Question of the Day - 03 October 2019

Selling the Cosmopolitan was a one-day story that surfaced on the VitalVegas.com blog, then expired for lack of oxygen.

While owner Blackstone Group may still be quietly shopping the 3,027-room resort, they’ve picked a fiendish time to go to market. The whole casino industry is sitting on the edge of its collective seat, waiting to see which Strip asset or assets Eldorado Resorts sells from the Caesars Entertainment portfolio (Planet Hollywood seems to be the most coveted).

The two likeliest suitors for Cosmo would have been Phil Ruffin, but it looks like he's buying Circus Circus, and Tilman Ferttita, who could want the Cosmo if he finds himself rebuffed by Eldorado. MGM Resorts International might also desire the Cosmo as a way of unifying the brand from Bellagio to CityCenter (of which the Cosmopolitan was often mistakenly assumed to be a part). That would be in keeping with MGM’s stated desire for the “organic” growth of the company. But everyone seems to be keeping their powder dry at the moment —  and not without reason.

The Cosmopolitan was built at a cost of $3.9 billion, opening in 2010, and went to Blackstone four years later for a priced-to-move $1.73 billion. In part because it was shouldering less debt, Blackstone did what original owner Deutsche Bank could not: operate the resort at a profit. When the Cosmo opened, its restaurants and hotel rooms were subsidizing the casino — a topsy-turvy state of affairs in Las Vegas. Blackstone fixed that.

Thus, the Cosmo is a desirable asset that would probably bring a resale value well in excess of what Blackstone paid. It’s got a great center Strip location and terrific pedestrian access. It will almost surely sell for a profit, but we think it unlikely that anybody, MGM excepted — and certainly not Fertitta — will make a play for it until they see how the Eldorado takeover of Caesars transpires.