Jockey Club - Cosmo What If??

[Snotick]

Since Boyd has delayed its building of Echelon place, I started thinking about other Properties under construction. Most important to me being the Cosmopolitan. (since I own at Jockey Club) I was wondering, what if Cosmo builders decided to halt the building? Since there was an agreement for Cosmo to supply parking and other amenities to JC in exchange for the land, would JC be able to take over part of the Cosmo? I know this is a big what if. I just thought it would be kind of unique since Cosmo received the land (which is the real value, not the unfinished building) Yet JC would not have received what they were suppose to if the project was abandoned.
I have thought of a lot of ways this would be resolved, and I'm sure it was probably addressed in the contracts before the deal was done. I just wanted to see what others thought?

 

[dougp26364]

IMO, since the property is in foreclosure all bets are off. I thought from the very beginning that this was a risky move for JC owners and, as fate would have it, I was right. It was a risky move.

At this time Cosmo is far enough along that the bank that owns it doesn't appear to want to stop construction. They appear to believe that it will be easier to sell whole rather than partially completed. It's a small lot of land with what is an unusual design for Vegas. Most experts didn't think it would survive/work even if everything had gone right (think Aladdin now Planet Hollywood).

Eschelon place was a stockholder move. Boyd stock apparently went up 30% on the announcement. It will be interesting to see if Boyd does restart construction of if this piece of land eventually becomes another El Rancho site (hotel sat vacant for many years before finally being torn down).

Cosmo is presently owned by a bank that wants to recover some of it's loses for it's stockholders. Abandoning the project seems less of a risk. What is at risk is any agreement reached between JC and whomever takes over the property. They may not feel they have to honor any agreement made with the previous developer so all bets may be off.

 

[zazz]

Since Boyd has delayed its building of Echelon place, I started thinking about other Properties under construction. Most important to me being the Cosmopolitan. (since I own at Jockey Club) I was wondering, what if Cosmo builders decided to halt the building? Since there was an agreement for Cosmo to supply parking and other amenities to JC in exchange for the land, would JC be able to take over part of the Cosmo? I know this is a big what if. I just thought it would be kind of unique since Cosmo received the land (which is the real value, not the unfinished building) Yet JC would not have received what they were suppose to if the project was abandoned.
I have thought of a lot of ways this would be resolved, and I'm sure it was probably addressed in the contracts before the deal was done. I just wanted to see what others thought?

What do you mean by take over part of the Cosmo? If you are asking whether or not the resort could squeeze itself in for a cut of the equity, I suppose anything is possible.

Without knowing any details about any deals that JC made with the original developer its hard to say what rights they would have in the event the project was stalled for any length of time. I would guess that JC doesn't have a lot of leverage nor does it really have anything to offer. The board doesn't have any experience in casino construction. You don't have a ton of cash to help float the project. And JC doesn't have any loans outstanding that they could exchange in return for some equity. Unfortunately, there are probably secured creditors that are way ahead of you in line for some equity should it come to that. Whatever deals JC made with Cosmo, the board is unsecured if its lucky and all bets are off if the venture filed for BK since the contracts could be nullified if the court felt it would get Cosmo out of the crapper.

 

[Snotick]

What do you mean by take over part of the Cosmo? If you are asking whether or not the resort could squeeze itself in for a cut of the equity, I suppose anything is possible.

I know this is hypothetical, but I looked at it this way, The Jockey Club gave up its parking (land) in return for something. If Cosmo doesnt deliver, would a court not feel that Cosmo needs to return the land to JC? After all, if Cosmo construction stopped and the building was left for ten years, JC would never have received the parking, or pool, or whatever else they were suppose to receive.
I am certain that there is a contract that spells out very clearly what each party is suppose to receive. It would be a breach of contract, a court would award a monetary settlement to JC. I dont think that Cosmo has a lean on it from the Jockey Club, that would allow JC to take possession of the property if there was a default.
But what would the settlement value be for Cosmo?? How could you put a price on the parking lot mid strip? How could you compensate JC owners when there is no where for them to park, the land is covered with an unfinished structure.
It would be a weird situation.
Someone brought up a very good point in another website in regards to Echelon and the McDonald's that was moved. I am sure that there was an agreement to rebuild the McD's closer to Slots o Fun. What if Boyd backed out, could McD's rebuild on the old plot of land that they owned?
I just like playing devil's advocate.

 

[zazz]

I doubt it would sit for ten years. If there was some sort of timeline written into the contract that spelled out when you were supposed to receive your amenities, I suppose that would be a breach. You could win in court I guess, but it would cost you a lot more in legal fees than it would be worth. Personally, If I were in DB's shoes, I would settle for a couple of bucks and tell JC to go away. No reason to cut you into deal if I could throw you a bone to make you go away. But anything is possible.

 

[Snotick]

I'm sure if something happened, JC members would be up in arms about the lack of parking. From what I here, the valet/shuttle over at PH is a pain. If push came to shove how could they ever correct the loss of parking.
For me I hope all goes as planned. Use of the pool would be great, but I spend very little time at the pool when in vegas. I just want easy access to the casino/shops/food.
Time will tell

 

[Fern Modena]

Hate to break this to you, but the Jockey Club owners aren't owed anything by the current owners of Cosmo. They hope to receive the benefits which were promised to them by the original owners/builders of Cosmo, but since the property has gone filed bankruptcy these agreements may no longer be in force.

As for owing the Jockey Club for the lost parking, Jockey did not own that land in the first place. You didn't realize that, I guess.

All of that said, the Cosmo is much further along than Echelon was, and I'm fairly certain it will be completed.

Fern

 

[roadtriper]

IF... the cosmo project went totaly belly up, I would think that MGM Mirage with their financial backing would be waiting to pounce, and purchase the project for a song. they own everything else around it except for The JC. and looking at all the construction at City Center the Cosmo looks like it's part of it anyway. RT

 

[roadtriper]

duplicate post oops!

 

[Snotick]

As for owing the Jockey Club for the lost parking, Jockey did not own that land in the first place. You didn't realize that, I guess.


Fern

I did not know that. If they didnt own it then why did Cosmo give them any compensation?

 

[Snotick]

Fern, I also agree with you that the Cosmo will be finished, maybe a little later than scheduled.
I was just throwing out this whole idea. It got me thinking.

 

[Larry]

I did not know that. If they didnt own it then why did Cosmo give them any compensation?

I seem to recall that the Jockey Club had something like a 99 year lease on the land that the parking spaces were on and therefore Cosmo guaranteed that they would have the same amount of parking spaces in their underground garage in return for the lease rights. The only land that JC owned was the land underneath the buildings and pool area.

 

[roadtriper]

This picture pretty much(actualy quite literaly) shows the land that the Jockey Club sits on! at the start of the construction of the Cosmo they pretty much made the Jockey club an Island. 9 story deep canyon all around the JC

http://www.vegastodayandtomorrow.com/images/jockey_hole.jpg

 

[Snotick]

I had not heard of the lease, but I am not all knowing (just ask my wife)
Again to play devils advocate: If I leased a truck, and a friend of mine wanted to buy it from me. I agree to turn the lease over to him, in exchange he agrees in writing to let me borrow the truck twice a year to haul firewood in. After 6 months into this agreement, the friend defaults on the lease and the bank repos it. If I took the friend to court, I would believe that he/she would be responsible for any expenses that I would have renting another truck. Or he/she would have to supply with another truck at his/her expense.
Take this same theory, where would the new parking come from?
I never put it past a judge or jury to make unbelievable rulings.

 

[Docklander]

The fiancial press were speculating just last Thursday that Deutche Bank (the bank that holds most of the Cosmo's debt) may well elect to keep hold of the property as there doesn't appear to be anyone who has both the financial strength and willingness to take the project off their hands. Its unlikely the bank would leave the project in its current state as it is far enough along to make it worth completing and selling as a going concern when the market steadies. Admittedly it would be a strange situation to have a bank like DB owning something like the Cosmo but it's not unheard of.

 

[Snotick]

I think the list of prospective owners is very short. With the trouble everyone is having securing loans and the finacnial scare that the media is projecting in Vegas, it would have to be someone with very deep pockets to take it over.
Too bad Howard Hughes is dead.

 

[GaryDouglas]

This project, unfinished, would be quite an eyesore to the City Center. It's my understanding that the City Center is funded significantly with petro-dollars. If they can get the Cosmo for pennies on the dollar, that would finish off things nicely.

 

[dougp26364]

I had not heard of the lease, but I am not all knowing (just ask my wife)
Again to play devils advocate: If I leased a truck, and a friend of mine wanted to buy it from me. I agree to turn the lease over to him, in exchange he agrees in writing to let me borrow the truck twice a year to haul firewood in. After 6 months into this agreement, the friend defaults on the lease and the bank repos it. If I took the friend to court, I would believe that he/she would be responsible for any expenses that I would have renting another truck. Or he/she would have to supply with another truck at his/her expense.
Take this same theory, where would the new parking come from?
I never put it past a judge or jury to make unbelievable rulings.

We JC signed over their rights for a promise, they gave away their rights. The problem was they traded their rights for a promise and now the entity that made that promise is gone. I suppose JC could file a law suite but, it wouldn't do any good if the person who made the promise went bankrupt, releasing them from their obligations.

IMO, JC took a gamble. It may still pay off but that gamble looks a little less secure now.

As for who will take over the Cosmo it's for sale. MGM hasn't made a move on it but word is that both Hilton and Hyatt have an interest IF the price is right. Hyatt was a serious contender for awhile but they backed off. Time will tell who's going to end up with the property and how they'll accomadate JC owners......if they have to accomadate them at all.

 

[roadtriper]

8/14/08 Deutsche Bank Forclosed on the Cosmo. and is now the owner! the article I saw said that construction would continue, and they are looking for a "Partner" ! MGM Mirage, Hyatt, Hilton, and Starwood. are on the "short list" RT