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Cosmo Sale Rumor Dept: More Rumors!

By Chuckmonster on Wednesday, 16th April 2014 2:21pm
  » filed under Las Vegas  comments: 13

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Cosmopolitan sale rumors are like the purple panther's hipster clientele... variously moustachioed and fleeting. Monthly, a new scenario with different characters enters the public transom, so much so that we gave up making sense of any of these.

There is a cast of usual suspects include MGM Resorts International, Phil Ruffin, James Packer and/or Melco Crown Entertainment, Galaxy Entertainment, Caesars Entertainment, Penn National Gaming, Pinnacle Entertainment plus dark horse contender Alex Yemenidjian.

Apparently, someone at Bloomberg has taken the bacon, stating "Deutsche Bank is in talks with potential buyers of its Cosmopolitan resort in Las Vegas." This is roughly akin to stating that "Deutsche Bank is in talks with potential customers about opening checking accounts." They're ALWAYS talking about selling this joint to anyone who asks. Call em!

Bloomberg's tipster - who claims knowledge of the matter - says that DB's asking price is $2B and has attracted four bidders, two in the money and two dialing in low. The price tag to build Cosmopolitan was south of $4b.

This could be the sweet spot for DB to sell Cosmopolitan. Profits are up, operations are becoming streamlined, they've sorted out the players club disaster, fired up a slew of compelling entertainment venues and have been steadily ticking the punch list of opening years mistakes.

To an investors, Cosmopolitan is brand new second hand property, discounted to the hilt with a long runway of possibility rolled out and ready to rock. Operating and optimizing a business with an upward trajectory is infinitely easier than pulling one out of the weeds.

The the Bloomberg story plant is all about DB not getting their asking price and springing a leak on the sleeping giant without violating whatever rules are applicable.

Fact or fiction, my bet is on Yemenidjian being nosed out at the wire by MGM.

Big thanks to the dozen or so folks who sent me the link this morning. You know who you are!



Tagged: cosmopolitan   rumors   



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Comments & Discussion:

Dr. Dave posted some interesting numbers in regards to Cosmo and the rumored asking price over on the FHBM FB page, which I'm sure he'll share over here as well.

The only way I see Caesars or MGM buying Cosmo is if they sell off a property in Vegas (While Caesars has done some asset shuffling and "sold" Planet Hollywood to another company, said company is controlled by Caesars.).

What about Genting? Resorts World is several years from completion and picking up Cosmo would give them access to Cosmo's player database, which would be important for them when Resorts World opens up.

James Packer/Melco Crown is probably the front runner, although after the half billion plus he lost in Vegas on investments in Fontainebleau, Harrah's Entertainment, Station Casinos and Cannery Casinos (He was going to acquire them but scrapped the deal.), you would think he'd be gun shy about investing in Vegas again.

Based on what Ruffin has done at Treasure Island (and is in the process of doing there), I don't want him buying Cosmo.

Regardless of the price, DB will be taking a bath on the sale.

If I win the Powerball and make a series of large investments with an excellent, and speedy return, the Cosmo will be mine!

Hope they do sell though. A bank should not be running a hotel, especially one in Vegas.

Here's what I said on FB:

"$2 billion is unrealistic. Multiplying EBITDA by 7, I get a back-of-the-napkin value of $721 million. $2 billion is 20X EBITDA, which is unjustifiable. This isn't like the El-Ad purchase of the Frontier, which was essentially a real estate deal--there isn't any developable land here, so you're basically paying for the building as it is, and it's a building that generates $100 million a year right now.

Maybe you can get a better strategy/management team in there and do better, but I can't see where this place changes hands for $2 billion."

I stand by that. It only sells as a working asset, whereas something like Riviera would sell because of the value of the land. I have a hard time wrapping my head around 20X EBITDA.

Makes the most sense for MGM to buy it since folks think it's part of City Center anyway because of its location smack dab between Aria and the Bellagio. What Cosmo needs to make it profitable are gamblers and that's something MGM can easily provide with its large database of players. It would also make some sense for Caesar's to buy it too because of their known players as well but I suspect Murren wouldn't let that happen if it came down to it.

the easiest way to justify 20x EBITDA would be to assume it is bought by Caesars, which then vends it into a separate company, which then leases it to a subsidiary that pays a management fee back to the original parentCo. Look how easy that was! Financial wizardry.

Also, in a related link from Bloomberg, check out this article: http://www.businessweek.com/articles/2014-04-03/casinos-close-as-revenue-falls-in-gambling-saturated-u-dot-s

see page 2 - I didn't realize that the Genting 'Resorts World Aqueduct' slots casino outside New York City was so successful, $793mm grossed in the last 12 months vs Vegas $6.5B revenue quoted in the article = Genting is doing the equivalent of 12% of Strip revenue from just that one facility. Not Macau levels but still startling - no wonder they want to try and open in Miami!

Anybody who ponies up $2BN for the place should be subject to a psychiatric evaluation.

So. My money is on Caesar's.

I would doubt that Ruffin had a chance in hell of putting in a bid but Caesar's could. Most do think that Cosmo is part of City Center but MGM isn't going to want to sell something to get the property if it is even really up for sale.

Prognosticating hat is on. I have zero inside knowledge or hard facts to base this on, but my money is on Melco Crown to pick this up. And I will make one more prediction: the sale is announced by DB before the end of the year. Prognosticating hat is now off.

I'm not biting, I've made too many 'predictions' of the Rio sale. Oh hell, who am I kidding, I'm going with a darkhorse, especially if it's going to go for around 700m as Dr. Dave has pointed out. I'll go with the Maloof's, although I'm not sure they are going to have the capital for this purchase, plus I saw a rumor somewhere they were sniffing around Binions as a potential purchase.

Reports out of Australia indicate that Packer/Crown will be one of the parties interested in buying Cosno.

http://www.brisbanetimes.com.au/business/crown-resorts-risks-deal-on-the-las-vegas-strip-20140421-370ez.html

Seems like the Bloomberg story echo chambered through Australia?

Maloofs? The thought of working for that family again is a self-fulfilling personal Hell. Not that I see The CosmoPalmsitan as any sort of possibility.

I'm taking Mandarin lessons in case my hunch pays off.

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