Foreclosure Commences on $3B Las Vegas Resort-Casino Project

Two months after Deutsche Bank presented Cosmopolitan Resort and Casino developer 3700 Associates L.L.C. with a notice of loan default, the foreclosure process on the $3 billion project has gotten underway. Despite financial woes, general contractor Perini Building Co. has been moving forward with construction activities and is now in talks with the 3700 Associates and Deutsch Bank regarding the continuation of its work.Less than three weeks ago, Global Hyatt Corp. and Marathon Asset Management L.L.C. stepped in to salvage the drowning project; negotiations are still in the works for a recapitalization plan. The Cosmopolitan’s troubles seem to be, quite simply, a sign of the times. “I don’t think anyone feels negatively about the project,” Carlton Geer, executive vice president with real estate services firm CB Richard Ellis Inc.s’s global gaming group, told CPN today. “People are getting used to bad credit market news, and I think the Cosmopolitan is one of the many more recent victims of the credit process.” Sandwiched between the Bellagio Resort and MGM Mirage’s massive CityCenter project, the Cosmopolitan will occupy an 8.5-acre site on the Strip with the address of 3708 Las Vegas Blvd. The 6.9 million-square-foot development will feature two 52-story condo-hotel towers with nearly 3,000 residential and hotel units, an 80,000-square-foot casino, 265,000 square feet of retail space and 150,000 square feet of convention space. A theater and a 40,000-square-foot spa will also be incorporated into the project. Global Hyatt has been affiliated with the Cosmopolitan since 2005, when it signed on to manage the hotel and condo-hotel residences; the Cosmopolitan will be Global Hyatt’s first property in Las Vegas. With financial issues hovering and meetings regarding Perini’s next construction moves currently taking place, it is unclear if the Cosmopolitan (pictured) will meet its scheduled 2009 completion date. “The issue is the developer has a construction loan to refinance during its construction cycle, and the credit markets are making that difficult,” Greer noted. “It was just really bad market timing for the Cosmopolitan, but they have no control over that.” Perini, which is now being paid by Deutsche Bank, had $1.4 billion of work to complete under its construction contract as of the close of last year. Ground broke on the project in October 2005. The estimated price tag of the entire development is $1.8 billion.Las Vegas-based 3700 Associates is spearheaded by CEO Ian Bruce Eichner, who has developed over 6 million square feet of upscale residential, office, hospitality and retail space with a total valued in excess of $2 billion. Perini Building Co. is a division of Framingham, Mass.-based construction services firm Perini Corp. which is known for its hospitality and gaming projects. The company also focuses on healthcare, sports, entertainment and educational developments. Among Perini’s current endeavors is the 1,282-room 64-story Trump International Hotel & Tower Las Vegas, which is on target to open its doors on March 31. Company stock opened at $35.46 today.