With Las Vegas’ real estate market roaring, New York developer Ian Bruce Eichner held a ceremonial groundbreaking in 2005 for a towering resort on the Strip: The Cosmopolitan.
A midmorning thunderstorm didn’t stop him from holding the event, either.
“About six people in the last two minutes told me a little rain brings good luck,” Eichner said at the time.
Three years later, with the economy spiraling downward and the real estate market cratering, its lender foreclosed on the partially built resort. It finished construction, opened the multibillion-dollar project in late 2010 during the worst recession in decades, and, after the resort lost plenty of money, sold it at a steep discount.
The Cosmopolitan of Las Vegas was the last newly built hotel-casino to debut on the Strip until Thursday, when the $4.3 billion Resorts World Las Vegas opened to huge crowds. The market for new casinos in the famed resort corridor was shaky long before the pandemic devastated tourism last year, and, like countless other projects around the valley, The Cosmopolitan got started during the frenzied real estate bubble and later ran into steep financial problems.
Eichner, 76, told the Review-Journal in a recent interview that people have often said real estate is all about “location, location, location.”
He offered another description: “It’s timing, timing, timing.”
Before the pandemic shut off much of the economy last year, Las Vegas had spent about a decade crawling back from the Great Recession. The construction industry — which was all but wiped out after the easy-money-fueled boom of the mid-2000s screeched to a halt — mounted a comeback as developers put up housing tracts, apartment complexes and other projects.
Resorts World was initially supposed to debut in 2016, but its expected opening kept getting pushed back as the project showed little progress for a while after developer Genting Group bought the site in 2013. Other plans for new supersized resorts on Las Vegas Boulevard have since come and gone or stalled.
Las Vegas real estate broker Michael Parks, a hotel-casino specialist with CBRE Group, noted that megaresorts on the Strip cost billions of dollars to build and that major financial backers have been “hesitant to invest in Las Vegas” for such projects coming out of the Great Recession.
“The costs of these projects have grown exponentially,” Parks said.
Southern Nevada has a long history of developers pitching big plans and never following through, and one of multiple ideas on the Strip to go nowhere in recent years was Alon Las Vegas.
Parks said that Alon, a proposed 1,100-room hotel-casino on the former New Frontier site, would have been a great project. But Australian billionaire James Packer, who was behind the plans, reportedly had trouble raising project funds.
The resort was never built, and the land went up for up sale in 2017. As Parks described it, capital markets “didn’t cooperate” with the project.
The site, purchased by casino operator Wynn Resorts, remains empty.
‘They lost billions’
Resorts along the Strip sit on huge parcels of land — Bellagio sits on 75 acres, and MGM Grand is on more than 100 — but Eichner and partners bought a vastly smaller plot for The Cosmopolitan in 2004, at about 8.5 acres.
Eichner, founder of the Continuum Co., boasts of a portfolio of high-rises and said recently that the size of The Cosmopolitan’s site is like “half the city” in New York. It also meant that in Las Vegas, “in a world of horizontal projects,” he went vertical.
He set out to build a hotel-condo project with around 3,000 rooms spread among two 50-story towers, county records show. Eichner announced in early 2006 that Deutsche Bank had loaned $415 million for the project, and in spring 2007, project officials held a traditional Japanese blessing and sake ceremony to mark the first piece of structural steel going up, according to news reports.
But soon enough, the economy started to stumble. Deutsche Bank issued a default notice in March 2008 and foreclosed on the partially built project later that year, records show.
Eichner said that the German financial giant had put $1 billion into the project and bought him out for “a lot of money.” He also stated that he did not take a loss on the project.
“I personally did not lose any money,” Eichner said. “The bank did; they lost billions.”
Deutsche Bank declined to comment for this story.
The economy only worsened after the foreclosure, and, as The Wall Street Journal previously reported, Deutsche Bank was unable to find new partners or investors and decided to finish The Cosmopolitan itself.
Its opening, on Dec. 15, 2010, drew big crowds and featured a three-song set from The Killers frontman Brandon Flowers, followed a few weeks later by New Year’s Eve performances from Coldplay and Jay-Z.
The resort became known as a trendy spot, with its lavish Chandelier Bar and its Marquee dayclub and nightclub. But overall, the business was deep in the red.
The Cosmopolitan lost $97 million in 2011, $106.6 million in 2012 and $94.8 million in 2013, a securities filing shows.
Enter The Blackstone Group. After the economy crashed and property values plunged, the New York financial giant bought real estate across hard-hit Southern Nevada, including, in 2014, The Cosmopolitan.
It acquired the resort for $1.73 billion — a huge sum by any measure but less than half of the project’s development cost, which, according to Blackstone, exceeded $4 billion.
$500M in upgrades
Tyler Henritze, head of real estate acquisitions for the Americas at Blackstone, said in a statement to the Review-Journal that the company “had been tracking The Cosmopolitan for years prior to the acquisition” and was drawn by its quality, brand, and location “on the centerline” of the Strip.
He also said Blackstone has spent around $500 million in improvements, including building 21 penthouse suites on four unfinished floors and full renovations of The Cosmopolitan’s guest rooms.
Patrick Nichols, general manager and chief strategy officer at The Cosmopolitan, told the Review-Journal that Blackstone’s five-year plan for the property totaled more than 200 pages.
Among other things, several new food and beverage concepts were brought in, and the casino was spruced up with new lightning, carpeting and high-limit gambling areas, he said.
Eichner said that he views The Cosmopolitan as a body of work and that he can’t get upset about it.
If the idea had been terrible, or the project had never been finished, he said, there would be a certain amount of regret. But more than a decade later, the resort is bustling with guests.
“There’s nobody that doesn’t know The Cosmopolitan,” he said.