Blackstone Claims Most Profitable Asset Sale With $5.6 Billion Cosmopolitan Deal

Investment group Blackstone notched a massive windfall on a casino resort in the heart of the Las Vegas Strip.

Blackstone inked a deal to sell its Cosmopolitan of Las Vegas resort for $5.65 billion, a roughly 3,000-room property the company bought in 2014 for $1.7 billion. The company has since spent $500 million in upgrading the facility.

The buyer consortium includes Cherng Family Trust, Stonepeak Partners and Blackstone Real Estate Income Trust. MGM Resorts International, which Blackstone has several operating agreements with in Las Vegas, intends to sign a $1.625 billion operations agreement for the property.

“This transaction underscores Blackstone’s ability to acquire and transform large, complex assets,” Tyler Henritze, head of acquisitions for the Americas for Blackstone Real Estate, said in a statement. “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 deal is expected to close early next year. A separate Blackstone letter to investors obtained by the Wall Street Journal indicate the transaction would be the largest profit the firm ever achieved in a single-asset real estate sale.

Blackstone's continued involvement with the property through its partial ownership via its real estate trust is the latest sign the company sees opportunity in travel assets. The company's Blackstone Real Estate Investment Trust is a non-traded lodging trust subsidiary that invests in real estate compared to its publicly traded Blackstone parent company.

“We have by far the lowest exposure we’ve had to it, but we’d like to increase that exposure going forward,” Jonathan Gray, Blackstone’s president and chief operating officer, said of the travel sector on a July investor call.

That interest backs analyst expectations that lodging trusts will lead the way for hotel dealmaking and mergers and acquisitions coming out of the pandemic rather than hotel brands. There is simply too much opportunity at the asset level compared to the brand side.

Blackstone purchased the MGM Grand, Mandalay Bay, and the Bellagio Hotel & Casino from MGM Resorts in recent years. MGM continues to operate all of the properties. Blackstone and MGM made plans for another of these sale-leasebacks with a $4 billion deal announced this summer for the Aria Resort and Casino and Vdara Hotel and Spa.

The Cosmopolitan operations agreement would give MGM an unobstructed row of resorts on the western side of the Las Vegas Strip from Flamingo Road just to the north of the Bellagio all the way to Russell Road south of Mandalay Bay.

"We are proud to add The Cosmopolitan, a luxury resort and casino on the Las Vegas Strip, to our portfolio," MGM Resorts CEO Bill Hornbuckle said in a statement. "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."