Blackstone To Sell The Cosmopolitan Of Las Vegas For $5.65 Billion
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MGM Resorts International will acquire the operations of The Cosmopolitan, the luxury casino and hotel on the Las Vegas Strip, for $1.625 billion from private equity giant Blackstone.
Both MGM and Blackstone announced the deal on Monday.
The private equity firm’s Blackstone Real Estate Partners VII LP is selling the hotel and casino’s real estate assets to the Cherng Family Trust, which was started by billionaires Andrew and Peggy Cherng of fast-food chain Panda Express, alternative real estate investment firm Stonepeak Partners and Blackstone Real Estate Income Trust, Inc. for more than $4 billion.
Once the deal closes, MGM will enter into a 30-year lease agreement with three 10-year renewal options. The casino operator will pay $200 million in annual rent, which will increase annually 2% for the first 15 years.
Blackstone first bought The Cosmopolitan from Deutsche Bank for $1.7 billion in 2014. According to the Wall Street Journal, Blackstone told its investors through a private letter that the deal marked its most profitable sale of a single real estate asset ever. The profits from the sale would be more than $4.1 billion, WSJ reported.
Bill Hornbuckle, the CEO and president of MGM Resorts, said in a statement that The Cosmopolitan is an “ideal fit” for the company’s portfolio, which includes 31 hotels and casinos across the U.S., Macau and Japan like the Mandalay Bay, the Bellagio and MGM Grand.
Blackstone pumped $500 million worth of renovations into The Cosmopolitan, which has 3,032 rooms, since it purchased the property. The Cosmopolitan also has a 110,000 square-foot casino, 26 restaurants and bars, a 3,200-seat theater, a nightclub and 243,00 square feet of meeting space.
The property is on the Las Vegas Strip next to other properties MGM operates, including the Bellagio, the Aria, Park MGM and the MGM Grand.
This is not the first time MGM and Blackstone’s real estate investment trust have done business together in Las Vegas. In 2019, Blackstone Real Estate Income Trust, Inc. bought the Bellagio from MGM for $4.25 billion in a sale-leaseback transaction. In 2020, Blackstone Real Estate Income Trust, Inc. and MGM Growth Properties acquired the real estate assets of the MGM Grand and Mandalay Bay for $4.6 billion.
Las Vegas is Blackstone Real Estate Income Trust’s top market—17% of its portfolio lies in Sin City, the largest percentage of its portfolio in any U.S. city.
After a long recession due to the Covid-19 pandemic, Las Vegas has been on the upswing. In July, Sin City recorded its best financial performance in eight years with $794 million in gambling revenue. July posted a 46% increase compared to prepandemic revenue in July 2019, according to the Nevada Gaming Control Board. Statewide, gaming revenue hit $1.36 billion for the month, making July thefifthconsecutivebillion-dollar month and a 33% increase over July 2019.
In August, Macquarie Research referred to the outlook for Las Vegas as “upbeat,” with the expectation that Sin City will recover to prepandemic levels by mid-2022.
Earlier this summer, Vici Properties, a casino-focused real estate investment trust, announced that it would acquire MGM Growth Properties, which is controlled by MGM Resorts International, for $17.2 billion.
In March, nearly two months after casino mogul Sheldon Adelson passed away, Las Vegas Sands struck a deal to sell its Las Vegas properties, which include the Venetian Resort and the Sands Expo and Convention Center, to Apollo Global Management for $6.25 billion.
The transaction is expected to close in early 2022.
