Colony Capital is considering a possible investment in the troubled City Center project in Las Vegas, according to people familiar with the situation.
The Los Angeles-based private equity real estate firm is in “preliminary” talks with the project owners MGM and Dubai World, after the $8.6 billion development ran into trouble.
The City Center project has been close to bankruptcy with Dubai World reportedly suing MGM citing poor management and cost overruns and MGM Mirage struggling from its own $13.5 billion debt load and dwindling gambling revenues. Last week, Dubai World, which has invested $4.3 billion in City Center, declined to make its half of a $200 million monthly payment needed to fund construction. It was funded instead by MGM.
At the time, MGM said in a statement it would work with Dubai World and lenders to “find a long-term solution for the financing of City Center's completion”.
An investment from Colony could keep the project out of bankruptcy. Sources told PERE the talks were early, and “may or may not lead to a deal”. The source added that Colony was trying to help both MGM and Dubai resolve a challenging situation. A spokeswoman for Colony and MGM declined to comment. Dubai World was unavailable for comment at press time.
According to the Wall Street Journal, the City Center project needs to raise another $800 million in cash as a condition of accessing a $1.8 billion loan needed to finish the development.
In 2007, Colony took private the Las Vegas Station Casino group in a $5.4 billion deal. The group is considering filing for Chapter 11 as it struggles with its debt and declining revenues. On Tuesday, co-investor Eurazeo said it had completely written off its €144.6 million investment in the company. Eurazeo owns a 5.3 percent stake in the company, while Los Angeles-based Colony controls 75.9 percent.
Colony is though keen to target distressed real estate opportunities, having raised $900 million for its Colony Distressed Credit Fund last April. The firm is also reportedly considering raising another fund to participate in the US government's newly announced public-private partnership programme for buying distressed assets.