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.