Two Way Hard Three | Las Vegas Casino & Design Blog

Posted by detroit1051

I believe Cosmo will be hugely successful. Eichner has a strong track record. The location between Bellagio and CityCenter is terrific. Stand-alone properties like Cosmo and Fontainebleau will fill a niche on the Strip.

Am I the only one who believes Echelon will either not get done or will fail?
BYD should leave the high end to MGM, Wynn, Elad's Plaza and Fontainebleau. I don't believe the South Beach and LA hotels, Mondrian and Delano along with Shangri-La will translate to the Strip. BYD would be better served by focusing on its downtown properties. As the Strip becomes even higher priced, there's a real opportunity for downtown to attract mainstream gamblers and tourists as we've discussed about Binion's.

Posted by Mark D

Why don't you think Echelon will get built? The tower foundations are done and they've erected six tower cranes already. Boyd stock sure has been taking a beating though and might be ripe for a takeover.

Posted by detroit1051

Hi Mark. I may be overstating it. I'm not sure Boyd understands the new, high-end market as well as MGM or Wynn does, Borgata's success notwithstanding. The scope of this project is huge, but the core hotels will be the 2,500 room Hotel Echelon and the 650 room Suites at Echelon. With the cost of the project, will Boyd be able to attract the $300 a night crowd? One big plus is the fact that Boyd already owned most of the land because of Stardust.
BYD is getting killed, down 50% in the past 52 weeks. You may be right that BYD is ripe for a takoever...if someone can pull it off in this market.

You have to wonder if the construction cost have risen that much, that now they are running short of money, or if they started the project knowing they didn't have enough money to complete it. Either way, this could become a very interesting situation, especially now that the credit markets are tigher than ever.

As for Echelon Place, it will get built, but I could see LVS buying it. And though Wynn might be a buyer of Art, he is a builder of hotels, not a buyer.

I never hear anyone in the industry say bad things about Boyd. I think Mr. Boyd has about 70 years experience in the Casino biz, more than Adleson, Wynn (And probably Loveman) combined. Borgata is universally praised as well run and high quality. They employ more people than Wynn and LVS (Possilby combined) in Nevada. I think the fact that they are low key in an industry of larger than life personalities gives them a bum rap. I've never read anything in any "professional" media that says Echelon is in doubt. However, if they can't make Echelon work, I think it will be very difficult for the Crown project and even the MGM-Kerzner project to get done

Of all the developments under way, I actually think Echelon has the best chance at success. Boyd is a shrewd gaming operator and will be able to tap into a pretty substantial existing customer base for marketing. There are quite a few things they can still do construction-wise to cut costs (perhaps fake plants instead of real ones). So, will they really need to get $300/night to make their ROI target?

I believe that Boyd operates Borgata. If so, it is an extremely well run casino resort. It is head and shoulders above anything else in AC. I don't really see much of a problem for them to translate that success and knowledge to the high end Las Vegas market.

Posted by mike_ch

Part of the problem when you talk to people who own stock in these companies is they see nothing but optimism for the market they're invested into. As someone once said, it's hard to get a man to understand something if he'll lose money once he understands it.

I've always said Steve Wynn is a little bit foolish for thinking of Las Vegas as a high-end luxury town, but he's definitely carved out a niche for himself, and it seems LVS has done an okay, bottom-line driven attempt to fight for that market. But the Steve Wynn customer base isn't everyone. It's a tiny fraction of people with a ton of money, but there's not much of them.

There's word now that even the very successful draws to town like CES are thinking of finding greener pastures because of the resort industry's relentless greed. The Strip is in for a rude awakening about the prices that the market will bear.

If you think everybody of normal means is going to have to move to Downtown because the Strip is too expensive, you aren't living in reality. Reality is going to be a lot of resorts being sold for less than it cost to build them and "suite" hotels having to market to a lot less sophisticated clientele than they promised investors when they broke ground.

There's only so much room at the top, and the crunch (not necessarily a crash) will be interesting to watch.

Mike I have to agree with you. However, my only objection is that it will not be the "suite" hotels that will have to adjust their rates. CityCenter's hotel will not lower its nightly room rates when MGM can lower Bellagio's and retain CityCenter as its flagship. The same stands true for LVS. They will lower the Venetian's rates ages before they'll lower Palazzo's. Developments like these, Encore included, will simply have their parent company retain their sister resorts' high end customers and lower the rates at those resorts, so as to adjust to the market.

However, there are resorts that will be forced to do just what you say they will do. Fontainebleau, for example, will not have a large client base to choose from and will not have an existing customer base at a sister resort. Resorts like Fontainebleau, Echelon, ELAD's Plaza, and even the Cosmopolitan will have to lower their room rates in order to attract a customer base.

However, I can see yet another potential outcome, and that is the simple idea that resorts like PH, TI, Mandalay Bay, Mirage, Paris, etc., will "slide" down the proverbial food chain so that these newer resorts can remain solvent. This, though, won't be achieved by any of these hotels. It will, in all actuality, be carried out and achieved by the consumer. He/She will choose which hotels will remain "luxury" hotels and which perceived "luxury" hotels will become mid-level. And, in all honesty, this is what will result from this impending recession. We, as the consumer, will be the deciding factor, as we have almost always been, as to what will be profitable as luxury hotels in las vegas.

So, is this a sign of the fall of the House of Harrah? Will they be unable to go as downmarket on pricing on their strip properties because they are crippled by the $10 billion "equity strip" that was added to their debt in going private?

For those interested in Vegas architectural design check out my blog today http://slotblogger.blogspot.com/, normally I stick to slot machines, but I'm also know to rattle on about art and architecture. Today's subject is about saving a Googie style Denny's in Seattle that includes a hilarious observation on the merits (or lack thereof) of Barry Manilow. Let me know what you think!

I think you're right, the "average joe" isn't going to completely abandon the strip, and pricing won't force him off. Mid range properties abound (NYNY, Monte Carlo, Luxor, TI, Venetian, never mind Excalibur as the next generations Circus Circus) and pricing will adjust to the increased higher end "glut". Although I have to say, the state of Vegas room rates even now that make me think we're underestimating what the market will bear - after all, Vegas operators are champs at adjusting rates to maximize occupancy.

From Detroit1051:

Cosmo foreclosure!!

http://money.cnn.com/news/newsfeeds/articles/djf500/200801161602DOWJONESDJONLINE001065_FORTUNE5.htm

I wonder if MGM Mirage would consider swooping in to buy the project?

Posted by detroit1051

Hunter, I agree. This might be an opportunity for MGM and/or Dubai to pick it up and have a property stretching from Flamingo to Tropicana. Too bad Jockey Club is there, but if Steve Wynn couldn't acquire it when he was building Bellagio, no one can.

WOW!!! What a train wreck. I don't know what to think of this. I don't know if MGM would touch this thing or not, they have plenty of land, and plenty else going on. I guess if they stole it, they might consider it. A smart business will at least consider anything. We've seen brand new properties fail in LV (Aladdin), but we've never seen a major Mega-Resort, stop being built due to lack of funding, this is pretty unbelieveable. I'm very curious to see what comes of this. Perhaps, Packer should invest in this place also, they seem to have more money than they know what to do with. I was never impressed at all by this project, I wonder if Hyatt will step in, since its one of the properties they were going to manage?

Posted by detroit1051

LV sun on Cosmopolitan:
http://www.lasvegassun.com/blogs/gaming/2008/jan/16/trouble-brewing/#

Posted by Mark D

http://online.wsj.com/article/SB120054012983095939.html?mod=googlenews_wsj
This story touches on some broader implications and shows how the Cosmo's problems illustrate that the residential sub-prime implosion is now rolling over into the commercial property markets. They also say that in the past Eichner lost some big New York buildings in the early 1990's because of shaky financing during a bad market downturn. Deja vu.

Posted by mike_ch

Who else has enough bank buy Cosmo? Packer seems possible. Could LVS or even Wynn buy this? I doubt Wynn would want it because of the Jockey Club hanging around, but it would make a great feeder resort and really be at thorn in MGM's side.

LVS could afford it, probably? The MEGACENTER(tm) has grown about as far as it logically can, but Adelson has yet to show any interest in building something that doesn't hinge on convention space.

Posted by Mark D

http://www.lvrj.com/business/13860847.html
This RJ story has some comments from MGM and also a little history of previous Strip projects that got stalled because of finances.

Posted by Mark D

This was on Barron's Shares of the construction-services company Perini tumbled 27%, after the developers of an ongoing Perini project received a notice of default. Under its contract with the Las Vegas Cosmopolitan Resort and Casino, Perini still has about $1.4 billion worth of work to perform. Perini said it was "in discussions with the developer and lender to facilitate an orderly continuation of construction of the project." Broker D.A. Davidson cut its Perini price target on the news to $60 from $70 but kept a Buy rating. Analyst John Rogers wrote, "We expect the project to move forward, although difficult financing could slow the process."

That 27% fall on PCR stock today was a complete joke. This is only one project of many they have, and their profit on this project hardly can compare to the 27% drop in the value of their company. This is a classic example of a Wall Street over reaction, Perini is a smoking buy at these levels. This stock was just $75 over the summer, and I expect PCR to be bidding on the Plaza, and I'm sure they are up for MGM AC, and the next MGM property next to Circus Circus.

I have never found this current LV project very interesting at all, I think they tried to put too must stuff in to small of space, and there is nothing very special about this project at all, short of its location. I wouldn't miss it, if it never got finished, but I hate to see this effect Perini, a great company in such a negitive way. I don't see this project stopping though, they've spent too much money at this point to stop now. But we'll see what happens.

Posted by mike_ch

I can sort of understand it. Perini's other big project is Iraqi reconstruction projects, and the most likely next President is one of the ones who say they'll have all non-defensive combat troops out of the country at the end of '09.

People have been secretly afraid that the need and demand for construction in Vegas has been inflated, and this has no doubt assured people that their bubble fears aren't entirely unfounded.

Brian, I would agree with you that Perini is a good company, but I seriously doubt that they'll even have a chance at MGM AC. Tishman, the GC for Echelon, controls the market in the New York/New Jersey area. They built the Borgata and, having proven themselves for MGM, will probably end up building MGM AC.

However, Perini will still probably, as you have said, be first in line to build the Kerzner development and whatever MGM does with Circus Circus. In addition to that, I would venture to guess that Perini will have some sort of involvement in Wynn's "Manhattanization" of the golf course. I don't know why, but something tells me that they will be involved.

Actually, Perini's work in Iraq is just a few hundred million dollars, which is a very small percentage of the 8.5 Billion, it has in current backlog.

Posted by detroit1051

Jan 18 (Reuters) - Perini Building Co Inc, a unit of Perini Corp (PCR.N: Quote, Profile, Research), said Deutsche Bank will continue paying for the construction of Cosmopolitan Resort and Casino project in Las Vegas, Nevada, while the issues of loan default with the developer are being resolved.
The company's work at the Cosmopolitan will continue unaffected by the default notice, it added.

Cosmopolitan is back on track, but Eichner is out.
Who will operate the casino? Hyatt isn't licensed, is it?
Will the financial issues affect original plans for Cosmo to spend big bucks on its neighbor, Jockey Club?

"Marathon Asset Management, a global hedge fund with offices in New York, has agreed to partner with the Hyatt hotel chain to buy out Cosmopolitan developer and owner Ian Bruce Eichner. The new partners also will invest enough additional equity to finance the remainder of the project amid difficult market conditions."
http://www.lasvegassun.com/blogs/gaming/2008/feb/22/cosmo-dodges-foreclosure-hyatt-manage-hotel/

Cosmopolitan foreclosure is back on. Does anyone have thoughts on how this will be resolved? Will MGM add it to CityCenter?
The story is in the WSJ and is available without a subscription:

"The developer of the Cosmopolitan Resort Casino, a $3.9 billion condo-hotel complex on the Las Vegas Strip, has been notified by its primary lender that it will begin foreclosure proceedings.
The move by Deutsche Bank AG, the lender on a $760 million senior loan, comes after the developer, Ian Bruce Eichner, wasn't able to finalize a deal for new financing amid the credit crunch. Mr. Eichner in late February cut a tentative deal with two of his other lenders, Global Hyatt Corp. and New York hedge fund Marathon Asset Management, for a possible rescue of the twin-tower project. A default on the loan in January triggered automatic defaults on an additional $175 million in loans."
http://online.wsj.com/article/SB120554452781938671.html?mod=googlenews_wsj

Out of the frying pan, into the fire:
"Cosmopolitan Chief Operating Officer Scott Butera, a former investment banker specializing in reorganizing financially troubled companies, has left the troubled Strip project to take over as president of Tropicana Entertainment, the parent company of the Tropicana Las Vegas."
http://www.lvrj.com/business/16846466.html

I have a deposit down on a unit at the Cosmopolitan in Las Vegas. I don't trust the project any more with all the financial woes it's going through. I want my deposit back. If anyone else would like their deposit back, lets all get in touch with each other. My email is Dwn2earth4321@aol.com. Thank you.

The Cosmopolitan will be a huge success. It has an incredible location and will soon have new owners. The building design fits well with its neighbor, CityCenter, and its Strip address and casino assure it a steady cash flow.
Management will be the key to success here but anyone who can afford to take this project over should have no problem there. I believe if you sell now you'll be beating yourself later.

Please send me an e-mail if you are an owner and would like to get your deposit back. I am trying to coordinate a class action suit.

cosmovegasowner@yahoo.com

I guess if they stole it, they might consider it. A smart business will at least consider anything. We've seen brand new properties fail in LV (Aladdin), but we've never seen a major Mega-Resort, stop being built due to lack of funding, this is pretty unbelieveable.
I don't see this project stopping though, they've spent too much money at this point to stop now. But we'll see what happens.