Deutsche Bank has struck a deal to sell The Cosmopolitan of Las Vegas resort and casino to Blackstone Real Estate Partners VII for $1.7 billion, which will be paid in cash. Deutsche Bank invested $4 billion in the resort it acquired after picking up the foreclosed property following the previous owner's default on a construction loan in 2008. The sale represents one of the biggest losses on a single project that Las Vegas has ever seen. A Deutsche Bank spokesman declined to specify the loss from the Cosmopolitan in a Wall Street Journal article, but the bank has reported €6.9 billion ($9.5 billion) in losses from noncore assets since 2012.
"The bank is committed to reducing its non-core legacy positions in a capital-efficient manner which benefits shareholders," Pius Sprenger, head of the Frankfurt-based lender's non-core operations unit, said in a statement today. The division is selling and winding down assets that Deutsche Bank doesn't consider to be central to its business. The Cosmopolitan opened in December 2010, but made net losses of $440 million over its first four years of operation. Other bidders for the property included Crown and a joint venture of TPG Capital, Apollo Global Management and Caesars Entertainment, according to people familiar with the bidding process.
"As a significant investor in the hospitality sector, Blackstone recognizes the value and potential in The Cosmopolitan as well as Las Vegas itself," said Tyler Henritze, senior managing director of Blackstone's real estate group. "This marks the beginning of the next chapter for The Cosmopolitan of Las Vegas, and the thousands of dedicated CoStars (i.e. employees of the property) who are committed to providing a compelling guest experience."
Blackstone's acquisition of the Cosmopolitan "speaks to a historically smart real-estate buyer making a statement on the length of the Las Vegas Strip recovery," said J.P. Morgan casino analyst Joe Greff in a report Thursday.
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