Reshuffling The Pack – Blackstone Off-loads Vegas Cosmopolitan, Sort Of

In a move that can only be described as a fast-food shuffle, or a hedge fund hedging its bets in Covid-era Vegas, private equity giant Blackstone has sold The Cosmopolitan--its flagship hotel and casino in the heart of the Strip--for US$5.65 billion (£4.16bn/€4.83bn), sort of.

Ownership of the hotel—in a stunning sleight of financial alchemy—has now passed to the Cherng Family Trust, a multi-billion-dollar single-family investment firm, who own the 2,200-plus Panda Express fast-food restaurants, and to the Blackstone Real Estate Income Trust and Stonepeak Partners — both Blackstone fiscal spin-offs, as their names imply.

Meantime, MGM Resorts International has agreed to pay US$1.63 billion (£1.2bn/€1.39bn) for the right to operate the 3,000-room luxury resort for 30-years and MGM will also pay the new ownership troika a further US$200 million (£147.55m/€171.16m), and up, a year in rental.

This makes The Cosmopolitan the second major Vegas investment for the Cherng Family.

In 2018 they bought the Mandarin Oriental Hotel, also on the Strip, for US$214 million (£157.88m/€183.14m) and rebranded it, under license, as a Waldorf Astoria.

Blackstone acquired The Cosmopolitan in 2014 for US$1.8 billion (£1.32bn/€1.54bn), investing around US$500 million (£368m/€427.91m) in the property.

So it’s difficult to find fault with the venture capitalist’s card play.

With Las Vegas and other retail-heavy gaming resorts around the world facing mid- and post-pandemic strictures, many analysts may go further and applaud the move as a masterstroke.

Increasing, action in “old world” pre-Covid gambling entrepôts is shifting to online sports betting, iGaming and, overall, to diversification.

But Jonathan Halkyard, MGM Resorts Chief Financial Officer, quite naturally boosted his company’s investment, as did Chief Executive and President Bill Hornbuckle.

“We are proud to add The Cosmopolitan to our portfolio,” said Hornbuckle.

“The Cosmopolitan brand is recognized around the world for its unique customer base and high-quality product and experiences, making it an ideal fit with our portfolio and furthering our vision to be the world’s premier gaming entertainment company.”

MGM said The Cosmopolitan generated US$959 million (£707.53m/€820.73m) in net revenue and US$316 million (£233.14m/€270.44m) of Adjusted Earnings in the financial year, ending February 29, 2020 – before the Covid-19 hurricane blew into town.

Subject to regulatory approval, the deal is expected to close early next year.

“Vegas has had a strong recovery coming out of the pandemic and solidified itself as a diversified entertainment destination,” said Tyler Henritze, Blackstone’s Head of Acquisitions for the Americas.

Referring to the currently super-hot Las Vegas Raiders football team and new entertainment ventures from MGM, Mr. Henritze added: “It’s not just about gaming anymore.”

Despite concerns over the Delta variant, Las Vegas tourism has climbed back steadily this year.

An estimated 3.3 million people visited Vegas in July, almost the same number of punters who partied in pre-pandemic July 2019.

Yet worries over the pandemic persist; with the US National Association of Broadcasters, for example, recently cancelling its October show because of Delta variant fears.

Here’s hoping the twin towers Cosmopolitan property, like the gambling Mecca itself, can survive any future Covid strokes.

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