In mid-April, Deutsche Bank first made preparations to sell its Cosmopolitan Resort in Las Vegas, a venture that has lost the company money for six years and counting.
The property was foreclosed in January 2008 after its developer, Ian Bruce Eichner, defaulted on a construction loan. Deutsche Bank was originally on the hunt for $2 billion in return for the property, instantly picking up multiple bidders, which included Australia's Crown Resorts.
However, it seems now that the Blackstone Group is sweeping in to pick up the 3,000-room property for $1.7 billion in cash, according to the Wall Street Journal. While this is under Deutsche Bank's original asking price, the company already spent $4 billion on the property as both a lender and an owner, and is most likely happy to hand it off somewhere else.
"The bank is committed to reducing its non-core legacy positions in a capital-efficient manner which benefits shareholders," Pius Sprenger, head of Deutsche Bank's non-core operations unit, told Bloomberg. The sale of this property is part of a plan for the bank to cut its balance sheet and rid itself of unwanted assets not considered central to its business.
Casino City Times reported that analysts believe the sale is a positive sign for the Las Vegas market. JP Morgan gaming analyst Joe Greff told Casino City Times that Blackstone Group is paying nearly 17 times The Cosmopolitan's 2013 cash flow of $103 million, hinting at a high valuation of other upscale Strip companies such as Wynn Resorts and MGM Resorts International.
“We also think this announcement speaks to a historically smart real estate buyer making a statement on the length of the Las Vegas Strip recovery, also a positive,” Greff said.
The Cosmopolitan’s new own is Blackstone Real Estate Partners VII, a division of New York City-based Blackstone. The business owns $81 billion in real estate assets globally.