Deutsche Bank had to take a heckuva haircut but it finally rid itself of The Cosmopolitan Las Vegas for $1.7 billion and change. The buyer is private equity fund Blackstone Group, which paid a staggering 16.7X cash flow for this white elephant. “As part of our Strategy 2015+, the bank is committed to reducing its non-core legacy positions in a capital efficient manner which benefits shareholders,” said Deutsche Bank executive Pius Sprenger. A minority investor in Caesars Entertainment, Blackstone has never waded waist-deep into gambling like this. The immediate reaction from JP Morgan analyst Joseph Greff was “We … think this announcement speaks to a historically smart real estate buyer making a statement on the length of the LV Strip recovery, also a
positive.” The market did not share that sentiment. Also-rans in the Cosmo stakes were Penn National Gaming (which deemed it too expensive) and James Packer, who’s presumably still nursing that shiner he got in last week’s public brawl.
* All’s not well at Foxwoods Resort Casino, which is closing parts of its Rainmaker Casino floor during the slow hour — meaning you’ll have to go somewhere else to ‘make it rain.’ In what sounds like a precursor of layoffs to the 6,000-person workforce, Foxwoods said there would be “staffing changes across all levels of employment.”
* Ken Adams critiques the stranger-than-fiction casino-approval saga in Massachusetts and finds the appropriate metaphor: a three-ring circus.
Blackstone owns Hilton. I would imagine that they bring Hilton into the fold and ditch the affiliation with Marriott.
In any event, they are paying WAY too much for the Cosmo. Joe Greff should be ashamed of himself (and I like Joe) for not pointing that out (he also covers Hilton) …
Private Equity over-paying for gaming assets. Sound familiar? Good times are back!!!
But I do wish the Cosmo success. It’s a great property (like Revel) where no one gambles.
The restaurants and nightclubs do exceptionally well at Cosmo but obviously the lack of gamblers has hurt Cosmo since it opened in December of 2010. I thought Cosmo would sell for around $1 billion dollars or so but I guess Blackstone Group thought it was worth a lot more.
Interesting that BX would fall. BX isn’t the buyer; its one of their partnerships, which happens to be the largest RE partnership ever; they raised 13B, mostly from pension funds