Blackstone Explores Rare Sale of a Vegas Casino -- WSJ
April 18 2019 - 3:02AM
Dow Jones News
By Craig Karmin
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 18, 2019).
Blackstone Group LP is exploring a sale of the Cosmopolitan
hotel and casino, the rare instance of a major casino on the Las
Vegas Strip coming to the market.
Deutsche Bank AG and PJT Partners Inc. have been retained to
explore strategic alternatives for the property, including a sale,
people familiar with the matter said. Blackstone, the New
York-based investment firm, acquired the Cosmopolitan in 2014 for
$1.7 billion, and it has sunk another $500 million into finishing
and renovating the property.
The property is the only major operating casino on The Strip to
hit 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
such as Wynn Resorts and MGM Resorts International. The property
could also draw interest from Asian firms like Genting Group in
Kuala Lumpur, Malaysia, or U.S. regional casino companies, some
industry executives and bankers said.
A sale could bring $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. Blackstone ran the Cosmopolitan as an
independent property.
While the Cosmopolitan's casino is considered small by Las Vegas
Strip standards, the property's 3,000 room-hotel commands among the
highest average daily room rates on the Strip at more than $330,
according to company public filings and people familiar with the
matter.
The Cosmopolitan's operating performance, as measured by
earnings before interest, taxes, depreciation and amortization, has
nearly tripled since 2014 to more than $300 million, these people
said.
Blackstone is selling the Cosmopolitan as Las Vegas tourism has
cooled down a bit 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 was one of the
biggest real estate busts in the U.S. of all time. Deutsche Bank
took control of the property in 2008 after the original owner
defaulted, and it spent about $4 billion on the property before
selling it to Blackstone for less than half that amount.
Banks and Wall Street firms have had mixed records of success in
the casino world in the years since the financial crisis. Morgan
Stanley pulled out of Revel Atlantic City in 2010 and wrote down
nearly all of the $1.2 billion it spent on the project, The Wall
Street Journal has previously reported.
Billionaire investor Carl Icahn made a tidy profit in 2017, when
he sold the unfinished Fontainebleau Las Vegas for about $600
million. Now called the Drew Las Vegas, the property still hasn't
opened.
The Cosmopolitan first welcomed guests in 2010. Blackstone
acquired it four years later as part of the firm's broader bet that
Las Vegas would bounce back following a downturn, when casino and
convention business dried up. The firm also spent billions of
dollars acquiring Las Vegas office properties, industrial buildings
and single-family homes.
At the Cosmopolitan, 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.
Write to Craig Karmin at craig.karmin@wsj.com
(END) Dow Jones Newswires
April 18, 2019 02:47 ET (06:47 GMT)
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