CB Investment, a company founded by Chilean businessman Claudio Fischer that was planning to develop a hotel-casino on the Strip near the Las Vegas Convention Center’s West Hall, has pulled out of the $120 million deal. On Tuesday, Las Vegas Convention and Visitors Authority (LVCVA) CEO Steve Hill said the tourism agency’s sale of 10 acres at the corner of the Strip and Elvis Presley Boulevard to the firm did not close on December 15.
CB Investment is controlled by South American businessman Claudio Fischer, whose portfolio includes casinos, residential properties, and commercial real estate primarily in South America. Fischer is co-founder of Sun Dreams, the largest casino resort operator in Latin America, with 19 properties in Chile, Argentina, Panama, Colombia, and Peru.
On Thursday, December 29, Fischer informed the executives of the LVCVA that he would not complete the purchase of the land in Las Vegas due to the fact that the high cost of debt makes the project non-viable at present time. Fischer hopes to bid again in the future once conditions are financially favorable if the space is still available.
Hill said in a statement on Tuesday that, upon failure of Fischer to complete the acquisition, “the LVCVA terminated the agreement, received the $7 million non-refundable deposit, and re-listed the property.”
Steve Hill, LVCVA's CEO
The transaction, announced in October 2021, involved a location that formerly housed a portion of the since-imploded Riviera Hotel-Casino. At that time it was established that the payment would be completed before June 2022, but the authority finally postponed the payment to November, with a deposit to be made for the delay. Fischer then asked for more time, until December 15, at which point the businessman decided to pull out of the deal.
In recent months, the Chilean businessman began to analyze the business’ expected figures, and interest rates diluted his projections. The US Federal Reserve raised its rate on seven consecutive occasions: in March it was at 0.25%, and today it is at 4.25%, significantly increasing the cost of credit.
Rates on 30-year fixed mortgages reached 7.08% in October and November, their highest level in two decades. Faced with this scenario, Fischer not only had to take out a loan to cover part of the $120 million needed to acquire the land, but this level of rates also complicated construction and made the project financially unsustainable.
Fischer had until 2031 to start construction of a resort at that location, but his intention was always to start construction within a maximum of two years. These types of projects achieve average returns of between 10% and 15%, and sources reveal that the financing they surveyed exceeded 10%.
Claudio Fischer
In mid-December, the Federal Reserve Chairman stated that, although the increases would be more moderate, they would continue to occur and there was still a long way to go until returning to the previous stable level of prices.
According to the contract, the parcel was to be developed into a Dreams hotel-casino with construction to begin by January 1, 2031, and it consisted of a 50-story hotel with 2,000 rooms, combined with a casino with 2,000 slot machines. The estimated investment was between $1.5 billion and $2 billion, values much higher than the values typically managed in Dreams, where the largest casino is the Monticello, valued at some $300 million.
At present, no new interested parties interested in occupying this land have been announced. In fact, sources explain that in the area, only older developments are being built with credits at convenient rates.
As reported, the LVCVA planned to use the proceeds from the sale to finance the renovation of four convention center exhibit halls over a two-year period. The convention center’s $1 billion West Hall, a 1.4 million-square-foot expansion, opened in 2021. Hill said in an interview a renovation is being planned for the convention center’s North Hall.
Given the current situation, while it is complex for new interested parties to appear soon, if they do appear, it is very likely that the LVCVA will decide to complete the sale. Until then, Claudio Fischer will wait for conditions to normalize, to see if he can finally fulfill his long-time dream.
Original article: https://www.yogonet.com/international/news/2023/01/04/65588-chilean-casino-company-pulls-out-of-deal-to-buy-las-vegas-strip-land-amid-rise-in-interest-rates
