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Gaming Guru

Arnold M. Knightly
 

Strip development: Ray of light for Cosmo

4 September 2008

LAS VEGAS, Nevada -- After months of speculation, the pieces are starting to fall into place for the financially troubled Cosmopolitan project on the Strip.

New York-based Related Cos. has been hired by Wall Street investment house Deutsche Bank to finish development of the $3.9 billion Cosmopolitan project on the Strip, an affiliate of the bank announced Wednesday.

John Knott, executive vice president of the Global Gaming Group for CB Richard Ellis, said Deutsche Bank's decision to bring in a company with major development experience was a good sign.

"The good news from a market perspective is that the project goes forward as opposed to sitting there idle and leaving a big question mark on the Strip," he said. "So it's got some direction."

Knott said he assumes Deutsche Bank will continue to evaluate possible partners and investors.

The bank is still negotiating with hotel operators to operate the casino, and an announcement is expected in the next few months, according to the statement.

The investment bank did not say if the project's opening will be pushed back from its current late 2009 date.

Deutsche Bank has taken over full ownership of the project under an affiliate, Nevada Property I, and will continue to coordinate design and construction of the project.

A call to the bank's New York offices asking if the company still plans to sell the project after the credit markets loosen were not returned by press time.

Related is one of five companies that recently signed contracts with Deutsche Bank to help finish the 2,998 unit hotel-condominium project after the original developer, New York-based Bruce Eichner, ran into financial trouble this year.

Eichner contributed the 8.5-acre site between CityCenter and the Bellagio, which was purchased for $90 million in 2004, and $50 million from a subsidiary of Global Hyatt. Increased construction costs helped drive the Cosmopolitan's construction budget from its original $2 billion price in early 2006 to its current $3.9 billion price, and banks in January insisted Eichner put more equity into the project before they would provide new funding.

In addition to Related, W.A. Richardson Builders will consult on the design and construction of the casino and Perini Corp. signed a new contract to complete construction work on the project. W.A. Richardson builders is owned by former Manadalay Resort executive Bill Richardson Jr.

Perini, which has been working on the project from the beginning, was being paid under an interim agreement since March when Deutsche Bank began foreclosing on a $760 million loan after Eichner failed to complete a deal to secure more financing.

Deutsche Bank also signed new agreements with Las Vegas-based architect The Friedmutter Group and Miami-based Arquitectonica to consult on the interiors of the resort and casino.

The privately held Related was founded in the early 1970s by Chief Executive Steve Ross. The company's most famous project was the $1.7 billion Time Warner Center in New York City.

Locally, the company is still developing the $3 billion, 12 million-square-foot World Market Center downtown.

This is Related's third attempt to move into the Las Vegas resort market. Related was a joint-venture partner with Centra Properties on the canceled Las Ramblas project.

Slated for 4,000 hotel-condominium units on Harmon Avenue west of the Hard Rock Hotel, the project involved actor George Clooney and nightclub magnate Rande Gerber. The land was sold in June 2006 for $202 million after the partners cancelled the project.

Related's Icon luxury condominium project, slated for 41/2 acres on Convention Center Drive, was canceled in November because of rising construction costs. The land was sold the same month for $42 million.

Related also once held a development agreement for the 61-acre Union Park, but it expired when talks with the city collapsed.