Court Approves Cosmopolitan DealCourt Approves Cosmopolitan Deal
Monday, 02 November 2009 00:00
Condominium buyers have until December to opt out of settlement
BY TONY ILLIA
Las Vegas Business Press
Homebuyers at the Cosmopolitan are getting some of their money back. On Oct. 20, Clark County District Court Judge Elizabeth Gonzalez approved a deal between plaintiffs and defendant Deutsche Bank AG to return a portion of deposits on 1,322 condominium residences inside Cosmopolitan's 600-foot-tall West Tower. The $3.9 billion development at 3700 Las Vegas Blvd. South consists of two hotel-condominium towers perched atop a multilevel retail, casino and entertainment podium. Deutsche Bank bought the 3,000-unit development complex, on 8.5 acres, during a foreclosure sale last summer. It's expected to tentatively finish construction next year.
The court settlement will return 74.4 percent of homebuyer deposits, which average about $140,000 a piece. Deutsche Bank spokesman John Gallagher declined to comment on the case. Homebuyers have until Dec. 4 to opt out of the settlement. Checks could be mailed out in time for Christmas.
"We are pleased with the decision and feel that it represents a fair settlement, which makes economic sense for everyone," Marquis & Aurbach Managing Principal Terry Coffing said. "We believe the checks will be distributed by the end of December."
Las Vegas-based law firm Marquis & Aurbach represents owners of 430 units inside Cosmopolitan's West Tower or 32.5 percent of the total building. Homebuyers had claimed numerous breaches of contract, including unmet completion deadlines. Several lawsuits filed earlier this year sought return deposits; they were eventually combined into a single case with more than $200 million in down payments at stake. The settlement will return roughly $140 million of that amount. But not everyone is happy with the deal.
"The offer by Deutsche Bank is insulting," said Daniel Park, a partner with Los Angeles-based Lurie & Park, which represents more than 20 homebuyers inside the West Tower. "This would be a windfall profit for Cosmopolitan, resulting from their failure to honor the promises made to buyers."
Lurie & Park intends to represent homebuyers unwilling to settle for partial payment; the firm plans to pursue further litigation in order to recover full restitution.
"Buyers of units are being told that they must agree, or opt out of the settlement by early December," added Lurie & Park Associate Attorney Sonia Taylor. "This is a pressure tactic that is unseemly."
Cosmopolitan's East Tower, meanwhile, remains mired in litigation. Purchase pacts for the 800-unit high-rise are structured differently than its counterpart, which makes a settlement agreement unlikely, say legal experts. The fight for return deposits is expected to head to court. A sold-out East Tower represents about $112 million in deposits.
A worsening economic outlook has many Cosmopolitan homebuyers scrambling to get out from underneath their purchases, as many face challenges finding funds and securing mortgages amid a frozen credit market. Luxury condominiums are being valued differently today than a few years ago during the real estate boom. Rising unemployment and a deepening recession are fueling more widespread financial conservatism, as once bullish investors delay, defer and cancel large capital expenditures. It could make remaining condominium sales difficult, say industry observers.
"We have so many condo hotel units in the market that it is driving price points downward," said Bruce Hiatt, owner of Luxury Realty Group Inc., a Las Vegas-based high-rise condominium brokerage company. "Today's buyer is much more aware of the current resale marketplace and those price points, which are very different from what they were a few years ago."