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Blackstone Selling Cosmopolitan Of Las Vegas In Its Most Profitable Deal Ever

MGM Resorts International has acquired the operations of the Cosmopolitan of Las Vegas, a major hotel and casino complex on the Strip, and inked a long-term net lease for its underlying real estate for a total of $5.65B.

Cosmopolitan of Las Vegas

The seller, Blackstone Real Estate Partners VII, paid $1.7B for the Cosmopolitan in 2014, and then invested over $500M to renovate the property's nearly 3,000 guest rooms, build 67 new rooms and suites, and upgrade its food and beverage offerings, gaming amenities and common areas.

Blackstone told investors in a letter that the deal represents the company’s most profitable sale of a single asset ever, The Wall Street Journal reports. The total profit will be about $4.1B when the transaction closes next year. 

"This transaction underscores Blackstone’s ability to acquire and transform large, complex assets," Blackstone Real Estate Head of Acquisitions Americas Tyler Henritze said in a statement.

The long-term net lease will be with a partnership between Cherng Family Trust, Stonepeak Partners and Blackstone Real Estate Income Trust. The lease will be for an initial term of 30 years, with three 10-year options to renew. Stonepeak Partners specializes in infrastructure, while the Las Vegas-based Cherng Family Trust is the family office for the founders of the Panda Restaurant Group.

MGM Resorts will pay rent of $200M for the first year, with payments escalating 2% annually for 15 years. After that, rent will rise at the greater of 2% per year or the increase in the consumer price index (capped at 3%).

Las Vegas has been the site of a number of large deals as the area recovers from last year's pandemic-related shutdowns. In August, VICI Properties acquired MGM Growth Properties, whose portfolio includes Excalibur, Mandalay Bay, MGM Grand Las Vegas and Luxor, all properties on the Strip. Earlier in the year, Las Vegas Sands Corp. sold its Las Vegas properties to Apollo Global Management and VICI Properties for about $6.25B.