The rich get richer and the opportunities mount on the Las Vegas Strip. Last week, MGM Resorts reported it would close a deal to buy the Cosmopolitan of Las Vegas from Blackstone, and that the deal to sell the Mirage to Hard Rock International should close by the end of the year.
Meanwhile, the mystery of what Strip property Caesars Entertainment would sell was cleared up as sources identified the Flamingo as the property on the block.
For the Cosmopolitan, MGM will pay Blackstone $5.65 billion to acquire the property that opened in 2010 at a cost of $3.9 billion. Once the deal is complete MGM will sell the real estate of the Cosmopolitan to a REIT, a consortium of investors, for $4.4. billion. Those investors include the Cherng Family Trust, an investment firm developed by Panda Express founders Andrew and Peggy Cherng, and Stonepeak, an investment firm that specializes in infrastructure and real estate assets. MGM will pay the firm an annual rent of $200 million for 30 years.
The Cosmopolitan has 3,027 rooms in two towers, a 110,000-square-foot casino floor, 300,000 square feet of retail and food and beverage outlets and a 3,200-seat theater.
MGM President and CEO Bill Hornbuckle says he’s admired the Cosmopolitan for years, particularly since it is adjacent to MGM’s CityCenter project and the Aria Hotel Casino.
“We’ve been interested in that for some time,” he told the Nevada Gaming Control Board at a hearing last week. “Obviously now, the marketplace has afforded us finally an opportunity to do it. It is a great property. It is massively well-branded and well-run.
“I give great credit to (Cosmopolitan President and CEO) Bill McBeath and the entire team there. They’ve taken it from a meager beginning and made it into a powerhouse in Las Vegas. And for us to get it to join our portfolio and the market mix and the customer base that it brings to us is extremely compelling.”
Caesars CEO Reeg said last week that a sale of a Strip property was moving along. Although he didn’t mention the Flamingo, sources said this is the target for the sale. Bloomberg cited several sources that claim Caesars is looking for $1 billion for the property’s operations, but hasn’t had any bites, claiming the property’s age and need for renovations make it risky. Another factor is a buyer will be required to separate the property from the powerful Caesars Rewards loyalty program, which would cause an immediate business decline.
But Reeg is confident that a sale will be done in the timeframe originally outlined, even without identifying the property.
“When you get a lot of lawyers involved, the work extends to whatever the maximum allowable deadline is,” Reeg told investors in a conference call. “So if we finish one day ahead of that six months, I’d be very pleased.”
Caesars has committed to selling a Strip property in order to reduce its $13.5 billion in debt, estimated at the end of the first quarter.
The Flamingo opened in 1946, originally envisioned by Las Vegas pioneer Billy Wilkerson, but completed by mobster Bugsy Siegel.