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Arnold M. Knightly

Cosmopolitan project saved by pair's aid

28 February 2008

"LAS VEGAS, Nevada – A hotel company and an investment firm have reached an agreement to save New York developer Bruce Eichner's financially troubled $3 billion Cosmopolitan from default, an official with the Strip project said Wednesday.

"Global Hyatt Corp. and New York-based Marathon Asset Management have agreed to recapitalize the condominium-hotel project, Cosmopolitan Chief Operating Officer Scott Butera told the Review-Journal.

"The parties are finalizing the terms of the agreement with the project's lender, Deutsche Bank, he said.

"Although terms of the agreement are confidential, Butera said Eichner will continue to have a role in the project.

""Eichner's an important part of the project," Butera said. "But a substantial amount of the equity will be supplied by Marathon and Hyatt."

"Eichner and Global Hyatt could not be reached for comment.

"The revelation comes six weeks after Deutsche Bank issued a notice of default to Eichner on a $760 million construction loan when the developer missed a payment after failing to secure refinancing for the project.

"Prospective lenders then said Eichner's company, 3700 Associates LLC, needed to increase its equity to at least 10 percent of the project's cost before they would provide new funding.

"The company had contributed the 8.5-acre site, which was purchased for $90 million in 2004, and $50 million from a subsidiary of Global Hyatt.

"The project's senior management team has been working with financial institutions Deutsche Bank and Merrill Lynch to try to locate new investors since the default notice was announced.

"The Chicago-based Global Hyatt Corp. emerged as a possible savior for the project soon after the project's financial problems surfaced.

"Besides the $50 million investment, a subsidiary of Hyatt was slated to manage the property's 150,000 square feet of convention and meeting space.

"Gaming Control Board Chairman Dennis Neilander said Wednesday evening he was not familiar with Marathon, but that Hyatt, which is privately held by the Pritzker family, has been licensed to operate a casino in Nevada for a few years.

"The company has owned and operated the Hyatt Regency Lake Tahoe in Northern Nevada since 1989, according to state records.

""They're a very wealthy family and they have been licensed here for a long time," Neilander said.

"The family recently received an infusion of $4.5 billion after selling 60 percent of the family's holdings in investment firm Marmon Holdings to billionaire investor Warren Buffett's Berkshire Hathaway.

"The Pritzker family also sold a $1 billion stake in the Hyatt in August to an investment arm of Wal-Mart's founding family and Goldman Sachs.

"The Wall Street Journal first mentioned Marathon as a potential partner in the Cosmopolitan on Jan. 31.

"Construction has continued on the site, which is wedged between MGM Mirage's Bellagio and that gambling company's CityCenter project, while new financing was being sought.

"Perini Building Corp. received an interim commitment on Jan. 18 from Deutsche Bank guaranteeing monthly payments to continue construction work for the project.

"Our work at the Cosmopolitan continues unabated," Perini Corp. President Robert Band said Tuesday during the company's fourth-quarter earnings call. "All current amounts due to us have been paid ... and work is proceeding on schedule. We are confident the Cosmopolitan ... will be completed on the original time line at the end of 2009." Band said.