BluefoxToday blog : Two Las Vegas condo and hotel projects in financial straits

Two Las Vegas condo and hotel projects in financial straits

Home buyers and refinance hopefuls are currently struggling with a mortgage market that has retooled its guidelines several degrees harder. They aren't alone, however. The same thing is now happening to the commercial finance sector, too. Even major developers are finding it difficult to secure financing for their projects and if they find it, it comes at a cost that may be too high to make sense.

A few weeks ago it was reported that the Cosmopolitan had worked out a tentative deal with Global Hyatt Corp. and Marathon Asset Management who would recapitalize the troubled condominium and hotel project on the Strip, next to the under-construction CityCenter. The details were supposed to be worked out by Thursday, but the deadline was missed and now Deutsche Bank, the main lender, has informed the principals that foreclosure papers are being filed on its $760 million loan.

Obviously the lead bank is unhappy about the pace of the negotiations, so it decided to put some pressure on the parties to reach an agreement pronto by threatening foreclosure. In the meantime, construction on the site stays on schedule as Perini Building Corp. is being paid by Deutsche Bank as stipulated in their prior arrangement.

The other development said to be on thin ice is the Plaza Las Vegas, a hotel and condominium complex to be built on the former New Frontier site. The plan includes seven towers that would house 4,100 hotel rooms and 2,600 condos and they would surround a large casino. The marquee tower is to be a replica of the famous New York Plaza, a landmark hotel over there.

A newspaper report states that the developer is going to hold off on it until the mortgage and overall credit markets improve, although the president of the Elad Group, a joint venture partner in the project, disputes that. Financing has been a question mark from the day the project was announced because no details were disclosed then and now that the capital market situation has further deteriorated they may simply have a terrible time convincing anyone about their plan's viability. The smart money is on the decision to wait out the slump and come out swinging when the haze of uncertainty clears.

 

 

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Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Comment balloon 8 commentsEsko Kiuru • March 19 2008 10:25PM

Comments

Esko -

It doesn't surprise me that these projects are running into some trouble.  And, they are SO EXPENSIVE!

Keep your fingers crossed, and your dice warmed, man!

DEAN & DEAN'S TEAM CHICAGO

Posted by Dean Moss, Dean's Team Chicago IL Real Estate Team (Dean's Team - Keller Williams Realty Partners Chicago IL) over 10 years ago
Esko, money is getting tight all over. We got more changes this week on the residential side and they were not good.
Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 10 years ago

That would be a pretty long wait!  No telling when this madness is going to peak....

Posted by D. Bass, Blog: Ask The Underwriter (Ask The Underwriter) over 10 years ago

Dean,

The newcomers to town are finding it hard to secure financing now.

Posted by Esko Kiuru over 10 years ago

George,

These Bear Stearns-type of events are scaring everybody in the mortgage and overall financial markets.

Posted by Esko Kiuru over 10 years ago

D. Bass,

It could take a while to sort everything out, unfortunately.

Posted by Esko Kiuru over 10 years ago
Thanks for these updates.  Since I do not dabble much in this market I love to hear what is going on!
Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) over 10 years ago

Renee,

Any time. More projects could be put on hold for now.

Posted by Esko Kiuru over 10 years ago

Participate