Today, Blackstone Real Estate Partners confirmed the sale of the Cosmopolitan of Las Vegas. The casino operation of the property was bought by MGM Resorts for a sum of $1.625 billion.
The real estate assets of The Cosmopolitan will be bought by The Cherng Family Trust, Stonepeak Partners, and Blackstone Real Estate Income Trust. The total purchase price for the property amounts to $5.65 billion.
The transaction is anticipated to be finalized in the first half of 2022. As is typical, the sale is contingent on obtaining regulatory approvals and meeting other standard closing conditions.
A Las Vegas casino deal seven years in the making
In 2014, Blackstone acquired The Cosmopolitan for $1.7 billion with a plan to renovate and enhance its operations before reselling it. Over the past seven years, approximately $500 million has been spent on upgrading the property by The Cosmopolitan.
The sale of The Cosmopolitan was anticipated after Blackstone declared it was on the market less than a month ago. Tyler Henritze, who heads acquisitions Americas for Blackstone Real Estate, made the following remarks about the deal:
“This transaction highlights Blackstone’s capacity to purchase and revamp large, intricate assets. As the proprietors of The Cosmopolitan, we infused strategic capital and applied our knowledge and experience in the hospitality industry to establish the most vibrant destination on the Las Vegas Strip.”
Blackstone receives an excellent return on its initial investment of $1.7 billion through the $5.65 million deal.
As with many recent Las Vegas casino sales, the operator will differ from the real estate owner. This deal is significant for Blackstone, but it also represents a substantial addition to MGM Resorts’ Vegas Strip portfolio.
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. This split sale is similar to Las Vegas Sands’ earlier this year.
MGM Resorts intends to run the casino for 30 years, despite not owning the land. Upon closing the deal, they will engage in a lease agreement for the same period. The agreement will encompass three renewal options, each lasting 10 years.
The following statement about the deal was made by Bill Hornbuckle, CEO & President of MGM Resorts:
The globally recognized Cosmopolitan brand, renowned for its unique clientele and superior quality products and experiences, aligns perfectly with our portfolio, advancing our goal of becoming the world’s leading gaming entertainment company. We eagerly anticipate the inclusion of The Cosmopolitan’s guests and employees into the MGM Resorts family.
The Cosmopolitan won’t undergo immediate changes. The establishment will continue to be operated by the current management until some point in the first half of 2022.
A new M Life Rewards property
MGM Resorts has yet to disclose detailed plans for the property. There’s a strong possibility that The Cosmopolitan will be incorporated into its M Life Rewards casino loyalty club program. Based on MGM Resorts’ latest earnings report, the M Life Rewards program boasts 36 million members.
The following Las Vegas casinos will be joined by The Cosmopolitan in the rewards program:
- Aria
- Bellagio
- Excalibur
- Luxor
- Mandalay Bay
- MGM Grand
- The Mirage
- New York-New York
- Park MGM
The Cosmopolitan will instantly join the elite MGM Resorts Las Vegas luxury properties, Aria and Bellagio. Interestingly, The Cosmopolitan is geographically situated between these two properties.
Guests can also earn comps for use in Las Vegas at M Life Rewards’ casinos located outside of Las Vegas.
- Beau Rivage (MS)
- Borgata (NJ)
- Empire City Casino (NY)
- MGM Springfield (MA)
- MGM National Harbor (MD)
- Gold Strike (MS)
- MGM Grand Detroit (MI)
- MGM Northfield Park (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.
Furthermore, M Life Rewards is in partnership with Hyatt Hotels. Currently, The Cosmopolitan is the sole hotel affiliated with Marriott on the Vegas Strip. This part of the deal might not sit well with existing guests of The Cosmopolitan.
Will The Cosmopolitan remain the right amount of wrong?
The Cosmopolitan, when it first launched in 2010, employed a variety of atypical marketing strategies to distinguish itself from rivals. It presented itself as a Las Vegas casino with the “right amount of wrong”.
As an independently run casino, The Cosmopolitan could operate differently from its corporate rivals. The establishment was not bound by the corporate policies that other casinos adhere to.
Since its inauguration, The Cosmopolitan has provided a distinctive experience for its guests. There’s a chance that MGM Resorts may allow the property to retain its unique character. Although MGM’s properties all operate in a similar manner, each has its own set of offerings such as restaurants and shows.
The corporate synergy of MGM Resorts is likely to modify the experience to a certain degree. Aspects such as hotel room amenities are expected to become standardized with Aria and Bellagio. MGM categorizes its properties into different tiers.
For instance, Aria and Bellagio provide higher quality sheets, towels, and toiletries compared to Luxor and Excalibur. It’s the distinctive minor details that have elevated The Cosmopolitan’s value, potentially making it worth over $5 billion.
The operations of the casino may not vary significantly since the current CEO, Bill McBeath, was an employee 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 currently determine precisely how it will change.
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