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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Blackstone gets preliminary nod to acquire Cosmopolitan of Las Vegas

4 December 2014

LAS VEGAS -- The Cosmopolitan of Las Vegas moved a step closer to new ownership Wednesday.

The Nevada State Gaming Control Board recommended that Blackstone Group, a multinational private equity investment fund, be licensed to acquire the 4-year-old Strip hotel-casino, which has never turned an annual profit.

The Nevada State Gaming Commission will take up the matter on Dec. 18.

“We think there is a lot of opportunity to bring the property to its full potential,” Tyler Henritze, one of three controlling owners in Blackstone, told the Control Board at a hearing in Carson City.

Blackstone Real Estate Partners VIII, a division of New York City-based Blackstone, announced in May it would acquire the Cosmopolitan from Germany-based Deutsche Bank for $1.73 billion.

The Blackstone division owns $81 billion in real estate assets globally.

In Nevada, the company owns nearly 1,000 homes. Last year, Blackstone subsidiary Equity Office Partners acquired the 1.4-million-square-foot Hughes Center at Paradise and Flamingo roads for $347 million. The office park was renamed The HC | Hughes Center.

Blackstone also owns a small stake in casino operator Caesars Entertainment Corp.

The 2,995-room Cosmopolitan opened in December 2010 at a cost of $3.9 billion. Deutsche Bank which took ownership of the property after the original developer defaulted, had always intended to sell the resort and its 8.7-acre Strip location between Bellagio and CityCenter.

Henritze said Blackstone had other previous business dealings with Deutsche Bank.

Control Board members complimented Deutsche Bank for completing and opening The Cosmopolitan, rather than leaving the property unfinished.

The Cosmopolitan is best known for its restaurants and nightclubs, including the recently opened Rose. Rabbit. Lie., and Marquee, which is one of the top-grossing clubs in the U.S. The centerpiece Chandelier Bar in the casino is three stories tall.

Henritze said the property collects 80 percent of its revenue from the hotel and food and beverage operations.

The property has two 52-story towers and a 110,000-square-foot casino.

Blackstone representatives told the Control Board it planned to make changes at The Cosmopolitan, including adding another restaurant and renovating areas of the casino to improve revenue. The Cosmopolitan’s Strip frontage may get a new look.

Blackstone owner Jonathan Gray said the company has a window of opportunity on the Strip because other planned Strip developments, such as Genting Berhad’s Resorts World Las Vegas, are still a way off from being built.

“We’re excited by the potential of this hotel,” Gray said.

“We plan to bring to bear all the experience we have with other assets. For us, this is an exciting opportunity to do something special.”

Gray said Blackstone might look for other opportunities in Southern Nevada.

“We’re bullish on Las Vegas,” he said.