Blackstone Selling Cosmopolitan Las Vegas for $5.65B in Lucrative Asset Trade

Posted on: September 27, 2021, 07:14h. 

Last updated on: September 28, 2021, 12:21h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Blackstone (NYSE:BX) is selling Cosmopolitan of Las Vegas for $5.65 billion, meaning the private equity behemoth nearly tripled its investment on the Strip venue seven years after acquiring it.

Cosmopolitan Las Vegas
Blackstone is selling Cosmopolitan Las Vegas for $5.65 billion, seen above. MGM is buying operational rights. (Image: Eater Vegas)

As was widely expected, MGM Resorts International (NYSE:MGM) is involved in the deal. Already the largest operator on the Strip, MGM is shelling out about $1.6 billion to purchase Cosmopolitan’s casino and hotel operating rights. A consortium consisting of the Cherng Family Trust, Stonepeak Partners, and Blackstone Real Estate Income Trust (BREIT) is paying approximately $4 billion for the property assets. The casino operator will sign a long-term net lease with that group.

“Blackstone implemented significant operational changes and invested over $500 million into the property to renovate nearly 3,000 guest rooms, build 67 new rooms and suites, enhance the food and beverage offerings and dramatically improve the gaming amenities and common areas,” said the private equity company in a statement.

The Cosmopolitan’s recent performance has been stronger than ever, exceeding pre-COVID levels in the second quarter of 2021,” according to the statement.

Blackstone acquired Cosmopolitan for $1.74 billion from Deutsche Bank in 2014. The transaction is slated to close in early 2022.

Sweet Deal for Blackstone

Reports of the integrated resort being for sale surfaced nearly two and a half years ago. They died down as Blackstone went on its own buying spree of Strip real estate assets, and high-end casino property deals ebbed following the onset of the coronavirus pandemic.

The glitzy Cosmopolitan ranks as one of Sin City’s relics of the global financial crisis with Deutsche Bank seizing control of the venue from developer Ian Bruce Eichner after he defaulted. The German banking giant was initially a creditor of Eichner, but ultimately took ownership of the venue, pouring $4 billion into it.

That investment didn’t pay off, as Deutsche Bank would sell the gaming property to Blackstone for $1.74 billion.

Based on that price and the $500 million the private equity firm spent to enhance the venue, not only did Blackstone roughly triple its money on the property, selling Cosmopolitan represents Blackstone’s most profitable single asset trade to date, according to the Wall Street Journal.

With BREIT getting a stake in the Cosmopolitan’s real estate assets, that Blackstone affiliate has interests in some of the most iconic Strip venues. BREIT is also MGM’s landlord at Bellagio and owns minority stakes in MGM Grand and Mandalay Bay.

Cosmopolitan Sale Extends Busy Period of Strip Deals

While MGM kept its cards close to its vest on a possible Cosmopolitan acquisition, it was widely believed that operator and Blackstone rival Apollo Global Management (NYSE:APO) was the most viable contenders at the price point the seller was seeking.

The deal extends a brisk pace of high-level asset sales and mergers involving Strip landlords this year. In March, Las Vegas Sands (NYSE:LVS) sold the Venetian Resort and Sands Expo and Convention Center on the Strip to Apollo and VICI Properties (NYSE:VICI) for $6.25 billion.

Last month, VICI said it’s acquiring rival MGM Growth Properties (NYSE:MGP) for $17.2 billion in stock, creating the biggest casino landlord.

As for the next Las Vegas gaming asset to be sold, it’s not immediately clear which one it will be or when a deal will commence. B ut the rumor mill is spinning with some recent speculation involving Caesars Entertainment (NASDAQ:CZR) potentially shopping Planet Hollywood. Caesars previously said it’s targeting divestment of one of its Las Vegas venues next year.