Blackstone Real Estate Partners today announced the sale of the Cosmopolitan of Las Vegas. MGM Resorts purchased the casino operation of the property for $1.625 billion.
The Cherng Family Trust, Stonepeak Partners and Blackstone Real Estate Income Trust will acquire The Cosmopolitan’s real estate assets. Altogether the total sales price of the property is $5.65 billion.
The deal is expected to close in the first half of 2022. As usual, the sale is subject to regulatory approvals and other customary closing conditions.
A Las Vegas casino deal seven years in the making
Blackstone purchased The Cosmopolitan in 2014 for $1.7 billion. All along, the company planned on renovating the property and improving operations before selling it. The Cosmopolitan spent approximately $500 million upgrading the property over the past seven years.
The Cosmopolitan sale was expected as Blackstone announced the Cosmopolitan was on the market less than a month ago. Tyler Henritze, head of acquisitions Americas for Blackstone Real Estate, said the following about the deal:
“This transaction underscores Blackstone’s ability to acquire and transform large, complex assets. 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 $5.65 million deal gives Blackstone an excellent return on its initial $1.7 billion investment.
Like many Las Vegas casino sales recently, there will be a different operator than the real estate owner. While the deal is huge for Blackstone, it’s also a major Vegas Strip addition for MGM Resorts.
MGM Resorts will operate the Cosmopolitan
While the company won’t own the land, MGM Resorts plans to operate the casino for 30 years. When this deal closes, MGM Resorts will enter into a 30-year lease agreement. The deal will include three 10-year renewal options.
MGM Resorts CEO & President Bill Hornbuckle said the following about the deal:
“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 premiere gaming entertainment company. We look forward to welcoming The Cosmopolitan’s guests and employees to the MGM Resorts family.”
The Cosmopolitan won’t change right away. The property will remain under current management until some time in the first half of 2022.
A new M Life Rewards property
MGM Resorts hasn’t revealed specific plans for the property yet. It’s likely that the company will make The Cosmopolitan part of its M Life Rewards casino loyalty club program. According to MGM Resorts’ most recent earnings presentation, there are 36 million M Life Rewards members.
The Cosmopolitan will join the following Las Vegas casinos in the rewards program:
- Mandalay Bay
- MGM Grand
- The Mirage
- New York-New York
- Park MGM
The Cosmopolitan will immediately become part of top-tier MGM Resorts Las Vegas luxury properties Aria and Bellagio. Coincidentally, The Cosmopolitan is physically located between both properties.
M Life Rewards also has casinos outside of Las Vegas where guests can earn comps to be used in 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)
Joining M LIfe Rewards will give more visitors to Las Vegas access to discounts and complimentary rooms, meals and shows at The Cosmopolitan.
Additionally, M Life Rewards is a partner with Hyatt Hotels. The Cosmopolitan is currently the only hotel connected with Marriott on the Vegas Strip. Existing Cosmopolitan guests may not be too happy with this part of the deal.
Will The Cosmopolitan remain the right amount of wrong?
When The Cosmopolitan first opened in 2010, it did so with a slew of unusual marketing techniques to help set it apart from the competition. The Cosmopolitan billed itself as a Las Vegas casino with the “right amount of wrong.”
As an independently operated casino, The Cosmopolitan was able to do things a little differently than its corporate competition. The property didn’t have to conform to corporate policies that are used by other casinos.
Since its opening, The Cosmopolitan has offered guests a unique experience. It’s entirely possible MGM Resorts allows the property to remain the same. While MGM’s properties have different offerings — restaurants, shows, etc — they all operate similarly.
MGM Resorts’ corporate synergy will likely change the experience to some extent. Things like hotel room amenities should become uniform with Aria and Bellagio. MGM has different tiers for different properties.
For example, Aria and Bellagio have nicer sheets, towels and toiletries than Luxor and Excalibur. Small unique touches are what have made The Cosmopolitan a property that could be sold for more than $5 billion.
The casino operations might not be very different as current CEO Bill McBeath worked for MGM Resorts from 2007 through 2012.
The Cosmopolitan experience will likely become different in the second half of next year. We just won’t know exactly how different right now.