At the beginning of the week, The Blackstone Group revealed that it has reached an agreement to sell The Cosmopolitan in a $5.65-billion deal. The luxurious hotel and casino situated on the Las Vegas Strip is to be purchased by the US gambling giant MGM Resorts.
The newly-announced transaction is set to separate the casino operations of the property from the hotel ownership. The high-end casino and hotel complex is to be acquired in a simultaneous deal by three investors, including one of the real-estate funds owned by Blackstone, an entity controlled by Andrew Cherng’s family and Stonepeak Infrastructure Partners, for more than $4 billion.
Once the deal is finalized, MGM Resorts is set to enter into a 30-year lease agreement with the option to renew the deal three times for a 10-year period. The US casino operator is set to pay rent of $200 million on an annual basis, with the sum set to increase by 2% every year for the first 15 years of the agreement. As it was officially announced, MGM Resorts International will take over the operations of the 3,000-room hotel, which also incorporates a casino, a nightclub, restaurants and bars, for $1.6 billion.
The takeover deal was confirmed by both Blackstone and MGM Resorts on September 27th.
The president and chief executive officer of MGM Resorts, Bill Hornbuckle, described The Cosmopolitan as an ideal fit for the portfolio of its company, which already owns 31 casino and hotel properties in the US, Japan and Macau.
Blackstone Bought the Struggling Casino and Hotel in 2014
The current price of the acquisition deal for The Cosmopolitan hotel and casino is more than three times the price that was initially paid by The Blackstone Group at the time it took over the property.
Almost a decade ago, The Cosmopolitan was considered unsuccessful, which forced Deutsche Bank to dispose of the asset after spending almost $4 billion on the property.
The two-tower hotel and casino property was acquired by Blackstone from Deutsche Bank seven years ago for approximately $1.7 billion, with the group having spent an extra $500 million to upgrade the facility by making some refurbishments, renovating the guest rooms, adding new dining facilities and building more luxury suites. Apart from the 3,032 hotel rooms, the hotel and casino venue, which is situated on the Las Vegas Strip along with other MGM-operated properties, also features a 110,000-square-foot casino, massive meeting space, a 3,200-seat theater, as well as a nightclub, and over 20 bars and restaurants.
Also, it seems that the once bad luck of the iconic Las Vegas-based property changed, with Blackstone revealing that as of September 24th, 87% of the hotel rooms were occupied this month, at an average rate of $448 a night.
Reportedly, The Blackstone Group addressed its investors through a private letter, informing them that the acquisition marked its most profitable single real estate asset sale so far. According to the Wall Street Journal, the profits from the sale would amount to over $4.1 billion.