Blackstone to sell The Cosmopolitan for $5.65bn

December 2021 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

December 2021 Issue

In one of its most profitable property deals, private equity (PE) giant The Blackstone Group is to sell The Cosmopolitan of Las Vegas to American global hospitality and entertainment company MGM Resorts International for $5.65bn.

Under the terms of the agreement, MGM Resorts International will acquire the operations of The Cosmopolitan and sign a long-term net lease with a partnership between the Cherng Family Trust, Stonepeak Partners and Blackstone Real Estate Income Trust (BREIT), which will acquire The Cosmopolitan’s real estate assets.

A global leader in real estate investing, Blackstone’s real estate business was founded in 1991 and has $208bn of investor capital under management. It is the largest owner of commercial real estate globally, owning and operating assets across every major geography and sector, including logistics, multifamily and single-family housing, office, hospitality and retail.

Since acquiring The Cosmopolitan in 2014, Blackstone has transformed the resort into the leading destination on the Las Vegas Strip, implementing significant operational changes and investing over $500m into the property to renovate nearly 3000 guest rooms, build 67 new rooms and suites, enhance the food and beverage offerings and dramatically improve the gaming amenities and common areas.

As a result of these enhancements, which includes agreements with unions at the property that secured approximately 3000 jobs, The Cosmopolitan’s recent performance has been stronger than ever, exceeding pre-COVID-19 pandemic levels in the second quarter of 2021.

“This transaction underscores Blackstone’s ability to acquire and transform large, complex assets,” said Tyler Henritze, head of acquisitions Americas for Blackstone Real Estate. “As owners of The Cosmopolitan, we invested strategic capital and brought our expertise and experience in the lodging space to create the most dynamic destination on the Las Vegas Strip.

“The management team and employees at The Cosmopolitan, led by chief executive Bill McBeath, flawlessly executed an ambitious business plan, including navigating a challenging period for the entire industry, to position the property for such a high level of success,” he added.

Deutsche Bank Securities Inc. and PJT Partners served as financial advisers to Blackstone, with Simpson Thacher & Bartlett LLP serving as legal counsel. Latham & Watkins LLP served as legal counsel to Stonepeak Partners and Sklar Kirsh LLP served as legal counsel to the Cherng Family Trust.

Headquartered in New York, Stonepeak is a leading alternative investment firm specialising in infrastructure and real assets with approximately $39bn of assets under management. Its lease agreement partner, the Cherng Family Trust, was founded in 2005 and is a dynamic, single family office organisation accountable for the administration, finances, investments and charitable initiatives of the Cherng family.

The transaction is expected to close in early 2022, subject to regulatory approvals and other customary closing conditions.

Phill Solomond, head of real estate at Stonepeak, said: “Stonepeak, in partnership with the Cherng Family Trust, believes this transaction represents a fantastic opportunity to invest in the underlying real estate of The Cosmopolitan of Las Vegas, a solid asset with an irreplaceable location, durable cash flows and the potential for additional upside.”

Fraser Tennant