Cosmopolitan Las Vegas: Officially Foreclosed!! But Construction Will Continue

I’ve been keeping a close eye on the status of the Cosmopolitan Hotel & Casino in Las Vegas since the beginning of the year when speculation first arose that Deutsche Bank was going to foreclose on the property due to Bruce Eichner’s inability to get his financing in order.

The Cosmopolitan is made up of the two closest buildings under construction. The buildings in the rear are all part of the MGM CityCenter project. This picture was taken in June

Since that time rumors and speculation have abounded – complete with a Wall Street Journal article stating that Starwood Hotels & The Related Companies are purchasing an interest in it so that it can be completed, yet re-branded as the W Las Vegas, and also – as rumor has it – St Regis Las Vegas (two different brands in one building). Global Hyatt was also supposedly ready to take over the project but they could not come up with the appropriate financing required to do the deal.

Since May nothing has been said about the project – but on August 7th, Deutsche Bank officially foreclosed on the property – completely removing Bruce Eichner from the picture, while still continuing to finish construction.

For all those who have deposits on units there (and a lot of you have contacted me directly to see what the status is) all I can say is this: Construction is continuing, so I do not think that your deposits are in danger of being lost. Of course, please please please read your agreement or contract that you signed which should give you information as to what you can do/expect, or talk it over with a lawyer.

Here is a picture of the Cosmopolitan taken two days after the foreclosure (8/9/08) – showing construction still proceeding as normal

Why is Deutsche bank proceeding with construction? They are so far into the construction process that it would make more sense to finish the project rather than let it sit and raise the prospect that Deutsche Bank may lose more money than they already have put in by it just deteriorating. DB has a much better opportunity to get their money back by finishing the project and seeing it to its completion. Remember – DB isn’t the company that is actually building the place, and nor was Bruce Eichner’s company building it – a third party construction firm (Perini Construction) is actually building the project. So don’t be alarmed and think that a bunch of bankers are now pouring concrete! Also – Perini is also the firm overseeing all construction at MGM’s CityCenter.

Unlike a bankruptcy, a foreclosure does not mean that owner is instantly absolved from all the debts that is incurred – it means that the bank takes over the property and runs it. Typically banks don’t want to run the property – and will instead look to sell it off. Having that many deposits (aka: future residents) is a very valuable negotiating point for the bank trying to sell the property.

It’s been suggest that there are only 4 firms interested in the property: Starwood Hotels (probably with The Related Companies), MGMMirage, Hyatt and Marriott.

I think all four firms would be able to fit the Cosmopolitan into their roster easily – Marriott as an Edition, Starwood as the planned W Las Vegas/St Regis, Hyatt because it’s was the original hotel operator of the Cosmopolitan, and MGMMirage because CityCenter/Caesars surrounds the Cosmopolitan location, in fact – I think most people think that the Cosmopolitan is part of CityCenter.

I think that Starwood or MGM is the best bet – MGM because of where the Cosmopolitan is located – right smack in the middle of a lot of the MGM Strip Property, and Starwood because apparently they were so close to consummating a deal earlier in the year..

I’ll keep everyone posted on anything that i hear!

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Category: casino, construction, Hotel Development, Hotels, hyatt, las vegas, marriott, mgm mirage, real estate, resorts, Starwood Hotels, w hotels