Apollo Global Management (NYSE:APO) and MGM Resorts International (NYSE:MGM) are reportedly interested in acquiring the Cosmopolitan on the Las Vegas Strip. Current owner Blackstone (NYSE:BX) is rumored to be shopping the venue at a price tag of at least $5 billion.
A Bloomberg article out earlier today identifies private equity giant Apollo and MGM as potential suitors for the plush Sin City asset. It arrives several days after Vital Vegas reported that chatter regarding a sale is heating up.
Reports of the integrated resort being for sale surfaced nearly two and a half years ago. They died down as Blackstone went on its own buying spree of Strip real estate assets and high-end casino property deals ebbed following the onset of the coronavirus pandemic.
Blackstone acquired Cosmopolitan for $1.74 billion from Deutsche Bank in 2014 — a fire sale price, because the German bank shelled out $3.9 billion to build the venue.
Making Sense of Cosmopolitan Sale Rumors
Apollo didn’t confirm or deny interest in Cosmopolitan. But the private equity firm is a credible bidder for the property because it’s been cobbling together an array of gaming assets.
Earlier this year, Apollo partnered with VICI Properties (NYSE:VICI) to acquire the Venetian, Palazzo and Sands Convention Center from Las Vegas Sands (NYSE:LVS) for $6.25 billion. This year, the investment firm is viewed as a leading contender for William Hill’s international assets, and was a suitor for some sports betting operations in Australia. All that comes after Apollo bought a Canadian casino operator and an Italian sports wagering business last year.
It’s not immediately clear if VICI will partner with Apollo on a bid for Cosmopolitan. But the real estate company has a penchant for deals, as highlighted by the aforementioned transaction with Apollo and the recently announced $17.2 billion takeover of MGM Growth Properties (NYSE:MGP).
As for MGM, it’s already the largest operator on the Strip, and it remains to be seen if the company wants to add to its home market portfolio. Already tied to other takeover speculation, the Mirage operator has one of the industry’s strongest balance sheets, with more cash coming in by way of the MGP transaction and pending sales of Aria and Vdara.
On that note, MGM buying an asset from Blackstone would flip the script previously penned by the companies. Blackstone owns the property assets of Bellagio, almost of half the real estate of MGM Grand and Mandalay Bay, and is the buyer for Aria’s and Vdara property,
Said another way, Blackstone is MGM’s landlord, or slated to be at several venues. Additionally, the reported $5 billion-plus price tag for Cosmopolitan implies the real estate is for sale, which is interesting because the private equity company is building an empire of sorts with Strip property assets.
Talk of Other Suitors
At $5 billion, the list of legitimate suitors for Cosmopolitan Las Vegas is short. But prime Strip properties are highly desired, and if the sale rumor is true, it could draw some tire kickers.
Golden Nugget owner Tilman Fertitta has long desired a Strip property, and there’s plenty of speculation to that effect. He’s in the process of taking Fertitta Entertainment public, which includes the five Golden Nugget casinos and the Landry’s restaurant empire. He is also coming off the sale of Golden Nugget Online Gaming to DraftKings for $1.56 billion in equity.
As part of that transaction, Fertitta agreed to hold the DraftKings equity he’s receiving for at least a year. That indicates he’d have to find capital elsewhere to finance a potential run at Cosmopolitan.
There’s also been talk of Penn National Gaming (NASDAQ:PENN) getting into the mix. Vital Vegas dubbed the regional gaming firm a “dark horse” contender for Cosmopolitan. When factoring in cash, Penn’s long-term liabilities are $9.93 billion, indicating a $5 billion purchase might not be something shareholders and creditors will be enthusiastic about.
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