Construction of the $3 billion Cosmopolitan project on the Strip will continue toward a December 2009 opening while the owner and the banks work on new financing for the project, the construction contractor announced Friday.
Perini Building Co. received an interim commitment from Deutsche Bank that guaranteed continued payment on construction work for the project, which is being built on a 8.5-acre site wedged between MGM Mirage’s Bellagio and the gambling company’s CityCenter project.
Bruce Eichner, the Cosmopolitan’s New York-based owner and developer, received a notice of default on a $760 million construction loan from Deutsche Bank on Wednesday after missing a payment when he was unable to secure refinancing for the project.
Deutsche Bank and Merrill Lynch are working with Cosmopolitan’s owner and management team to find new investors.
Michael Sullivan, a finance professor at the University of Nevada, Las Vegas, said it is in the lender’s best interest to keep construction proceeding while the owner tries to find additional financing.
“At this point, what’s the bank to do,” he said. “They’re working with the builder here. They’re trying to accommodate him while things work out. But they can’t afford to go too far with him either.”
The bank risks losing its money if it backs out right now, but “you don’t want to be throwing good money after bad” either, Sullivan said.
Perini Building Co., a subsidiary of Framingham, Mass.-based Perini Corp. with offices in Las Vegas, said in a statement that work would continue unaffected by the default notice.
All current bills owed to the construction company have been paid. Nearly $1.4 billion worth of work remains to be completed under the current construction contract.
A Cosmopolitan spokesman said the developer was happy that Perini Building and Deutsche Bank had reached an agreement and that construction could continue as scheduled.
Contact reporter Arnold M. Knightly at email@example.com or (702) 477-3893.