Cosmopolitan may be for sale on Las Vegas Strip

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April 19, 2019 By Richard N. Velotta

The company that owns The Cosmopolitan of Las Vegas has retained two investment banks to explore the possible sale of the 3,000-room Strip resort.

The Blackstone Group LP, a major player in the Southern Nevada real estate market, has retained Deutsche Bank AG and PJT Partners Inc. to explore strategic alternatives for the property, including a sale, according to sources familiar with the deal.

Chad Beynon, an analyst with Macquarie Research, told the Review-Journal The Cosmopolitan could sell for as high as 13 times its cash flow — which is more than $300 million — implying a price tag of $4 billion.

The property would be the first major operating casino on the Strip to go on the market in more than a decade.

Representatives of Blackstone and Wynn Resorts Ltd. — identified as a potential suitor for the property — declined comment on the reports.

Others identified MGM Resorts International as a potential buyer because the property lies between two MGM developments, Bellagio and CityCenter.

A spokesman for MGM Resorts could not be reached for comment Wednesday.

Limited buyers

Las Vegas real estate expert John Knott, executive vice president and the head of the Global Gaming Group at CBRE, but not a party to the sale, said there’s not a broad list of companies that could qualify for such a purchase. “You have to have the financial qualifications to perform before they even let you enter the process,” Knott said. “There probably will be a lot of wannabes that reach out to them that could create some noise. But there are others that want to be on the Strip, like Penn National or Boyd (Gaming Corp.), and MGM could have a strategic interest in it because it’s between their properties.”

John DeCree, an analyst at Las Vegas-based Union Gaming, said MGM Resorts, Wynn Resorts and Penn National could be potential buyers.

A spokesman for for Penn National could not be reached for comment. A spokesman for Boyd Gaming declined to comment.

MGM could team up with MGP, its real estate investment trust, while Penn could partner with Gaming and Leisure Properties, its REIT partner, to buy the property, DeCree said.

The Cosmopolitan sits betweenMGM Resorts luxury properties Bellagio and Aria, so it makes sense that MGM would look at it, Beynon said.

However, MGM has promised investors it would reduce leverage in the coming years. MGM could sell a property like The Mirage or Mandalay Bay to help finance the purchase of The Cosmopolitan, Beynon said.

Another potential buyer with financial wherewithal could be the Genting Group of Malaysia, which is building Resorts World Las Vegas about a mile north on the Strip.

Genting Group could not be reached for comment.

Private equity firms as well as foreign operators, including Australia’s Crown Resorts and Asia-based Galaxy Entertainment and Melco Resorts could be potential buyers, the analysts said.

Blackstone big in Las Vegas

Led by billionaire Stephen Schwarzman, Blackstone is no stranger to Las Vegas real estate. It bought hundreds of homes to turn into rentals after the market crashed in 2007. It also bought the 68-acre Hughes Center office park for $347 million in 2013, and downtown’s massive furniture-showroom hall, the 5.4 million-square-foot World Market Center, for an undisclosed sum last year.

The New York investment giant has acquired at least nine local apartment complexes since spring 2017 for $616 million total, Clark County records show. The most recent deal came June 6, when, according to the seller, Blackstone and a San Diego firm bought Solis at Flamingo, a 1980s-era property across from a foreclosed strip mall in the eastern Las Vegas Valley.

They paid $72 million — more than $20 million above what the seller paid just three years ago.

A flurry of potential Strip property transactions have had the gaming industry buzzing for days.

Las Vegas-based Caesars Entertainment Corp., in the midst of a corporate takeover by billionaire financier Carl Icahn, has been the subject of sales speculation with potential buyers Eldorado Resorts of Reno and Houston-based Landry’s Inc. waiting in the wings.

Icahn leveraged the hiring of a new CEO, Anthony Rodio, on Monday, fueling speculation that Icahn is calling the shots for the company. It’s unclear whether he wants to broker a sale or reform the company’s operation.

Blackstone acquired The Cosmopolitan in 2014 for $1.73 billion and invested $500 million to finish 21 large suites on the top four floors of one tower targeted for high rollers. It also renovated other rooms enabling the resort to command among the highest average daily room rates on the Strip, exceeding $300 a night. The company also added 18 new bars and restaurants in an effort to appeal to a younger crowd.

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