Foreclosure, Shutdowns Threaten Future Las Vegas Skyline
Economic concerns continue to cast doubt on the probability of completion of several multibillion dollar Las Vegas Strip casino projects. With credit and financing getting harder and harder to find, and construction costs rising, both the Cosmopolitan Resort and Casino and the Plaza Casino and Hotel are having trouble refuting skeptics who believe these endeavors may not be finished.
The Cosmopolitan, owned by Bruce Eichner's company 3700 Associates LLC, was reported in January to be on the verge of foreclosure by its primary lender, Deutsche Bank. However, Eichner said at the time that Deutsche Bank was working with him to find new financing, and that he expected the project to continue apace.
The new investors have apparently been more difficult to locate than Eichner planned. After declaring the $760 million construction loan in default in January, Deutsche Bank was reported Tuesday to have begun foreclosure proceedings. No final date has been revealed, and Eichner did not say whether formal notice had been received.
Perini Building Corporation, contracted to build the Cosmopolitan, said it would continue with construction per an agreement with Deutsche Bank reached in January. The casino would eventually cost almost $3 billion, and sits adjacent to the Bellagio.
Officials from the Plaza, modeled after New York's famed Plaza Hotel, are to appear before the Clark County Commission today to answer published reports that the project would be put on hold. The Plaza's ownership is the Elad Group, led by several Israeli investors.
An Israeli news article cited the chance the Plaza may be delayed or cancelled due to the U.S. credit crunch; the article was picked up and circulated by Wachovia financial analysts.
Representatives of the Elad Group insist the rumors are incorrect, and the construction is on schedule. If completed, the Plaza is expected to cost over $6 billion.
Once considered recession-proof, casinos have become such huge investments that any possibility of less-than-spectacular business threatens entire projects. It is no longer sufficent to attract gamblers; families with stuffed wallets and whales who own empires must fill every room daily, or costs and debt service run perilously close to revenue. Did not the old Sands and Sahara have better, less risky strategies?
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| Posted by: Shari | When: 03/20/2008 10:08:08 AM EST |
| Plaza Las Vegas project moves forward (UPDATED) By Liz Benston · March 19, 2008 · 4 PM Plaza Las Vegas developer Miki Naftali of El Ad Group has denied a report in the Israeli publication Yediot Ahronot that the $6 billion Strip resort has been put on hold because of the credit crisis. ?We are forging ahead as planned? on the Plaza, Naftali said in a statement. The Clark County Commission today approved permits for the Plaza, which submitted plans for seven high-rise towers including 4,100 hotel rooms, 2,600 condominium units, a 175,900 square-foot casino, 134,500 square feet of restaurant space, 347,887 square feet of retail, 539,607 square feet of convention space, a 50,000 square-foot health club, a 1,500-seat theater and 227,038 square feet of rooftop space for pools and other amenities. Neither Naftali?s statement nor today?s commission action directly addresses the question of financing, which remains an issue for the Plaza and other developers needing to raise billions of dollars to complete their projects amid the worst financial markets in more than a decade. Banks aren?t lending to new projects because they are burdened with loans that are losing value and can?t be resold. ?In our opinion, it will be very difficult for new gaming development projects throughout the country to obtain financing in the near term unless project sponsors are willing to significantly increase their equity contributions,? bond analyst Dennis Farrell of Wachovia Capital Markets said in a research note today. This means that the Plaza Las Vegas folks could be hoping for the market to rebound before signing any financial agreements. Or they will have to put in more of their own money, which isn?t what they did in New York City. (The redevelopment of the original Fifth Avenue hotel was highly leveraged.) In other words, the days of putting up 10 percent equity instead of, say, 50 percent ? as Steve Wynn did to build Wynn Las Vegas a few years ago ? are over, as are the days of using land as equity to finance a major project. Land, after all, is only worth what a developer is able to build on it. And Wall Street banks, like mortgage lenders struggling to swallow their losses, want to see cash. | |
