Blackstone hits jackpot with $5.7bn Cosmopolitan casino sale

Blackstone Group LP updates

Blackstone has agreed to sell The Cosmopolitan in Las Vegas for $5.7bn, completing a turnround at a resort that had been blighted by losses and labour disputes before Stephen Schwarzman’s private equity firm took ownership seven years ago.

MGM Resorts International is paying $1.6bn to take over operations of the 3,000-room hotel overlooking the Las Vegas Strip, which incorporates a nightclub, a casino, and more than two dozen bars and restaurants.

In a simultaneous deal, the high-rise complex itself will be acquired by a trio of investors comprising Stonepeak Infrastructure Partners, a vehicle controlled by the family of Panda Express founder Andrew Cherng, and one of Blackstone’s own real estate funds.

“The management team and employees at The Cosmopolitan, led by [chief executive] Bill McBeath, flawlessly executed an ambitious business plan, including navigating a challenging period for the entire industry,” said Tyler Henritze, head of acquisitions for the Americas at Blackstone Real Estate.

Deutsche Bank sold The Cosmopolitan for $1.7bn in 2014, less than half of what it cost to build the resort.

The deal allowed the German lender to walk away from a property that had been posting net losses of $100m a year — and to extricate itself from an unplanned bet on the casino industry that began at the height of the financial crisis when developer Ian Eichner defaulted on a construction loan.

The beaten-down valuation helped load the dice in Blackstone’s favour. The Wall Street group invested more than $500m to build 67 new rooms and suites and renovate others that already required attention only a few years after the resort’s 2010 opening.

Blackstone also settled a labour dispute with the Unite Here union, which had fought with Deutsche over terms for 2,000 bartenders and culinary staff.

Las Vegas tourism has rebounded strongly this year after grinding to a halt last year during the height of the pandemic. About 3.3m people visited the desert city in July, not far off the 3.7m who visited in the same month in 2019, according to the Las Vegas Convention and Visitors Authority.

The revival vindicates Blackstone’s decision to double down on the sector last year, even as bookings dried up and asset values plummeted on fears that conventions and revellers might not return for several years.

Blackstone said that, in the three months to June, The Cosmopolitan reported financial performance “exceeding pre-Covid levels”.

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