Blackstone To Sell The Cosmopolitan Las Vegas Property For $5.65 Billion

Private investment giant Blackstone has entered into an agreement to sell The Cosmopolitan Casino And Resort in Las Vegas for $5.65 billion. MGM Resorts will take control of operations while the property itself will be under the ownership of Stonepeak Partners, the Cherng Family Trusts, and Blackstone Real Estate Income Trust (BREIT).

According to the deal, MGM will pay $1.63 billion in cash for rights to operate the property. MGM has stated that this amount is eight times the resort’s earnings bere interest, tax, depreciation, and amortization. 

MGM Enters Into 30 Year Lease And Operation Agreement

MGM will be given a 30-year lease on the property from the new owners. Three lease renewal options will occur, one every ten years. Initial rent will be $200,000,000 per year with 2%-3% increases each year depending on the rate of inflation.

Bill Hornbuckle, chief executive, and president at MGM Resorts said, “We are proud to add The Cosmopolitan, a luxury resort, and casino on the Las Vegas Strip, to our portfolio. The Cosmopolitan brand is recognized around the world for its unique customer base and high-quality product and experiences, making it an ideal fit with our portfolio and furthering our vision to be the world’s premier gaming entertainment company. We look forward to welcoming The Cosmopolitan’s guests and employees to the MGM Resorts family.”

BREIT is a Blackstone-owned real estate investment fund. Stonepeak is an alternative investment fund that focuses primarily on infrastructure. Stonepeak itself spun off from Blackstone in 2011. Andrew Cherng, co-founder and chief executive of Panda Express, runs the Cherng Family Trust investment business.

Head of real estate at Stonepeak, Phill Solomond, explained the company’s reasoning for entering the deal, “Stonepeak, in partnership with the Cherng Family Trust, believes this transaction represents a fantastic opportunity to invest in the underlying real estate of The Cosmopolitan of Las Vegas, a solid asset with an irreplaceable location, durable cash flows, and the potential for additional upside

Investment And Renovation Pays Off

The property was acquired by Blackstone in 2014. The investment firm then spent about $500 million in a series of property enhancements and renovations. Chief financial officer at MGM resorts, Jonathan Halkyard, said the deal was particularly attractive because of the improvements Blackstone made.

“With over $500m of capital invested to upgrade the property since 2014, The Cosmopolitan offers an incredible opportunity to expand our customer base and will provide greater depth of choices for our guests in Las Vegas,” Halkyard said. “We believe that we can leverage MGM Resorts’ expertise, operating platform, and other highly achievable synergies to continue providing best-in-class service while driving growth for the property.”

Tyler Henritze, Blackstone Real Estate’s head of acquisitions for the Americas, spoke about the deal saying, “This transaction underscores Blackstone’s ability to acquire and transform large, complex assets. As owners of The Cosmopolitan, we invested strategic capital and brought our expertise and experience in the lodging space to create the most dynamic destination on the Las Vegas Strip.

“The management team and employees at The Cosmopolitan, led by CEO Bill McBeath, flawlessly executed an ambitious business plan, including navigating a challenging period for the entire industry, to position the property for such a high level of success.”

The deal is still subject to regulatory approval but is expected to close sometime in early 2022.

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