Blackstone Preparing to Sell Las Vegas Strip Casino and Luxury Hotel

By Craig Karmin 

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 is 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 [e-mail]

(END) Dow Jones Newswires

April 17, 2019 10:28 ET (14:28 GMT)

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