Blackstone’s big bet on The Cosmopolitan

Las Vegas – Following several years of uncertainty and foreclosure proceedings, The Cosmopolitan of Las Vegas has a new owner. In May, a division of Blackstone Group picked up the 3,000-room property for $1.7 billion in cash from Deutsche Bank, which has held the hotel since 2008.

The casino-resort has had its share of problems since its groundbreaking in 2005. Originally slated to be branded as a Grand Hyatt, the property’s developer, Ian Bruce Eichner, defaulted on a construction loan in 2008. After the hotel entered foreclosure, numerous potential buyers surfaced, including Hyatt, MGM Mirage, Starwood Hotels & Resorts Worldwide and Hilton Worldwide, but all plans fell through. When the hotel opened in 2010 it became part of Marriott International’s Autograph Collection.

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 owner is Blackstone Real Estate Partners VII, a division of New York City-based Blackstone. The business owns $81 billion in real estate assets globally.