MGM Growth Properties, a spinoff of MGM Resorts International, has announced its purchase of the Hard Rock Rocksino Northfield Park in Northfield, Ohio, for $1.06 billion from Milstein Entertainment LLC. The company owned the racetrack prior to the opening of the Hard Rock Rocksino and will no longer be involved in the operations. The contract with Hard Rock International, which runs the property, was part of the sale, so it’s likely a new tenant will be recruited.
The rocksino has more than 2,300 video lottery terminals, retail, food and beverage, entertainment venues and a racetrack. The facility is licensed and managed by Hard Rock, which will continue under the ownership of MGM Growth Properties.
MGM Growth Properties, which owns a dozen MGM-branded casino properties, including three in Las Vegas, says it wants to sell the operating contract of the property to a willing operator (OpCo). It will rent the property for up to $60 million a year.
Union Gaming Group’s John DeCree says the deal makes sense for MGP and there should be no rush to find a new tenant.
“While we anticipate there are a number of interested parties in the Rocksino OpCo, we see no need for MGP to rush and sell the gaming license at a discount,” DeCree wrote in a note to investors. “First, MGP has ample TRS capacity, up to 20 percent of net income worth $55 million-$65 million based on our model and even more flexibility beyond that. The company could keep the asset on the books indefinitely without risking its REIT status. In addition, we believe MGM could serve as a backstop buyer if no one else is willing to pay a fair price. While regional casinos aren’t among MGM’s strategic priorities, MGM does own around 73 percent of MGP and has a significant economic interest in the deal being successful. If MGM did step in as the OpCo buyer, we believe the deal would be accretive and strategically beneficial, giving MGM access to a new and attractive presence in Cleveland.”
The plan is to close the deal in the second half of the year, using a mixture of cash and rent.