Blackstone selling Cosmopolitan, MGM acquiring hotel operations

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The Blackstone Group is selling the Cosmopolitan of Las Vegas in a $5.65 billion deal.
The Blackstone Group is selling the Cosmopolitan of Las Vegas in a $5.65 billion deal.

The Blackstone Group is selling the Cosmopolitan of Las Vegas in a $5.65 billion deal, with MGM Resorts International taking over resort operations at the central Strip hotel-casino for $1.625 billion. 

MGM will enter a 30-year lease, with three 10-year renewal options, with a group of investors that will acquire the hotel real estate -- Cherng Family Trust, Stonepeak Partners and Blackstone Real Estate Income Trust Inc.

MGM CEO Bill Hornbuckle said that acquiring the Cosmopolitan's resort operations is "an incredible opportunity to expand our customer base." 

"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," Hornbuckle said.  

The transaction is expected to close in the first half of 2022, and MGM will pay an initial annual rent of $200 million, with annual increases of 2% for the first 15 years and the greater of 2% or the Consumer Price Index (up to 3%) after that initial period.  

"The Cosmopolitan offers an incredible opportunity to expand our customer base and will provide greater depth of choices for our guests in Las Vegas," MGM Resorts CFO Jonathan Halkyard said in the statement. "We believe that we can leverage MGM Resorts' expertise, operating platform and other highly achievable synergies to continue providing best-in-class service while driving growth for the property."

In 2014, Blackstone bought the Cosmopolitan and subsequently invested $500 million into the property, adding 21 large suites and renovating guestrooms. 

Blackstone considered other paths forward for the property, but decided separating the resort's operations and real estate would result in "an optimal outcome," the company said in a statement.  

The deal continues an MGM strategy to operate resorts but not own the real estate. In August, a $17 billion deal was announced to sell MGM Growth Properties, a real estate arm of the company, to Vici Properties.

In July, MGM agreed to buy out Infinity World Development Corp. for sole ownership of CityCenter, the Las Vegas Strip complex that includes the Aria and Vdara hotels and sits next door to the Cosmopolitan. Upon completion of the deal, MGM will control CityCenter resort operations but will sell the real estate to Blackstone Group for $3.89 billion.

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