Thursday, Sept. 4, 2008 | 2 a.m.
The Cosmopolitan has become an unwitting symbol of the region’s economic downturn since the resort’s primary lender, Deutsche Bank, started foreclosure proceedings in January.
Observers thought the massive project was doomed after its owner, developer and chief architect defaulted on more than $900 million in loans. Some doubted the $3 billion-plus project would be completed — a misguided view fueled by false reports that construction had stalled.
The murky future of the resort at the northwest corner of Harmon Avenue and Las Vegas Boulevard became more clear Wednesday when an affiliate of Deutsche Bank bought the resort out of foreclosure for about $1 billion.
That Deutsche Bank reclaimed ownership of the property, which failed to generate a heated bidding war among gaming or hotel giants, isn’t surprising given the lack of affordable or available financing in a down economy.
Still, the transaction is a bit of good news for the property — and the larger business community — whose image has been tarnished by a vacuum of information about who has been running the show the past several months.
Contractor Perini Corp. has plowed ahead with construction, building outward and upward even as ownership was in limbo. Given the millions that had been spent planning and constructing the resort, Deutsche Bank has an interest in seeing the Cosmopolitan through to completion.
The trustee sale to Nevada Property 1 LLC, which was publicly noticed to potential buyers, will pave the way for the major work on the 3,000-room resort.
Perini has signed a “guaranteed maximum price contract” to complete construction, “underscoring the new owner’s commitment to the Cosmopolitan and the Las Vegas Strip,” according to a statement from the resort.
Deutsche Bank named four companies to the resort’s development team Wednesday. They include New York-based real estate developer Related Cos., which will oversee the project, and W.A. Richardson Builders, a gaming construction design firm in Las Vegas. Related built the World Market Center downtown. W.A. Richardson Builders is owned by Bill Richardson, a former executive with casino giant Mandalay Resort Group, which was bought by MGM Mirage in 2005.
The remaining two companies, design firm The Friedmutter Group of Las Vegas and architecture company Arquitectonica Corp. of Miami, were part of the original design team and will remain with the project under the new ownership.
Key roles have yet to be filled.
Deutsche Bank has yet to name a company to manage the hotel or the casino. The casino manager, which could be a separate company, would need a Nevada gaming license. That process can take up to a year, less time if a management company with a license is appointed in the interim.
Deutsche Bank is expected to negotiate such agreements in the coming weeks.
Conspicuously absent from Wednesday’s announcement were some names that have come up in connection with the resort. Hyatt, which has maintained staff at the sales center for months, was the original hotel manager for the Cosmopolitan but may not be part of the finished product. Hilton, named as an interested buyer, isn’t part of the development team.
The transaction has been long coming for hundreds of people who bought condominiums at the Cosmopolitan — sales that helped finance the resort’s development with little money down. Some of these investors signed deals more than three years ago, when the condo market, and the economy, were hot.
Buyers have signed purchase contracts for more than 1,800, or more than 80 percent, of the property’s nearly 2,200 condo-hotel units — condominiums that buyers can put in a rental pool, receiving income from nightly renters. The remaining 800 units were planned as hotel rooms.
Sales agents say the Cosmopolitan may benefit from timing. Although some buyers are expected to exit their contracts, typical for any project, the economy may turn by the time most buyers are able to close escrow, they say.
Previous management had planned to open the Cosmopolitan by late 2009 or early 2010, with the resort’s towers topped off by year-end. The foreclosure and planning process could delay the opening, especially if certain features are changed.
No doubt the newcomers will take a hard look at the placement of the casino, which was planned for a side entrance to the property, with retail boutiques facing the Strip sidewalk in front. The development team will also focus on the resort’s interiors, from the lobby down to the bathroom sinks. It could save time and money by keeping the rock star-like designs, which include leopard prints and giant mirrors, developed under the previous owners.
But like excited new owners of a custom mansion, they will probably go for something new.