Today, Blackstone Real Estate Partners announced that they have sold the Cosmopolitan of Las Vegas. The casino operation of the property was bought by MGM Resorts for $1.625 billion.
The real estate assets of The Cosmopolitan will be acquired by The Cherng Family Trust, Stonepeak Partners, and Blackstone Real Estate Income Trust. The combined sales price of the property amounts to $5.65 billion.
The transaction is anticipated to be finalized in the first half of 2022. As is standard, the sale hinges on obtaining regulatory approvals and satisfying other typical closing conditions.
A Las Vegas casino deal seven years in the making
In 2014, Blackstone acquired The Cosmopolitan for $1.7 billion. The company always intended to renovate and enhance operations of the property before putting it up for sale. Over the past seven years, approximately $500 million was invested by The Cosmopolitan into property upgrades.
The sale of The Cosmopolitan was anticipated since Blackstone declared it was on the market less than a month ago. Here’s what Tyler Henritze, Blackstone Real Estate’s Head of Acquisitions Americas, had to say about the transaction:
“This transaction highlights Blackstone’s skill in acquiring and transforming large, complex assets. Our ownership of The Cosmopolitan involved strategic capital investment and the application of our expertise and experience in the lodging industry, enabling us to develop the most vibrant destination on the Las Vegas Strip.”
The deal worth $5.65 million provides Blackstone with an outstanding return on its initial investment of $1.7 billion.
Just as with numerous recent Las Vegas casino sales, the operator will differ from the real estate owner. This deal represents a major coup for Blackstone, while also significantly augmenting MGM Resorts’ presence on the Vegas Strip.
MGM Resorts will operate the Cosmopolitan
MGM Resorts is purchasing the operations of The Cosmopolitan of Las Vegas for a cash payment of $1.625 billion, mirroring a similar split sale by Las Vegas Sands earlier in the year.
MGM Resorts intends to run the casino for 30 years despite not owning the land. Upon the deal’s closure, MGM Resorts will commit to a 30-year lease agreement. The deal encompasses three 10-year renewal options.
The following statement regarding the deal was made by Bill Hornbuckle, CEO & President of MGM Resorts:
The Cosmopolitan brand is globally acknowledged for its distinct clientele and superior products and experiences, making it an excellent addition to our portfolio and aligning with our goal to be the leading gaming entertainment company worldwide. We eagerly anticipate welcoming the guests and employees of The Cosmopolitan into the MGM Resorts family.
The Cosmopolitan will not undergo immediate changes. The current management will maintain control of the property until some point in the first half of 2022.
A new M Life Rewards property
MGM Resorts has not yet announced specific plans for the property. However, it is probable that they will include The Cosmopolitan in its M Life Rewards casino loyalty club program. As per MGM Resorts’ latest earnings report, M Life Rewards has a membership of 36 million.
The following Las Vegas casinos will be joined by The Cosmopolitan in the rewards program:
- Aria
- Bellagio
- Excalibur
- Luxor
- Bay of Mandalay
- Grand MGM
- The Illusion
- New York, New York
- MGM Park
The Cosmopolitan will instantaneously join the top-tier Las Vegas luxury properties of MGM Resorts, Aria and Bellagio. Interestingly, The Cosmopolitan is physically situated between these two properties.
M Life Rewards also operates casinos outside Las Vegas, where guests can accumulate comps for use in Las Vegas.
- Beau Rivage, Mississippi
- Borgata, New Jersey
- Casino Empire City (NY)
- Springfield MGM (MA)
- National Harbor MGM (MD)
- MS Gold Strike
- MI’s MGM Grand Detroit
- Northfield Park MGM (OH)
More visitors to Las Vegas will have access to discounts and complimentary rooms, meals, and shows at The Cosmopolitan by joining M Life Rewards.
Moreover, M Life Rewards is affiliated with Hyatt Hotels. Presently, The Cosmopolitan is the sole hotel associated with Marriott on the Vegas Strip. Current guests of The Cosmopolitan might not be pleased with this aspect of the agreement.
Will The Cosmopolitan remain the right amount of wrong?
The Cosmopolitan, upon its initial opening in 2010, deployed a series of unconventional marketing strategies to distinguish itself from competitors. It promoted itself as a Las Vegas casino offering the “right amount of wrong.”
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As an independently managed casino, The Cosmopolitan had the freedom to operate differently than its corporate competitors. The property wasn’t bound by the corporate guidelines that other casinos follow.
From the time it opened, The Cosmopolitan has provided a distinctive experience for its guests. It is highly likely that MGM Resorts might let the property maintain its uniqueness. Even though MGM’s properties have a variety of features such as restaurants, shows, etc, they all function in a similar manner.
The corporate synergy of MGM Resorts is likely to alter the experience to a certain degree. Elements such as hotel room amenities are expected to become standardized across Aria and Bellagio. MGM implements varying tiers for its different properties.
For instance, Aria and Bellagio offer superior quality sheets, towels, and toiletries compared to Luxor and Excalibur. The Cosmopolitan’s distinctive and minor details have enhanced its value, potentially making it sellable for over $5 billion.
The operations of the casino may not vary significantly, given that the current CEO, Bill McBeath, was employed at MGM Resorts from 2007 to 2012.
The experience at The Cosmopolitan will probably change in the latter half of next year. However, we can’t determine exactly how it will change at this moment.
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