its work and present its recommendation. We’re not going to get ahead of them.” The Cosmopolitan is factored into the equation because of its location on the Strip between CityCenter and Bellagio. Plus, the expected $4 billion price tag leaves only a handful of companies as potential buyers. On the positive side, Murren said the “tremendous amount of interest in Las Vegas real estate, both non-gaming and gaming,” is good for MGM. “What that is doing is bringing a lot of attention both in terms of operators and in terms of real estate owners and investors to Las Vegas to look at the Valley,” Murren said. “Of course, we own about half of the Valley and so it’s good for us from the standpoint of having some good discussions. It’ll be interesting to watch what plays out.” The land associated with six of MGM’s Strip properties – plus The Park dining and entertainment district – is owned by real estate investment trust MGM Growth Properties. MGM Resorts owns 70 percent of MGM Growth and operates the properties through a lease agreement. Cosmopolitan of Las Vegas MGM Growth could make a deal for the Cosmopolitan and lease it back to MGM Resorts, similar to recent MGM Resorts-MGM Growth deals for casino properties in New York and Ohio. MGM Growth could also buy the Cosmopolitan and lease the property to another operating company, such as Penn National Gaming or Eldorado Resorts. “There hasn’t been a significant transaction in about a decade on the Strip,” Murren. “So we love what we own and operate. (But) we look at things all the time.” Murren’s fascination with the Cosmopolitan goes back more than a decade. He told me in a 2009 interview that he approached Deutsche Bank, which owned the once-troubled site, about swapping equity in the then-under construction CityCenter for the developing Cosmopolitan, as well as a loan of $1.2 billion to help complete the massive complex. “I thought it was a clever idea,” Murren said at the time. “Nobody else did. We would have the joint venture buy it, button it up and shut it down. We would make it phase two of CityCenter.” Deutsche Bank finished Cosmopolitan, opened the resort in December 2010, and sold the property to Blackstone four years later for $1.7 billion. Blackstone has since invested another $500 million into the resort. Now, Murren seems to have lost interest in the property. Instead, he hopes MGM Resorts can “over deliver” on the MGM 2020 venture, which he has said “is much more than a cost-cutting plan.” He expects MGM Resorts to have between $3.6 billion and $3.9 billion in annual cash flow following the restructuring. “It’s actually positive for MGM that there’s interest in Las Vegas as a market,” Murren said. “But our focus is on executing these plans because this is within our control. That’s the simplest way, the clearest way, of increasing shareholder value. We’re not going to let anything distract us from that.” Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.