{"id":13603,"date":"2014-05-19T10:13:31","date_gmt":"2014-05-19T18:13:31","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=13603"},"modified":"2018-03-17T10:17:19","modified_gmt":"2018-03-17T18:17:19","slug":"cosmo-now-comes-the-hard-part","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/cosmo-now-comes-the-hard-part\/","title":{"rendered":"Cosmo: Now comes the hard part"},"content":{"rendered":"

\"714_Cosmopolitan_John_Unwin_061_RT\"<\/a>Cosmopolitan of Las Vegas<\/strong> CEO John Unwin<\/strong> is crowing in triumph over Blackstone Real Estate Partners VII<\/strong>‘s staggeringly lavish purchase of the megaresort over which he presides.\u00a0\u201cThis marks the beginning of the next chapter for The Cosmopolitan of Las Vegas …\u00a0It is a testament to our unique approach to the Las Vegas<\/strong> market.\u201d<\/p>\n

Revisionist history was also running amuck at owner Deutsche Bank<\/strong>, which claimed to have made “a small profit”<\/a> on the $3.9 billion Godzilla<\/strong>, which it sold for $1.7 billion. The property has lost $440 million operationally, too. J.P. Morgan<\/strong> analyst Joseph Greff<\/strong>‘s statement<\/a> that \u201cWe also think this announcement speaks to a historically smart real estate buyer making a statement on the length of the Las Vegas Strip<\/strong> recovery, also a positive,\u201d simply beggars credibility. But we agree with UBS<\/strong> gaming analyst Srihari Rajagopalan<\/strong> that the inflationary tide lifts all boats.<\/p>\n

\"Godzilla\"<\/a>If by “unique approach” Unwin means a Strip casino that does negligible gambling\u00a0business, he’s got that right. Let’s face it; Deutsche Bank<\/strong> hornswoggled Blackstone but good. In what parallel universe is 17 times cash flow a good price for an asset? Blackstone is really going to struggle to justify that price and private equity, in general, has shown yet again that it doesn’t know beans about casino investment. According to the Las Vegas Review Journal<\/em>‘s Howard Stutz<\/strong>, “Blackstone says its buys under-performing property for resale after making improvements.” We see no need for improvements at Cosmo but, at the high purchase price\/low cash flow ratio, Blackstone will be hard-pressed to flip it at a profit.<\/p>\n

\"450px-Cosmopolitan_from_Las_Vegas_Blvd\"<\/a>The first bump in the road will be the disconnect between Blackstone’s Hilton<\/strong> affiliation and the Cosmo’s Marriott Rewards<\/strong> partnership. It’s no small matter, because room revenue is the engine that keeps the Cosmo moving. Blackstone, which appears to be a real estate speculator (at least in the Vegas market) may be slow to appreciate this.<\/p>\n

A casino-management alliance with another company (one with a strong database) has been mooted. It’s difficult, although not impossible, to see this happening with one of Vegas’ biggies. For MGM Resorts International<\/strong>, Las Vegas Sands<\/strong>, Wynn Resorts<\/strong> and especially Caesars Entertainment<\/strong> (although Blackstone owns a slice of Caesars), it would be robbing Peter to pay Paul. This may be the opportunity Penn National Gaming<\/strong> has long sought to get in on Strip action and Boyd Gaming<\/strong> might also look on this as a low-risk means of re-entry to the Strip.<\/p>\n

\"cosmo-pic\"<\/a>Also mooted — but rather preposterous as viable candidates — are U.S.-novice\u00a0Crown Resorts<\/strong> (which would have paid $2 billion for the Cosmo), Galaxy Entertainment<\/strong> and Melco Crown Entertainment<\/strong>. Getting approval for a Macao<\/strong>-based company would be threading the eye of the regulatory needle, as we’ve seen in the past.<\/p>\n

On the other hand, any operator would probably be an improvement on Deutsche Bank, whose commitment to the Cosmo was a mile wide and not even an inch deep<\/a>. Having run almost five times over budget, it was a white elephant before it even opened. It was a great place to eat, sunbathe or go clubbing, but the claustrophobic casino floor seemed an afterthought.<\/p>\n

At least the Culinary Union<\/strong> was extending Blackstone a welcoming hand.\u00a0\u201cThe Blackstone Group<\/strong> owns the Hilton hotel company, which is one of our union\u2019s largest employers. We will work tirelessly to ensure workers are retained during this transition,\u201d read an official statement.<\/p>\n

MGM is feeling its oats<\/strong> about Japan<\/strong>.\u00a0Ed Bowers<\/strong>, MGM’s senior vice president for global gaming\u00a0<\/span>development says the company could have a casino <\/a>\"Japan-flag\"<\/a>up and running by 2019<\/a> (a year sooner than expected), so long as the Diet acts before the end of its autumn session. MGM has been studying Osaka<\/strong> and, more specifically, the Yumeshima<\/strong> sector. Its plans? No fewer than “two hotel towers with a total of 5,000 rooms, a 20,000 seat entertainment arena and a circular waterway inspired by the moat surrounding Osaka Castle<\/strong>.” Panasonic<\/strong> is the favored potential joint-venture partner.<\/span><\/p>\n

Getting even the first bill, removing the casino ban, has been difficult. The Diet has been mulish and a leading casino proponent rates its chances no better than one in two. Potential operators are now pinning their hopes on the autumnal extraordinary session.<\/p>\n","protected":false},"excerpt":{"rendered":"

Cosmopolitan of Las Vegas CEO John Unwin is crowing in triumph over Blackstone Real Estate Partners VII‘s staggeringly lavish purchase of the megaresort over which he presides.\u00a0\u201cThis marks the beginning of the next chapter for The Cosmopolitan of Las Vegas … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":13604,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[60,66,14,7,96,171,93,11,69,33,25,12,32,38],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/13603"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=13603"}],"version-history":[{"count":2,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/13603\/revisions"}],"predecessor-version":[{"id":21367,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/13603\/revisions\/21367"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media\/13604"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=13603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=13603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=13603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}