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CMA
July 08, 2016  

Blackstone Mulls Refinancing Big Vegas Hotel

Blackstone is quietly exploring whether to refinance its $1.3 billion floating-rate mortgage on the Las Vegas Cosmopolitan Hotel.

The private equity giant lined up that loan on the 2,995-room hotel and casino just 18 months ago from J.P. Morgan. The mortgage matures in January, but has three one-year extension options, so Blackstone isn’t facing time pressure to refinance.

The existing debt package encompasses an $875 million securitized senior loan and $425 million of mezzanine debt with a blended rate of one-month Libor plus 434 bp. A new loan might qualify for a larger proportion of senior debt, reducing Blackstone’s blended spread. That’s because the property’s performance has improved. Net cashflow at the Cosmopolitan climbed to $193.6 million last year, from $122.1 million in 2014 and $114.3 million in 2013.

Blackstone has reached out to only a few lenders so far, working without an advisor. “It’s still in the very early stages,” one source said.

The property’s original developer was Bruce Eichner. Deutsche Bank provided $768 million of total financing, starting in 2005, but Eichner defaulted in 2008. Deutsche assumed the partially completed property and repositioned it, increasing its total investment to a whopping $3.8 billion. The hotel opened in 2010. Blackstone acquired it four years later for $1.7 billion, via its $13.3 billion Blackstone Real Estate Partners 7 fund.

The Cosmopolitan, on the Las Vegas Strip, encompasses two high-rise towers, an 1,800-seat theater, more than a dozen restaurants and a nightclub. It sits on a relatively small 8.7-acre site at 3708 South Las Vegas Boulevard, between the Bellagio and CityCenter resorts. The Bellagio, by comparison, occupies a 120.5-acre site.

A Bloomberg report earlier this year said the hotel had recently attracted more high rollers by raising the casino’s betting limits to as much as $200,000 per hand and raising the limit on credit it extends to $5 million per gambler.

The existing senior debt, pegged to Libor plus 295 bp, was securitized in a stand-alone offering (JPMCC 2015-COSMO). The senior mezzanine tranche has a coupon of Libor plus 650 bp. The junior mezzanine tranche has a rate of Libor plus 875 bp.