Blackstone seeks to sell the Cosmopolitan of Las Vegas

Blackstone Group is working with Deutsche Bank AG and PJT Partners Inc. to explore strategic options for the Cosmopolitan hotel and casino in Las Vegas and solicit interest from potential buyers for the resort, which could fetch USD 4 billion or more, according to sources quoted by Bloomberg and The Wall Street Journal on Wednesday. Ken Caplan, Blackstone’s co-head of real estate, described the investment as a “classic buy-it, fix-it, sell-it opportunity” in a video posted on the company’s website. Representatives for Blackstone and Deutsche Bank declined to comment, Bloomberg reported.

Blackstone acquired the hotel and casino for USD 1.73 billion in 2014 from Deutsche Bank, which gained ownership through a crisis-related loan default in 2008. It has since spent another USD 500 million on improvements, completing construction on the top four floors, redesigning over 3,000 guest rooms and renovating spaces including the high-limit slots area. It is the only major operating casino on The Strip to enter the market in more than 10 years, though smaller and non-operating Las Vegas properties have changed hands.

The opportunity to own a prime-location luxury hotel and casino on the Strip is expected to attract the attention of a variety of potential buyers in the industry, including big Las Vegas operators, Asian firms, or US regional casino companies. A sale could bring USD 4 billion or more for the Cosmopolitan if it goes to another casino operator, which would be able to plug the hotel into its larger gambling platform and hotel system and derive more business from the property, according to some real estate and casino executives, quoted by the WSJ.

Blackstone ran the Cosmopolitan as an independent property. Its operating performance, as measured by earnings before interest, taxes, depreciation and amortization, has nearly tripled since 2014 to more than USD 300 million, according to the same sources.

Blackstone is selling the Cosmopolitan as Las Vegas tourism has slowed down from its peak of nearly 43 million visitors in 2016. The number of visitors fell closer to 42 million the past two years, though Union Gaming analyst John DeCree said in a recent report that there are “a number of visitation catalysts ahead” including the National Football League’s Oakland Raiders coming to Las Vegas.

Las Vegas convention attendance in February increased by 8.5% year-over-year with the return of some large events, like the National Association of Home Builders, according to the Las Vegas Convention and Visitors Authority.

Before Blackstone bought it, the Cosmopolitan, which first opened in 2010, was one of the biggest real estate busts in the US of all time. Deutsche Bank took over the property in 2008 after the original owner defaulted, and it spent about USD 4 billion on it before selling it to Blackstone for less than half that amount. Blackstone converted the hotel’s top four floors, which were unfinished at the time of its purchase, into 21 large suites that were aimed at high rollers around the world. It also added 18 new bars and restaurants in an effort to appeal to a younger crowd.

Cosmopolitan isn’t the only Las Vegas property for sale. Billionaire Carl Icahn is pressing Caesars Entertainment to seek a buyer. Icahn, who holds an 18 percent stake in the company, the largest owner of US casinos, controls three board seats. Caesars named industry veteran Anthony Rodio as its CEO this week.

Furthermore, real estate mogul Steven Witkoff said this week he plans to complete the Drew Las Vegas in the second quarter of 2022. That property, which he acquired from Icahn for USD 600 million two years ago, was also abandoned during the meltdown. Another project crippled during that period, the unfinished Echelon, is being completed by Genting and will be called Resorts World.