1. Company Background (Cosmo)
History and Background
Conceptualized as 2,200 condo-hotel units & 800 hotel rooms but converted to full-fledged 3,000-room casino resort post-default
Owned by German investment bank (Deutsche) at $40bn market cap
2005: Construction started by private developers with roughly $760m in construction financing from Deutsche
Jan-2008: Defaulted on $760m loan from Deutsche at 1/3 completion due to overruns and inability to raise other financing (pre-GFC)
Aug-2008 to Dec-2010: Deutsche assumed ownership and funded project until completion
2009 & 2010: Classified as investment with no external debt on Deutsche’s books at $3.3bn carrying value net of write-off
Standalone EBITDA Forecast by Segment
Startup (2011) and Operating Performance (2011 & 2012)
Top position in luxury tier by experience
Premiere destination with among highest room rates on strip
Record food, beverage and entertainment sales
Widely credited with reviving Vegas strip
Aims to attract curious class, who are well traveled and want change offering versatile experience with decreased focus on gaming
Gaming revenues somewhat underperformed at $118m in 2012 and 13% EBITDA margin vs. $200-$300m and 30-50% for successful peers
Lack of customer database and inability to offer VIP gaming due to insufficient revenue base to absorb volatility
Unexpected low hold % turned Casino EBITDA negative in Q3 2012
In 2012, expect 20% revenue growth and EBITDA margin increase from (-8.5%) to 5% with capacity expansion planned in Q4 2011
Standalone Revenue and EBITDA Forecast
“ 1,000 key Grand Hyatt-managed hotel, 2,000 condominium hotel units totaling approximately 2,232,000 square feet, a 75,000 square foot casino, 275,000 square feet of retail and restaurant space, 150,000 square feet of meeting and ballroom space” -
2,200 condo-hotel units or 2,000 units?
“Approximately 2,700 keys comprised of luxury condo-hotel units and hotel rooms with over 1,700 condo-hotel units offered for sale” -
“- Initial developer Ian Eichner exhausts project funding / defaults on construction loans of $760 million and enters foreclosure” -
- Confirmed at 760 with Bloomberg article
€500m write-off in 2009 (annual report 2010) ~ $750m
Notes: Steady-state forecasted on comparable properties by room and class
Growth driven mostly by volume and margin growth in Casino
2012E based on prorated Q using adjusted 2012 YTD margins