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Not Satisfied With Taking Over America's Rental Market, Blackstone Now Takes Aim At Las Vegas

Tyler Durden's picture




 

After losing $4 billion as both a lender and equity-holder, Deutsche Bank has decided now is the time to sell The Cosmopolitan of Las Vegas. The lucky buyer of the 3000-room hotel and casino... none other than America's largest landlord - Blackstone Group. The formerly biggest "buy-to-rent" private equity firm is paying $1.7 billion for the Vegas hotspot after having piled $3.5 billion into property across the city and other parts of Nevada. It is ironic that it was Steve Wynn, another Vegas magnate, who recently noted just how great times were for the 'big guy' seeking cheap financing (and, unfortunately, just how bad it was for the average joe).

 

 

As The Wall Street Journal reports,

The world's largest private-equity firm on Thursday agreed to pay $1.7 billion in cash to Deutsche Bank for the Cosmopolitan of Las Vegas, a 3,000-room hotel and casino on the Strip that ran into big financial trouble during the downturn. The German bank sunk around $4 billion into the Cosmopolitan, first as a lender and then as an owner after its original developer defaulted.

 

The sale comes two years after Deutsche Bank, Germany's largest bank, formed an internal unit for unwanted assets to cut its balance sheet and improve its equity capital.

 

...

 

The deal caps a series of major real-estate investments in Las Vegas by Blackstone. Over the past two years, the New York-based company has acquired about $3.5 billion of property in the city and other parts of Nevada, say people close to the firm.

 

...

 

Blackstone is using cash from its $13.3 billion real-estate fund, but later is expected to borrow around $1 billion toward the acquisition, say people close to the sale.

 

...

 

Blackstone is betting that the recent uptick in Las Vegas' economy will continue and that the small casino won't be a major drawback in a changing Las Vegas tourism industry. With gambling proliferating throughout the country, Las Vegas hotels have aimed to attract tourists with fine dining, nightclubs and other entertainment.

 

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.

 

Blackstone's other Las Vegas deals were partly motivated by low prices. The homes it acquired were bought in foreclosure auctions.

The question - of course - is, has Blackstone bitten off too much at the peak of the latest credit cycle? or is this "Just the right amount of wrong?"

It would seem Blackstone has been listening to Steve Wynn:

It’s a perfect storm for a businessperson unless you look at the truth of the matter and the impact it has on your customers and your employees.
 
And that’s a much darker story.
 
It doesn’t lend itself to a soundbite, but it’s — for every businessman in America and any economist that has their heads screwed on right, it’s an ominous situation.
 
But in terms of our moment in history, in commercial history...along with our colleagues in the industry, it’s nirvana.

...

 
But look at it from a consumers’ point of view or a working person’s point of view, who’s paying for all this cheap money? Well, right now, the Fed is.
 
I thought Bernie Madoff went to jail for that.

 

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Fri, 05/16/2014 - 18:26 | 4767931 Make_Mine_A_Double
Make_Mine_A_Double's picture

The only thing propping up Vegas are the receipts from Macau. Without that cross subsidy Vegas would would be in the toilet.

And I will lay odds (pun intended) that the Chicoms will come up with some sort of tax evasion charge, racketeering or whatever is necessary to gets Sands, et al. to sign over their Macau properties. No way the Chicoms leave that chunk of change on the table for the Farangs for long.

  

Fri, 05/16/2014 - 20:00 | 4768090 Manthong
Manthong's picture

Whorehouses generate reliable revenue to pay the rent.

Fri, 05/16/2014 - 18:27 | 4767932 Bastiat
Bastiat's picture

- "for every businessman in America and any economist that has their heads screwed on right..."

I think I saw one of those sleeping under an overpass this morning.

Fri, 05/16/2014 - 18:29 | 4767937 caShOnlY
caShOnlY's picture

free Madoff!! (and Corzine!)

Fri, 05/16/2014 - 18:48 | 4767976 medium giraffe
medium giraffe's picture

                        <---- and Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi!

Fri, 05/16/2014 - 18:37 | 4767955 nmewn
nmewn's picture

Harry Reid: Blackstone is owned by the Koch brothers, who want to keep womens wages low so they'll work even harder and their increased body heat will contribute to global warming.

Fri, 05/16/2014 - 18:39 | 4767960 salvatorem
salvatorem's picture

I went to Cosmopolitan a couple years ago.  Buffet was the best on the strip. The crowd was a bunch of twerps.

Fri, 05/16/2014 - 18:43 | 4767965 monopoly
monopoly's picture

When the SHTF Vegas will be the first to go....Again. Just travel outside the 10 block radius of the strip and look at all the homes, empty, over 60,000. Wages in Vegas really suck and the Indian Casino's are getting ever more popular. Why drive the 4 hours, or fly in a crowded bus when you can gamble near your city or on line. We have very little in Nevada to offer people. And Vegas is busted, and the next downturn will be a Tsunami for the city of lights. Way too many lights. 

But at least we have Harry Reid. OMG>

Fri, 05/16/2014 - 20:21 | 4768174 Jlasoon
Jlasoon's picture

So that's why every damn hotel on the strip now has a $30/night resort fee. Fuck you Vegas I'm not going back until you bring back $1.99 steak & eggs and cheaper whores. 

Hey Harry, do you have any idea what $30/night gets me in Thailand? 

Sat, 05/17/2014 - 07:26 | 4768924 August
August's picture

I'm holding out for the $0.99 shrimp cocktail myself.

Sat, 05/17/2014 - 09:26 | 4769051 FredFlintstone
FredFlintstone's picture

US sex workers having to compete on a global scale.

Fri, 05/16/2014 - 18:45 | 4767969 FredFlintstone
FredFlintstone's picture

Rental market? How about renting a Rolex? No shit

http://www.bloomberg.com/video/like-fancy-watches-now-you-can-wear-even-...

 

 

Fri, 05/16/2014 - 20:24 | 4768180 Jlasoon
Jlasoon's picture

Or you can go to ioffer . c o m and get a replica for $20 with free shipping straight from shan shu ji who wong tong sup factory.  

Fri, 05/16/2014 - 18:58 | 4767987 Atomizer
Atomizer's picture

Freescale Semiconductor, owned by Blackstone

http://www.bloomberg.com/quote/FSL:US

 

What are you hiding little fuckers? 380.. Need a tissue? You will go down on fraud.

Flight manifest.

Fri, 05/16/2014 - 18:54 | 4767989 kchrisc
kchrisc's picture

So Deutsche Bank is in trouble and needs to sell some assets fast without causing a panic. In steps Blackstone. The whole thing is probably tacitly backstopped by the FedRes and/or treasury.

Fri, 05/16/2014 - 18:55 | 4767991 q99x2
q99x2's picture

Head for the hills. The money changers got hold of the printing press.

Fri, 05/16/2014 - 19:01 | 4767998 Atomizer
Atomizer's picture

The money changers are heading for the hills. Correcting your post

Fri, 05/16/2014 - 19:11 | 4768014 RaceToTheBottom
RaceToTheBottom's picture

Who would not want to go to Vegas with a "Get out of Hock" card from a rich uncle?

Fri, 05/16/2014 - 19:28 | 4768043 Mr. Magoo
Mr. Magoo's picture

Its Official, Blackstone is a front group for the Fed. The USSA is turning into Potterville

Fri, 05/16/2014 - 20:28 | 4768190 Jlasoon
Jlasoon's picture

Well if you're African American I guess America is now Pleasantville. Welcome to the future "Po Folks".  

Fri, 05/16/2014 - 19:30 | 4768047 BuddyEffed
BuddyEffed's picture

I wouldn't be suprised if the FED was the ultimate real bankroller in this, AND in the Belgian Waffles, AND in the plunger protectionism too.

Fri, 05/16/2014 - 19:43 | 4768067 ebworthen
ebworthen's picture

Wait, a Wall Street investment firm buying a casino?

Cue Vader:  "The circle is now complete."

Fri, 05/16/2014 - 21:32 | 4768341 Paracelsus
Paracelsus's picture

I think it was a few years ago Blackstone screwed the pooch over the Bedford Stuyvesant project.Anyhow the pension funds for Florida and California each took like a $250 mil. hit when it fell apart. The point is they were counting on the NY Admin changing the rent control statutes,a political decision which was wildly optimistic.Amazing how these people stay employed,rack up huge bonuses,while costing the taxpayer billions.Las Vegas is the showplace for the shopping mall theory of economics.If there is no discretionary income consumers behave conservatively.No spare bucks,then tourists only.Last I heard there will be a large shortage of water in LV,then those housing values are going down like Baumgartner....

Fri, 05/16/2014 - 23:47 | 4768578 user2011
user2011's picture

I see the whole picture now.   These giants companies are now relying on rents now.   The number of mortgage is going down as less buyers and more pay in full.   The only prospects are rental properties or student loans.   Polices are bullying homeless people.   Therefore these people are forced to rent.    

People are forced to buy into ridiculously high medical plans.   They are forced to eat less healthy and less food.   Now, they are forced to rent.  

Soon, I won't be surprised to see home ownership become even more expensive.  More taxes will be tagged onto all home owners.  That will drive people selling their house and into rentals.   Corporate scale  Landlord will become the mainstream business in US.

Sat, 05/17/2014 - 02:59 | 4768790 junction
junction's picture

I wonder if the Blackstone all cash deal for the Cosmopolitan is actually an all Federal Reserve cash loan to Blackstone to buy the hotel and bail Deutsche Bank out.  As for all those foreclosed homes Blackstone bought, they are a good short term investment.  Over the long run, those homes will start generating a negative cash flow.  But by then, who knows what shape the world will be in, what with all the comments you hear lately about the possibility of World War Three.  The sort of comments you never heard five years ago.

Sat, 05/17/2014 - 09:06 | 4769017 Atlantis Consigliore
Atlantis Consigliore's picture

Deutsche;  Tradahs  dont swear be arrogant, Vee are Cherman; We are Casino Operators,

Vee build for $ 4 Billion and sell for $ 1.7 Billion.

Losses? What losses? 

Libor manipulation, what s Libor.

Vee are German!   Wanna buy some CDs or CMO's   rename it Deutsche Wide.

Video:  But dont you dare swear, we re a Bankster.  Vee have ethics.

And we want respect,  

We re smart,  we re not a Fredo Bank.

We re expanding after this Casino flop into.....Mexico....

Lol.

Sat, 05/17/2014 - 09:38 | 4769066 kenezen
kenezen's picture

I'm not at all sure that Blackstone is profitable with it's rental of purchased housing. They have expenses with sub contractors that are sizable.  Blackstone has done very well with other things. They would have been profitable if they had controled all facets,however, that not their best expertise!

Sat, 05/17/2014 - 09:39 | 4769067 kenezen
kenezen's picture

I'm not at all sure that Blackstone is profitable with it's rental of purchased housing. They have expenses with sub contractors that are sizable.  Blackstone has done very well with other things. They would have been profitable if they had controled all facets,however, that not their best expertise!

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