This week has really been up and down in the Las Vegas condominium market. Earlier Sinifox Financial reported how well the MGM Mirage's CityCenter condos were accepted by the luxury home buyer. A few days later the news turned sour as an item surfaced about a downtown condominium project called Newport Lofts being taken over by its lead bank. And now there is another case of premature lender involvement.
Cosmopolitan, a $3 billion condo and hotel project wedged between the Bellagio and CityCenter, was served a notice of default by Deutsche Bank when payments on a $760 million construction loan were missed. The developer, 3700 Associates LLC, has already sent out a management team to scout the financial landscape for a potential equity partner that would ultimately lead to another loan. However, in today's soft residential real estate market and tough mortgage environment it can become a major challenge.
But then Deutsche Bank obviously had a change of heart and worked out a temporary arrangement with Perini Building Co. to continue construction on the project toward its estimated December 2009 opening. In the meantime 3700 Associates and the banks are discussing new financing options and availabilities.
This may be the best alternative for Deutsche Bank. If it pulled out of the project altogether, it would likely lose all of its to-this-point investment in it. Should a new lender emerge in the coming weeks, so much the better. Or it could let Perini finish everything as scheduled and then seek a buyer for the project. The real estate market in Las Vegas and the national mortgage conditions in late 2009 and beyond could be much improved and actually allow the bank to break even or even make a decent profit.