Posted date March 1, 2015 - 3:00am
Blackstone exec ready to bet big on Cosmopolitan of Las Vegas
Global Head of Real Estate for Blackstone, Jonathan Gray, speaks as contract talks begin between the Culinary representatives and Cosmopolitan officials at the Cosmopolitan of Las Vegas, Wednesday, Feb. 18, 2015. (Donavon Lockett/Las Vegas Review-Journal)
Global Head of Real Estate for Blackstone, Jonathan Gray, left, and Senator Dean Heller talk prior to kicking off contract talks between the Culinary representatives and Cosmopolitan officials at the Cosmopolitan of Las Vegas, Wednesday, Feb. 18, 2015. (Donavon Lockett/Las Vegas Review-Journal)
writes the weekly column Inside Gaming, reflecting what is happening in the industry. It appears Sunday and Wednesday in Business. Follow him on Twitter: @howardstutz
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By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL
Blackstone Group executive Jonathan Gray never will be mistaken for Nick the Greek. The company’s head of global real estate considers himself just a gambling novice.
Yet, the head of the New York-based private equity fund is wagering $1.73 billion it can make The Cosmopolitan of Las Vegas a shining jewel on the Strip.
To hear Gray describe the 4-year-old Strip hotel-casino, Blackstone is well on its way to beating the odds.
Gray, 45, oversees Blackstone Real Estate Partners, which owns $81 billion in real estate assets.
The company completed its purchase of the 2,995-room Cosmopolitan from Germany-based Deutsche Bank in December. The stylish hotel-casino was Blackstone’s largest real estate asset purchase ever.
“We’ve bought companies, but this is a sizable real estate investment,” Gray said. “I live in New York, and of all the assets we’ve bought, this is the only one that people come up to me and say, ‘Oh my God, I love the Cosmo.’ ”
In December, Gray and other Blackstone executives talked exuberantly about the Cosmopolitan when the purchase was approved by Nevada gaming regulators.
His tone hasn’t changed in two months.
During an interview in a Cosmopolitan board room, Gray said the company, which owns the Hilton Worldwide hotel chain, has a history of investing in businesses or into markets that have run into difficult times.
In Las Vegas, the company already owned about 1,000 homes purchased out of foreclosure and the 1.4-million-square-foot HC | Hughes Center at Paradise and Flamingo roads when it acquired The Cosmopolitan.
“We have a positive view of Las Vegas,” Gray said. “Las Vegas is down, but not out.”
Gray said regional gaming markets will continue to face economic and competitive challenges. And they will never replace Las Vegas.
“It’s difficult to replicate the entertainment and infrastructure you have here, with the meeting space, restaurants, retail and hotels all in one location,” Gray said.
The Cosmopolitan is best known for its dining options and popular nightclubs, including The Chelsea, Rose.Rabbit.Lie. and Marquee, which is one of the top-grossing clubs in the United States.
During its presentation to state gaming regulators, Blackstone said the property collects 80 percent of its revenue from the hotel’s two 52-story towers and the extensive food and beverage operations.
Gray said the figure is something the ownership wants to change. The company plans to invest more than $100 million initially into The Cosmopolitan to complete four floors of unfinished hotel rooms in the East Tower. Other public areas of the property also will be enhanced.
“It could take a couple hundred million to get this place where it should be,” Gray said.
He said the property’s unique advertising message, “a little bit of wrong,” won’t change, and the hotel rooms will remain available through Marriott’s Autograph Collection. New restaurant concepts also are being considered.
The focus will be on the gaming floor.
“It’s an area of great opportunity,” Gray said. “From a mathematical standpoint, The Cosmopolitan runs the highest average room rates on the Strip today. The gaming revenue per room is below the average of all the hotels on the Strip. That doesn’t seem to make a lot of sense to us.”
To fix those matters, Blackstone brought in veteran gaming executive Bill McBeath. He was president of three Strip resorts, The Mirage, Treasure Island and Bellagio, and most recently served as president of CityCenter.
McBeath says he is looking at ways to increase the casino play but also improve other areas of the resort. McBeath, who has been on the job since late December, likened the past few months to “drinking a glass of water out of a fire hydrant.”
He’s taken in every aspect of the property.
“I have put together a pretty aggressive program to enhance and differentiate our product offering,” McBeath said. “We have to deliver a product with a great nongaming offering, but at the same time, you can’t escape that we have a 100,000-square-foot casino on the first floor. You have to celebrate that with programs and services.”
McBeath’s commitment goes beyond his CEO position. He said he “made an investment” in the resort and is a minority owner.
Blackstone is relying on McBeath. Gray called his hiring a “coup” for the property.
He also believes the company’s history with hotel workers union UNITE HERE will lead to a labor agreement with Culinary Local 226, which had an adversarial relationship with Deutsche Bank and previous management.
That’s one reason Blackstone, Culinary leaders and elected officials participated in an event last month to celebrate the new ownership. Labor strife is over. It was also a way to introduce Blackstone to the community.
Gray said the company is looking for other potential Strip purchases so The Cosmopolitan won’t be a one-casino company, although he wasn’t tipping his hand on any new deal.
“We generally don’t talk about anything specific,” he said.
He said the private equity group is committed to the investment for the long haul and isn’t looking to a quick sale to recoup its investment.
“We see a lot of upside in this asset,” Gray said. “Selling quickly is not in our plan.”
Gray said his only experience with gambling was with small-stakes blackjack games on trips to Las Vegas. He’s relying on McBeath’s experience and background when it comes to The Cosmopolitan’s casino.
“I like the energy, excitement and entertainment in the casino, but it’s a real stretch to call me a big gambler,” Gray said. “I’ll leave my risk-taking to the investment side of things.”
Sentiment: Strong Buy
However, with Yahoo’s plans to spin-off its stake in Alibaba Group Holding Ltd (NYSE:BABA), there is a small fear among analysts that this will reduce the liquidity of Alibaba’s shares.
By Chris Witkowsky
NEW YORK, Feb. 27 (Buyouts Magazine) - Talk about smooth sailing. Blackstone Group(BX) has told its investors that it expects to hold a first close on its flagship private equity Fund VII in April on $10 billion, according to two limited partners with knowledge of the firm.
That is after officially launching the fund late last year with a $16 billion target and without a cap. The firm had been talking to potential limited partners about the fund since as early as last fall, sources said.
At this kind of pace, who knows how much Blackstone could potentially rake in for Fund VII. One LP who has heard the fundraising pitch said it would not be surprising if the firm tries to raise $18 billion or more.
Blackstone helped stoke the flames of the early fundraising by offering a six-month management fee holiday for early investors, the two sources said. This means LPs who commit prior to the first close will not pay management fees for six months, starting on the official first close date, one source said.
The fee holiday will help smooth out the J-curve for those LPs that qualify, the source said. The J-curve is the expected period of loss in the early years of a private equity fund, followed usually by gains as investments mature and are exited.
Blackstone will share 100 percent of any deal or monitoring fees with LPs in Fund VII, Blackstone President Tony James said during a media call earlier this year. This is the first time Blackstone has moved to a 100 percent deal fee offset in its private equity funds, though i
OBV has been increasing since the bottom on 1/23/2015..forming a reversal pattern..looking to break out here...
Sentiment: Strong Buy
Thu, Feb 26, 2015, 6:10pm EST - US Markets are closed
CLJ15.NYM -4.06% 48.92
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Blackstone's large US$1.8bn CMBS tops list of priced deals
9 minutes ago
By Joy Wiltermuth
NEW YORK, Feb 26 (IFR) - The Blackstone Group's US$1.8bn CMBS refinancing of Motel 6, a low-cost lodging chain it bought three years ago, was the biggest structured finance deal to price on Thursday, bankers and investors said.
Demand helped the issuer to tighten the top three classes 5bp-10bp from talk earlier in the week, even though the trade nearly cashed out Blackstone's entire US$626m equity stake in the company.
Presale reports showed that the new financing returned US$600m in equity to Blackstone, a point that two investors said made it less attractive than the initial US$1bn CMBS, which helped finance Blackstone's 2012 acquisition of Motel 6 from Accor.
"Is it a concern? We have conflicted thoughts," one analyst said. "We don't like to see big cash outs. But again, that's one reason why we will look at the sponsor."
Further down in credit, investors felt they wanted a bit more spread from Blackstone, particularly on the Triple B minus and Double B minus classes, which widened by roughly 15bp before they landed at Swaps plus 290bp and S+390bp, respectively.
Energy producer Samson Resources Corp., owned by private-equity firm KKR & Co.(KKR), is working with restructuring advisers, as a sharp decline in oil and gas prices complicates its efforts to stem losses and keep current on its multibillion-dollar debt load.
The Tulsa, Okla., company is working with law firm Kirkland & Ellis LLP's restructuring practice and Blackstone Group LP's(BX) restructuring advisory group on options for dealing with its $3.8 billion in long-term debt, according to people familiar with the matter.
Companies hire restructuring advisers to explore options to raise capital, sell assets or cut debt through out-of- court restructurings or bankruptcy filings. It isn't clear what options Samson is considering, though the company has previously said it is looking to sell some oil and gas fields.
KKR led a $7.2 billion buyout of Samson in 2011, as the shale-drilling boom was ramping up. The company took on $ 3.6 billion in debt as part of the takeover.
This next unit-price headwind is very ironic, since it's primarily driven by two factors that are actually among the strongest positives with BX: the high-yield distributions, and the financial strength of the firm, which puts somewhat of a short-term floor under the unit price. In other words, not only do short-term traders love to ride the momentum with the BX volatility that results from an ebb and flow of concerns over the various aforementioned regulatory issues, but short-term trading also disproportionately affects BX units in other ways.
For example, it's common for short-term traders to use the "dividend capture" tactic, which involves constantly trading in and out of stocks. Traders also tend to collectively "park" large chunks of cash in high-yield stocks for days, weeks or months in between trades, but have no intent of holding the shares beyond those short time periods. There are very few stocks that have a yield over 8%, yet simultaneously have a literally fortress-like balance sheet, so BX is clearly among the most frequented parking spots. The combined effect from all these factors is constant in-and-out trading, which can perpetuate otherwise normal minor selling into full sell-offs, and makes it harder to sustain any price level.
(click to enlarge)My BX investment thesis centers on two main drivers:  particularly strong leadership and,  cyclical nature of core businesses. As I opined in my prior article, the various people who lead BX are, at the absolute least, among the "smartest guys [and gals] in the room." That helps make investing worthwhile, especially when coupled with cyclicality in an environment of global economies recovering from a severe downturn. In the following excerpt from my prior BX article, the groundwork is set for the aspect of my thesis I want to expand on:
Sentiment: Strong Buy
Barclays Rating Update on The Blackstone Group L.P.
by Deanie Harlan on Feb 24, 2015
Equity Analysts at the Brokerage Firm, Barclays, maintains their rating on the shares of The Blackstone Group L.P. (NYSE:BX). Barclays has a Overweight rating on the counter. As per the latest research report, the brokerage house raises the price target to $43 per share from a prior target of $41.
Summit Materials of Denver files for IPO with value of $100M
Dec 19, 2014, 10:27am MST
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Kathleen Lavine | Denver Business Journal
Tom Hill, CEO of Summit Materials.
Denver Business Journal
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Denver-based Summit Materials Holdings Inc. has filed for an initial public offering.
Summit Materials supplies ready-mix concrete, cement, asphalt paving and other materials to the construction industry.
Summit, which moved its headquarters to Denver in 2013, yesterday filed an S-1 document with the Securities and Exchange Commission, one of the first steps toward becoming a company public.
Tom Hill builds Summit Materials despite recession
The preliminary prospectus, which is incomplete and can be changed, shows that the IPO could be valued at around $100 million.
The company has not returned request for comment, but the SEC imposes a silent period on companies after they file S-1 forms.
In a June interview, Summit CEO Tom Hill said the company would likely file for an IPO within 12 months.
Summit, which employs 4,500 people across its businesses nationwide, has experienced tremendous growth since Hill launched the company in 2009 with a $750 million equity from Blackstone Group.
In the first nine months of 2014, Summit brought in $870 million in revenue, according to financial documents provided to the SEC as part of the S-1.
In the June interview, Hill predicted the company would hit $1 billion in revenue in 2014.
I have them on IGNORE and if you IPCI investors will also and stop egging them on this will be a better board...long 6,000 here and happy to hold
price of $6.6 million..that comes in at $3.90 a share they sold it at ??? good report...
Sentiment: Strong Buy