Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2014~~2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-53938

Nevada Property 1 LLC

(Exact name of registrant as specified in its charter)


Delaware		27-1695189
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3708 Las Vegas Boulevard South Las Vegas, Nevada		89109
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code — (702)-698-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The Registrant’s Class A and Class B ~~membership~~Membership ~~interests~~Interests are not publicly traded. As of ~~November~~May 715, ~~2014~~2015, ~~Nevada~~BRE Spade Voteco LLC ~~owns~~owned all of the registered 100 Class A ~~voting~~Membership ~~membership~~Interests ~~interests~~of the registrant and ~~Nevada~~BRE Spade Mezz 1 LLC ~~owns~~owned all of the 100 Class B ~~non-voting~~Membership ~~membership~~Interests ~~interests~~ of the ~~Registrant~~registrant.

NEVADA PROPERTY 1 LLC

INDEX

	PageNumber
Forward Looking Statements			1
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements		1
Item 1.	Condensed Consolidated Financial Statements		2
Condensed Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013		1
	Condensed Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014		2
Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2014 and 2013		2
	Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2015 and 2014		3
Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2014 and 2013		3
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2015 and 2014		4
~~Notes to Condensed Consolidated Financial Statements~~	Notes to Condensed Consolidated Financial Statements	4	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		33
Item 4.	Controls and Procedures		30
PART II — OTHER INFORMATION		35	31
Item 1. Legal Proceedings		35
Item 1.	Legal Proceedings		31
Item 1A. Risk Factors		35
Item 1A.	Risk Factors		31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 3. Defaults Upon Senior Securities		36
Item 3.	Defaults Upon Senior Securities		31
Item 4. Mine Safety Disclosures		36
Item 4.	Mine Safety Disclosures		31
Item 5. Other Information		36
Item 5	Other Information		31
Item 6. Exhibits		37
Item 6.	Exhibits		33
SIGNATURES		38	34

Cautionary Statement Regarding Forward-Looking Statements

Any statements made in this report that are not statements of historical fact or that refer to estimated or anticipated future events are forward-looking statements. These statements may include, or be preceded or followed by, the words “may,” “will,” “should,” “might,” “could,” “potential,” “possible,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “hope” or similar expressions.

We have based our forward-looking statements on management’s beliefs and assumptions based on information available to our management at the time these statements are made. Although we believe our expectations are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, our actual results may materially differ from expected results. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from our expectations include, but are not limited to:

•

General economic and market conditions, particularly in levels of spending in the Las Vegas hotel, resort and casino industry;

•

increasing competition in our industry;

•

the seasonal nature of the hotel, resort and casino industry;

•

the capital intensive nature of the Las Vegas hotel, resort and casino industry;

•

costs associated with compliance with extensive legal and regulatory requirements, including anti-money laundering requirements;

•

diminishing value of our name, image and brand;

•

the unexpected loss of key members of our senior management;

•

dependence on various key third-party operators;

•

the outcome of pending or future legal proceedings;

•

cyber security risk including misappropriation of customer information or other breaches of information security;

•

our ability to collect gaming receivables from our credit players;

•

the impact a natural disaster or infectious disease outbreak may have on the travel and leisure industry;

•

the consequences of military conflicts and any security alerts and/or terrorist attacks which may impact levels of travel, leisure and consumer spending; and

•

other risks discussed in the sections entitled Part I —“Item 1A — Risk Factors” in our Annual Report on Form 10-K which was filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2015.

In addition, new risks and uncertainties emerge from time to time, and it is not possible for us to predict or assess the impact of every factor that may cause our actual results to differ from those contained in any forward-looking statements. Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document. Consequently, readers of this Quarterly Report on Form 10-Q should consider these forward-looking statements only as our current plans, estimates and beliefs. We do not undertake and specifically decline any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Except as may be required by law, we undertake no obligation to update or revise any forward-looking statements in this Quarterly Report on Form 10-Q or in our Annual Report on Form 10-K to reflect any new events or any change in conditions or circumstances.

Part I — Financial Information

Item 1 — Condensed Consolidated Financial Statements

NEVADA PROPERTY 1 LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,2014			December 31,2013
	Successor
	March 31,2015			December 31,2014
	(Unaudited)
ASSETS
Current assets:
Current Assets:
Cash held with Deutsche Bank	$	23,596		$	32,867
Cash on hand	$	18,274		$	21,270
Cash held with third parties and on hand		69,127			25,793
Cash in bank		57,199			34,166
Total cash and cash equivalents		9275,~~723~~473			5855,~~660~~436
Accounts receivable, net		53,590			53,564
Restricted cash		1,076			877
Due from affiliate		26,905			56,413
Designated cash		35,988			31,649
Inventories		13,352			14,575
Accounts receivable, net		64,566			51,806
Deferred income taxes		10,823			11,614
Inventories		13,744			15,055
Restricted cash		600			656
Prepaid expenses and other assets		18,600			21,514
Prepaid expenses and other assets		18,073			25,619
Total current assets		209,447			176,337
Total current assets		216,066			221,101
Property and equipment, net		1,419,722			1,432,298
Property and equipment, net		2,745,659			2,854,990
Goodwill		31,963			25,549
Intangible asset, net		8,704			9,956
Intangible assets, net		203,998			214,828
Deferred income taxes		80,558			83,354
Other assets		15,486			34,378
Other assets		35,112			35,421
Total assets	$	1,880,616		$	1,883,390
Total assets	$	3,086,099		$	3,204,822
LIABILITIES AND MEMBERS’ EQUITY
LIABILITIES AND MEMBERS’ DEFICIT
Current Liabilities:
Current liabilities:
Accounts payable	$	10,457		$	7,740
Accounts payable	$	17,744		$	14,403
Interest payable		1,284			—
Interest payable to affiliate		9,472			9,859
Accrued and other liabilities		98,399			102,210
Accrued and other liabilities		91,337			83,046
Total current liabilities		110,140			109,950
Total current liabilities		118,553			107,308
Accounts payable — construction		73			306
Accounts payable — construction		237			5,883
Accrued and other liabilities — construction		63			72
Accounts payable — retention		—			4,059
Debt obligations		864,146			862,617
Accrued and other liabilities — construction		1,569			7,792
Other liabilities		4,038			4,189
Loan payable to affiliate		3,428,094			3,499,917
Total liabilities		978,460			977,134
Other liabilities		4,394			4,982
Commitments and contingencies (Note 15)
Total liabilities		3,552,847			3,629,941
Members’ equity		902,156			906,256
Commitments and contingencies (Note 11)
Total liabilities and members’ equity	$	1,880,616		$	1,883,390
Members’ deficit		(466,748	)		(425,119	)
Total liabilities and members’ deficit	$	3,086,099		$	3,204,822

See accompanying notes to condensed consolidated financial statements.

NEVADA PROPERTY 1 LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited — In thousands)

	Three Months EndedSeptember 30,							Nine Months EndedSeptember 30,
	Successor					Predecessor
	2014			2013				2014			2013
	Three Months EndedMarch 31, 2015					Three Months EndedMarch 31, 2014
Revenues:
Casino	$	5558,~~567~~447		$	~~44,374~~	$	49,119	$	~~156,067~~		$	~~115,895~~
Hotel		80,~~346~~610			~~66,902~~		75,767		~~236,886~~			~~201,900~~
Food and beverage		8381,~~480~~879			~~81,312~~		85,399		~~264,159~~			~~246,038~~
Entertainment, retail and other		128,~~200~~175			~~8,816~~		8,286		~~30,784~~			~~25,647~~
Gross revenues		~~231~~229,~~593~~111			~~201,404~~		218,571		~~687,896~~			~~589,480~~
Less — promotional allowances		(4239,~~630~~274	)		~~(31,310~~	)	(35,705	)	~~(115,957~~	)		~~(88,677~~	)
Net revenues		~~188~~189,~~963~~837			~~170,094~~		182,866		~~571,939~~			~~500,803~~
Operating expenses:
Casino		3438,~~145~~292			~~28,582~~		30,950		~~96,644~~			~~83,973~~
Hotel		8,~~602~~223			~~9,921~~		9,224		~~27,151~~			~~30,279~~
Food and beverage		5447,~~599~~978			~~54,567~~		55,631		~~174,102~~			~~162,520~~
Entertainment, retail and other		116,~~424~~695			~~8,203~~		7,693		~~29,826~~			~~22,263~~
Sales and marketing		1215,~~620~~680			~~11,445~~		20,649		~~50,102~~			~~49,383~~
General and administrative		27,~~620~~490			~~29,568~~		25,061		~~79,278~~			~~80,466~~
Corporate		1215,~~787~~973			~~3,193~~		2,740		~~24,563~~			~~13,856~~
Pre-opening		—			1,727				—			2,172
Loss on disposal of assets		—					116
Loss on disposal of assets		2			79				117			85
Depreciation and amortization		27,460					41,690
Asset impairment		—			—				1,506			—
Total operating expenses		187,791					193,754
Depreciation and amortization		41,674			42,759				125,616			132,806
Operating income/(loss)		2,046					(10,888	)
Total operating expenses		203,473			190,044				608,905			577,803
Other income/(expense):
Operating loss		(14,510	)		(19,950	)			(36,966	)		(77,000	)
Net settlements and default income		—					149
Other income (expense):
Interest and other income		5					15
Net settlement and default income		—			—				245			217
Interest expense, net of amount capitalized		(7,440	)				(9,546	)
Interest and other income		8			11				38			28
Total other expense		(7,435	)				(9,382	)
Interest expense due to affiliate, net of amounts capitalized		(9,187	)		(9,903	)			(28,251	)		(30,197	)
Loss before income taxes		(5,389	)				(20,270	)
Total other income (expense)		(9,179	)		(9,892	)			(27,968	)		(29,952	)
Income tax benefit		—					7,582
Loss before income taxes		(23,689	)		(29,842	)			(64,934	)		(106,952	)
Net loss	$	(5,389	)			$	(12,688	)
Income tax benefit		8,340			10,437				23,305			37,608
Net loss	$	(15,349	)	$	(19,405	)		$	(41,629	)	$	(69,344	)

See accompanying notes to condensed consolidated financial statements.

NEVADA PROPERTY 1 LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited — In thousands)

	Nine Months Ended September 30,
	Successor					Predecessor
	2014			2013
	Three Months EndedMarch 31, 2015					Three Months EndedMarch 31, 2014
Cash flows from operating activities:
Net loss	$	(415,~~629~~389	)	$	~~(69,344~~	)$	(12,688	)
Deferred income taxes		~~(23,318~~—	)		~~(37,608~~	)	(453	)
Depreciation and amortization		~~125~~27,~~616~~460			~~132,806~~		41,690
Asset impairment		1,506			—
Amortization of debt discount and deferred financing costs		1,529					—
Loss on disposal of assets		117			85
Change in value on Interest rate cap		(157	)				—
Changes in operating assets and liabilities:
Gain on disposal of assets		—					116
Accounts receivable, net		(26	)		11,742
Bad debt provision		3,189					2,200
Due from affiliate		56,413			83,105
Changes in operating assets and liabilities:
Inventories		1,223			(1,494	)
Restricted cash		(200	)				(135	)
Prepaid expenses and other assets		7,583			6,802
Designated cash		(4,339	)				—
Accounts payable		3,341			2,822
Accounts receivable, net		(15,950	)				(15,902	)
Accrued and other liabilities		7,975			(297	)
Due from affiliate		—					(7,129	)
Interest payable to affiliate		(387	)		(926	)
Inventories		1,312					1,007
Restricted cash		56			444
Prepaid expenses and other assets		22,118					147
Net cash provided by operating activities		138,470			128,137
Accounts payable		2,717					(3,430	)
Cash flows from investing activities:
Accrued and other liabilities		(3,978	)				(7,002	)
Ordinary capital expenditures		(14,676	)		(12,234	)
Interest payable		1,284					(313	)
Capital expenditures from major developments and for construction projects		(17,908	)		(37,206	)
Net cash provided by/(used in) operating activities		29,596					(1,892	)
Net cash used in investing activities		(32,584	)		(49,440	)
Cash flows from investing activities:
Cash flows from financing activities:
Net cash paid for acquisition		(6,414	)				—
Borrowings under loan payable to affiliate		9,777			37,627
Ordinary capital expenditures		(2,517	)				(2,515	)
Principal payments under loan payable to affiliate		(81,600	)		(98,105	)
Capital expenditures for major construction projects		(1,917	)				(9,508	)
Net cash used in financing activities		(71,823	)		(60,478	)
Net cash used in investing activities		(10,848	)				(12,023	)
Net increase in cash and cash equivalents		34,063			18,219
Cash flows from financing activities:
Cash and cash equivalents at beginning of period		58,660			48,811
Borrowings under loan payable to affiliate		—					5,336
Cash and cash equivalents at end of period	$	92,723		$	67,030
Principal payments under loan payable to affiliate		—					(10,000	)
Supplemental disclosure of cash flow information:
Contributions from Members		6,414					—
Cash paid for interest due to affiliate, net of interest capitalized	$	28,839		$	31,123
Distributions to Members		(5,125	)				—
Non-cash investing activities:
Net cash provided by/(used in) financing activities		1,289					(4,664	)
Change in accrued additions to construction in progress	$	(15,928	)	$	8,512
Net increase/(decrease) in cash and cash equivalents		20,037					(18,579	)
Cash and cash equivalents at beginning of period		55,436					58,660
Cash and cash equivalents at end of period	$	75,473				$	40,081
Supplemental disclosure of cash flow information
Cash transactions:
Cash paid for interest due to affiliate, net of interest capitalized	$	—				$	9,859
Cash paid for interest due on term loan	$	4,473				$	—
Non-cash transactions:
Change in accrued additions to construction in progress	$	(147	)			$	(9,667	)

See accompanying notes to condensed consolidated financial statements.

NEVADA PROPERTY 1 LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of the Business

Company Overview

~~Sale~~Nevada Property 1 LLC, a limited liability company organized in Delaware (“Nevada Property” and, together with its subsidiaries, the “Company,” “we,” “us” or ~~Transfer~~“our”), operates The Cosmopolitan of ~~Members’~~Las ~~Equity~~Vegas ~~Interests~~(the “Property” or “The Cosmopolitan”) which commenced operations on December 15, 2010.

~~Nevada~~On ~~Property~~December 119, ~~LLC~~2014, aownership ~~limited~~of ~~liability~~Nevada ~~company~~Property ~~organized~~changed upon the sale of 100% of the Class B Membership Interests in ~~Delaware~~Nevada Property (the “~~Company~~Class B Membership Interests”) to BRE Spade Mezz 1 LLC, ~~owns~~(“Spade ~~and~~Mezz”), ~~operates~~an ~~The Cosmopolitan~~affiliate of ~~Las~~Blackstone ~~Vegas~~Real ~~(the~~Estate Partners VII L.P. (“~~Property~~Blackstone” or “~~The Cosmopolitan~~Parent”), ~~which~~as ~~commenced~~described ~~operations~~more onfully ~~December 15,~~below ~~2010~~under the heading “Sale or Transfer of Members’ Equity Interests and Corporate Structure.”

Nevada ~~Voteco~~Property’s wholly-owned subsidiaries are Nevada Restaurant Venture 1 LLC (“Nevada ~~Voteco~~Restaurant”), ~~holds~~which ~~100%~~was offormed ~~the~~on ~~Company’s Class~~November A24, ~~voting~~2009 ~~membership~~as ~~interests~~a limited liability company in Delaware and Nevada ~~Mezz~~ Retail Venture 1 LLC (“Nevada ~~Mezz~~Retail”), ~~holds~~which ~~100%~~was ofalso formed on November 24, 2009 as a limited liability company in Delaware. Nevada Restaurant leases the ~~Company~~Property’s ~~Class~~restaurants Band ~~non-voting~~the ~~membership~~nightclub ~~interests.~~from ~~The~~Nevada ~~Company~~Property ~~continues~~and inhas ~~perpetuity~~entered ~~until~~into ~~dissolved~~management ~~upon~~agreements ~~the~~with ~~election~~third-party ofrestaurant operators ~~Nevada~~and ~~Mezz~~a nightclub operator to manage and operate their respective establishments at the Property. Nevada ~~Voteco~~Retail orleases ~~through~~the aretail ~~judicial~~spaces ~~dissolution~~at ~~under Section 18-802~~the Property from the Company and operates certain of the ~~Delaware~~retail ~~Limited~~spaces ~~Liability~~within ~~Company~~the ~~Act~~Property. In addition, Nevada ~~Voteco~~Retail ~~and~~has ~~Nevada~~also ~~Mezz~~entered ~~are~~into ~~collectively~~lease ~~referred~~agreements with third-party retail operators to asmanage ~~the~~and ~~“Members”~~operate ~~within~~their ~~this~~respective ~~Quarterly~~retail ~~Report~~businesses onat ~~Form~~the ~~10-Q~~Property.

On May 15, 2014, we reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) that Nevada Mezz, Deutsche Bank AG (“Deutsche Bank”) and the Company had entered into a Purchase Agreement (the “Purchase Agreement”) with BRE Spade Mezz 1 LLC, an affiliate of Blackstone Real Estate Partners VII L.P., for the sale of all of the Company’s Class B non-voting membership interests held by Nevada Mezz. The Purchase Agreement also provides for the transfer to BRE Spade Voteco LLC, a newly-formed affiliate of Blackstone Real Estate Partners VII L.P., of all of the Company’s Class A voting membership interests held by Nevada Voteco (together with the sale of Class B interests, the “Company Sale”). BRE Spade Mezz 1 LLC and BRE Spade Voteco LLC are collectively referred to as the “Purchaser” in this Quarterly Report on Form 10-Q.

Subject to potential net working capital adjustments as defined in the Purchase Agreement, the all cash consideration for the membership interests totaled approximately $1.73 billion. The Purchase Agreement was unanimously approved by the Company’s Board of Directors.

The consummation of the Company Sale is subject to the receipt of certain regulatory approvals, along with other customary closing conditions.

The Company currently maintains a $3.9 billion credit facility (the “Credit Facility”) with the Deutsche Bank AG Cayman Islands Branch (“DBCI”), a branch of Deutsche Bank AG, as well as other related party agreements for member expense reimbursements, among other things. See Note 9 — Loan Payable and Interest Payable to Affiliate and Note 10 — Related Party Transactions for further discussion concerning termination, discharge and release of the Company’s obligations related to the Credit Facility and the intra-group arrangements upon successful completion of the Company Sale.

Corporate Structure

The Company’s wholly-owned subsidiaries are Nevada Restaurant Venture 1 LLC (“Nevada Restaurant”), which was formed on November 24, 2009 as a limited liability company in Delaware and Nevada Retail Venture 1 LLC (“Nevada Retail”), which was also formed on November 24, 2009 as a limited liability company in Delaware. Nevada Restaurant master leases the Property’s restaurants and the nightclub from the Company and has entered into management agreements with third-party restaurant operators and a nightclub operator to manage and operate their respective establishments at the Property. Nevada Retail master leases the retail spaces at the Property from the Company and operates certain of the retail spaces within the Property. In addition, Nevada Retail has also entered into lease agreements with third-party retail operators to manage and operate their respective retail businesses at the Property.

The Company’s operations, which includes hotel, casino, food and beverage, retail, spa and entertainment and other related operations, are conducted entirely at the Property. Given the integrated nature of these operations, the Company is considered to have one operating segment.

The principal executive offices of The Cosmopolitan of Las Vegas are located at 3708 Las Vegas Boulevard South, Las Vegas, Nevada 89109 and the telephone number is (702) 698-7000. The Cosmopolitan’s internet website is located at www.cosmopolitanlasvegas.com. The information on our website is not part of this Quarterly Report on Form 10-Q.

2.Sale ~~Basis~~or Transfer of ~~Presentation,~~Members’ ~~Principles~~Equity ofInterests ~~Consolidation~~ and ~~Summary~~Corporate ofStructure ~~Significant Accounting Principles~~

~~The~~On ~~unaudited~~December 18, ~~interim~~2014, ~~condensed~~BRE ~~consolidated~~Spade ~~financial~~Voteco ~~statements~~LLC ~~included~~(“Spade ~~herein~~Voteco”), ~~have~~received ~~been~~approval ~~prepared~~from ~~pursuant to~~ the ~~rules and~~Nevada ~~regulations~~Gaming ofCommission (the SEC. Although we believe the disclosures made are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~generally accepted accounting principles in the United States (~~“~~U.S.~~Gaming ~~GAAP~~Commission”) ~~have been condensed or omitted pursuant~~ to ~~such~~acquire ~~rules~~control orof ~~regulations~~the Company. In ~~management’s~~connection ~~opinion,~~with ~~all~~such ~~adjustments~~approval, and ~~normal~~with ~~recurring~~the ~~accruals~~completion ~~necessary for a fair presentation~~ of the ~~results~~Class ~~for~~B ~~the~~Sale ~~interim~~(as ~~periods~~defined ~~have~~below), ~~been~~on ~~made. The unaudited results for the three and nine months ended September~~December 3019, 2014, ~~are~~Nevada ~~not~~Voteco ~~necessarily~~LLC ~~indicative~~(“Nevada ofVoteco”) ~~results~~transferred 100% toof ~~be expected for~~ the ~~full fiscal year. The December~~Class ~~31,~~A ~~2013~~Membership ~~condensed~~Interests ~~balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read~~ in ~~conjunction with~~Nevada Property (the ~~audited~~“Class ~~consolidated~~A ~~financial~~Membership ~~statements~~Interests”) ~~included~~to inSpade ~~our~~Voteco ~~Annual~~for ~~Report~~nominal onconsideration ~~Form~~(together ~~10-K which was filed~~ with the ~~SEC~~Class onB ~~March 21~~Sale, ~~2014~~the “Sale”).

~~The~~On ~~Company~~December 19, is2014, anNevada ~~indirect~~Mezz ~~wholly-owned~~1 ~~subsidiary~~LLC (“Nevada Mezz”), an affiliate of Deutsche Bank., Incompleted its previously announced sale (the ~~normal~~“Class ~~course~~B Sale”) of ~~business,~~100% of the ~~Company~~Class B Membership Interests to Spade Mezz, an affiliate of Blackstone, for cash consideration of $1.73 billion plus Nevada Property’s ~~operations~~working ~~may include~~capital ~~significant~~of ~~transactions~~$49.4 ~~conducted~~million ~~with~~as ~~Deutsche~~determined ~~Bank~~pursuant orto ~~affiliated~~the provisions ~~entities~~ of ~~Deutsche~~the ~~Bank~~purchase agreement.

~~Restricted~~As ~~Cash~~a result of the Sale, Spade Voteco now has 100% voting control over Nevada Property through its ownership of all of the Class A Membership Interests and Spade Mezz now holds 100% economic control over Nevada Property through its ownership of all of the Class B Membership Interests. Except as provided by law, the Class B Membership Interests have no voting rights.

Restricted cash consists primarily of tokes (tips) earned by our CoStars (the Company identifies its staff as “CoStars”) in the Company’s slot and table games departments and condominium sales deposits plus earned interest that are held in interest bearing escrow accounts. The restricted cash balance at September 30, 2014 is comprised of $0.0 million of advance condominium deposits and $0.6 million of tokes. At December 31, 2013, the restricted cash balance is comprised of $0.3 million of advance condominium deposits and $0.4 million of tokes.

Inventories

Inventories consist of retail merchandise, food and beverage items which are stated at the lower of cost or market value. Cost is determined by the weighted average identification method.

Intangibles

The Company’s finite-lived intangible asset consists of the cost of a property easement right which is amortized using the straight-line method, which approximates the effective interest method, over the life of the easement right of nine years.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expense during the reporting period. Estimates used by us include, among other things, the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, estimated income tax provisions, the evaluation of the future realization of deferred tax assets,

~~determining~~In ~~the~~connection ~~adequacy~~with ~~of reserves for self-insured liabilities and~~ the ~~Identity Membership Program (“Identity”)~~Sale, ~~our customer guest reward program, estimated cash flows in assessing~~ the ~~recoverability~~Company ofcompleted long-lived assets and asset impairments, and contingencies and litigation. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the ~~current~~following ~~economic environment.~~transactions: Although management believes these estimates are based upon reasonable assumptions within the bounds of its knowledge of the Company’s business and operations, actual results could differ materially from those estimates.

~~Fair~~• ~~Value~~Nevada Property acquired all of ~~Financial~~the ~~Instruments~~membership interests in TCOLV Propco LLC (“Propco”), an affiliate entity of Blackstone, through a contribution of such interests from Spade Mezz.

~~The~~• ~~carrying~~Nevada ~~value~~Property oftransferred ~~the~~its ~~Company’s~~fee ~~cash~~simple ~~and~~interest ~~cash~~in ~~equivalents,~~the ~~restricted~~Property ~~cash~~to Propco, ~~and~~its ~~accounts~~direct ~~payable~~subsidiary ~~approximates~~at ~~fair~~the ~~value~~time ~~due~~of tosuch ~~their short-term~~transfer ~~maturities.~~and ~~All~~leased ofback ~~the~~such ~~Company’s~~Property ~~debt~~from isPropco ~~held~~(exclusive byof anthe ~~affiliate~~gaming assets and ~~accrues~~intellectual ~~interest~~property atto anwhich ~~interest~~Nevada ~~rate~~Property ~~derived~~had ~~from~~retained ~~the~~title) ~~three-month~~pursuant ~~London~~to ~~Interbank~~a ~~Offering~~Lease ~~Rate~~and ~~(“LIBOR”)~~Operating ~~plus~~Agreement, adated ~~margin~~as of 85December ~~basis~~19, ~~points~~2014, (~~0.85%~~the “Lease”).

~~LIBOR~~• isNevada ~~determined~~Property ~~two~~distributed ~~days~~all ~~in advance~~ of the ~~funding~~membership ~~based~~interests on publicly available quotes published by Reuters. Interest is calculated on the basis of actual days outstanding over a 360-day year. Given the related party nature of the Company’s debt, it is unlikely that the Company could obtain similar financing on the same terms with a third-party in anPropco ~~arm’s~~to ~~length~~Spade ~~transaction~~Mezz.

~~Reclassifications~~• Nevada Property, Propco, Spade Mezz and certain other affiliates of Blackstone entered into the financing arrangements and agreements described within this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, which was filed with the SEC on March 27, 2015.

~~For~~Spade ~~the~~Voteco ~~three~~ and ~~nine~~Spade ~~months~~Mezz ~~ended~~are ~~September 30,~~collectively ~~2013,~~referred weto ~~have~~as ~~reclassified certain revenues and operating expenses on~~ the ~~Company’s~~ ~~consolidated~~“Members” ~~statement~~within ofthis ~~operations~~Quarterly toReport ~~conform to current period presentations. These reclassifications had no effect~~ on ~~the~~Form ~~previously reported operating loss or net loss~~10-Q.

~~Recently~~2. ~~Issued~~Basis of Presentation and Summary of Significant Accounting ~~Pronouncements~~Policies

InBasis May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of ~~certain~~Presentation nonfinancial assets. ASU No. 2014-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. Management is currently assessing the impact of the adoption of this accounting pronouncement on the Company’s consolidated financial statements in future periods.

InThe ~~August~~Company’s ~~2014,~~condensed ~~the~~consolidated ~~FASB~~financial ~~issued~~statements ~~ASU~~are ~~No. 2014-15,~~prepared ~~Presentation~~in ofaccordance ~~Financial~~with ~~Statements~~U.S. —generally ~~Going~~accepted ~~Concern~~accounting ~~— Disclosure of~~principles ~~Uncertainties~~(“U.S. ~~about~~GAAP”). anThe ~~Entity’s~~condensed ~~Ability~~consolidated tofinancial ~~Continue~~statements asof athe ~~Going~~Company ~~Concern~~include ~~(Subtopic~~the ~~205-40).~~accounts ~~ASU~~of ~~No. 2014-15~~the ~~requires~~Company ~~management to provide an interim~~ and ~~annual~~its ~~assessment~~subsidiaries. ~~concerning~~The anaccompanying ~~entity’s~~unaudited ~~ability~~condensed toconsolidated ~~continue~~financial asstatements areflect ~~going~~all ~~concern,~~normal recurring ~~and~~adjustments, ~~also~~which ~~requires~~management ~~disclosures~~believes ~~under~~are ~~certain~~necessary ~~circumstances.~~to ~~ASU~~present ~~No. 2014-15~~fairly isthe ~~effective~~financial ~~for~~position, ~~fiscal~~results ~~years~~of ~~beginning after December 15~~operations, ~~2016,~~ and ~~for~~cash ~~annual~~flows ~~periods~~of ~~and~~the ~~interim~~Company ~~periods~~for ~~thereafter.~~the ~~Early~~respective ~~application~~periods ~~is permitted~~presented. ItAll ~~is currently~~intercompany ~~management’s~~transactions ~~intent~~and tobalances ~~adopt~~have ~~this~~been ~~accounting~~eliminated in ~~pronouncement upon the effective date~~consolidation.

NoThe ~~other~~accompanying ~~new~~condensed ~~accounting~~consolidated ~~pronouncements issued~~financial orstatements ~~effective~~for ~~during~~Nevada ~~2014~~Property or1 ~~2013~~LLC ~~have~~include ~~had~~TCOLV orPropco ~~are~~LLC (“Propco”), ~~expected~~which tois ~~have~~ a ~~material~~variable ~~impact~~interest onentity for which the Company is the primary beneficiary, Nevada Property 1 LLC, and Nevada Property 1 LLC’s, ~~financial~~wholly ~~position~~own orsubsidiaries, ~~results~~Nevada ofRestaurant ~~operations~~and Nevada Retail.

As previously noted, the Company is an indirect wholly-owned subsidiary of Blackstone. In the normal course of business, the Company’s operations may include significant transactions conducted with Blackstone or affiliated entities of Blackstone.

References in this Quarterly Report on Form 10-Q to “Successor” and “Successor Period” refer to the Company on or after December 19, 2014 and reflect assets and liabilities at fair value determined by allocating the Company’s enterprise value to its assets and liabilities pursuant to accounting guidance related to business combinations. References to “Predecessor” and “Predecessor Period” refer to the Company on or before December 18, 2014 and reflect the historical accounting basis in the Predecessor’s assets and liabilities.

Variable Interest Entities

A legal entity is referred to as a variable interest entity if, by design (1) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support from other parties, or (2) the entity has equity investors that cannot make significant decisions about the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. Variable interest entities for which the Company is the primary beneficiary are consolidated.

3In accordance with the guidance for the consolidation of variable interest entities, the Company analyzes our variable interests, to determine if an entity in which we have a variable interest is a variable interest entity and whether we must consolidate that variable interest entity. ~~Income~~Our ~~Taxes~~analysis includes both quantitative and qualitative reviews.

~~For~~As ~~the~~discussed ~~three~~in ~~months~~our ~~ended~~Annual ~~September 30~~Report on Form 10-K, ~~2014~~Propco leased the hotel and ~~2013~~other related property, ~~the~~except ~~effective~~for ~~income~~casino-related assets ~~tax~~for ~~rates~~which ~~were~~Nevada Property retains title, (~~35.2%~~the “Leased Property”) , to the Company pursuant to a Lease and Operating Agreement (~~35.0%~~the “Lease”). The Lease has an initial term expiring on December 31, 2021, subject to two automatic renewals for ~~each~~successive periods of five years each, subject to the ~~respective~~Company’s ~~periods~~election not to renew. ~~For~~Under the ~~nine~~Lease, ~~months~~the ~~ended~~Company ~~September 30~~is obligated to pay to Propco fixed annual rent (“Fixed Rent”) equal to $125 million per year, payable ~~2014~~in ~~and~~arrears ~~2013~~in equal monthly installments. Each year, during the ~~effective~~term ~~income~~of ~~tax~~the ~~rates~~Lease, ~~were~~the Company is obligated to pay Propco, as percentage rent, an amount equal to the difference, if positive, between (~~35.9%~~x) 90% of Operating Income, as defined in the Lease, for such year and (~~35.2%~~y) the Fixed Rent payable with respect to such year. Under the Lease, all costs and expenses incurred in connection with capital expenditure and expenditures for ~~each~~furniture, ~~respective~~fixtures ~~period~~and equipment for the Leased Property shall be paid by the Company from amounts funded by Propco to the Company for such purposes.

~~Due~~The ~~to the September 2014 opening of a Canadian satellite office, the~~ Company isdetermined ~~now subject to income tax filing requirements in Canada. As~~that ~~such,~~Propco ~~the~~is ~~Company’s~~a ~~tax~~variable ~~jurisdictions~~interest ~~are~~entity ~~the United States~~ and ~~Canada. Effective January 1, 2012, pursuant to broader tax reorganization,~~ the Company is ~~part of a Corporate Consolidated Tax Group (~~the ~~“U.S.~~primary ~~Consolidated~~beneficiary; ~~Group”) owned by a subsidiary of Deutsche Bank. As a result~~therefore, the Company ~~joined~~has ~~the~~consolidated ~~U.S.~~Propco ~~Consolidated~~in ~~Group~~the ~~after~~Successor ~~having been a separate taxpayer in 2011~~Period.

~~During~~Pushdown ~~the~~Accounting quarter ended June 30, 2013, the IRS notified the Company that its 2011 federal income tax return was selected for examination. As of September 30, 2014, the IRS has not commenced an audit on the aforementioned tax year period nor have we received any additional correspondence regarding the matter. The Company believes that it has no uncertain tax positions; however, there is no assurance that the taxing authorities will not propose adjustments that are different than the Company’s expected outcome and impact the provision for income taxes. As applicable, we recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. For the three and nine months ended September 30, 2014, there were no accrued penalties and/or interest.

4As previously noted, the Company is an indirect wholly-owned subsidiary of Blackstone. ~~Accounts~~As ~~Receivable~~a result of the Sale, ~~Net~~the Company elected to apply pushdown accounting to reflect Spade Mezz’s basis of accounting for the acquired assets and assumed liabilities of the Company. As discussed in Note 13, the Company is not a borrower under the two mezzanine loan agreements (the “Mezzanine Loans”) entered into by affiliates of Blackstone with JPMorgan for a total aggregate principal amount of $425 million. However, the amounts payable under such loans are, in each case, secured by a first lien on the direct and indirect equity of Propco and are expected to also include a pledge of the Class B Membership Interests and a call right of the Class A Membership Interests. Further, the Company is required to pay interest on the Mezzanine Loans; however, the Company is not a borrower, nor is the Company jointly and severally liable for the Mezzanine Loans; therefore, in accordance with ASU No. 2014-17, Business Combination (Topic 805): Pushdown Accounting, the Mezzanine Loans are not included as a liability on the condensed consolidated balance sheet of the Company as of March 31, 2015.

~~Net~~Use ~~accounts receivable consist~~ of ~~the~~Estimates ~~following:~~

	September 30,2014			December 31,2013
(In thousands)	(Unaudited)
Casino	$	34,053		$	29,279
Hotel		19,294			19,104
Other		7,311			10,335
		60,658			58,718
Less: allowance for doubtful accounts		(7,068	)		(5,154	)
	$	53,590		$	53,564

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Although management believes these estimates are based upon reasonable assumptions within the bounds of its knowledge of the Company’s business and operations, actual results could differ materially from those estimates.

~~Accounts~~Cash ~~receivable, including casino~~ and ~~hotel~~Cash ~~receivables,~~Equivalents are typically non-interest bearing. The Company issues credit to approved casino customers following investigations of creditworthiness. The allowance for doubtful accounts is estimated based on specific review of customer accounts as well as management’s experience with collection trends in the gaming and hospitality industry and current economic and business conditions.

Cash in banks and deposits with financial institutions that can be liquidated without prior notice or penalty are classified by the Company as cash and cash equivalents. The Company generally considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Pursuant to the terms of the Mortgage Loan agreement, dated as of December 19, 2014, among Propco, Nevada Property and certain subsidiaries of Nevada Property (collectively, the “Mortgage Borrowers”) and JPMorgan Chase Bank, National Association (“JPMorgan”), pursuant to which the Mortgage Borrowers borrowed $875 million (the “Mortgage Loan”) in connection with the Sale and as discussed in Note 11, the Company is required to establish and maintain certain specified cash accounts through the term of the Mortgage Loan and Mezzanine Loans. The amounts funded, and to be funded, to these cash accounts are subject to terms included in the Mortgage Loan and is to be released to us subject to certain conditions specified therein being met. To the extent

5 that an event of default were to occur as determined by the terms of such agreements, there are additional requirements and restrictions placed on the cash accounts. ~~Prepaid~~These ~~Expenses~~accounts are held with an independent third party agent (and ~~Other~~assuming ~~Assets~~no event of default has occurred), include: (i) a “lockbox account” which houses certain rents and other revenues from the Property and its operations, with the exception of income from casino or gaming operations; (ii) a “concentration account” which houses certain rents and other revenues from the Property and its operations and which houses all of the amounts transferred from the lockbox account and casino account. Transfers from the lockbox account are required to be made not less than once every business day throughout the term of the loans. Transfers from the casino account are required to be made not less than two times per week throughout the term of the loans; and (iii) “casino accounts” shall be established and maintained to hold all of the income derived from casino operations, less casino operating expenses and any amounts required under gaming liquidity requirements to be maintained on-site at the property in compliance with gaming regulations. For the purpose of the operation of the Company the cash accounts in (i) and (ii) mentioned above have been combined. A separate credit card depository account has also been established as part of the cash account requirements of the Mortgage Loan. Amounts held in the aforementioned accounts may be invested in securities permitted by the loan documents. The Mortgage Loan lender has a first priority security interest in these accounts subject to certain stipulations related to gaming laws for casino related accounts.

~~Prepaid~~Cash ~~expenses~~and cash equivalents are held in checking, savings, and ~~other~~liquid ~~assets~~investment ~~consist~~accounts at various financial institutions. The combined account balance at any given institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes, based on the ~~following:~~quality of the financial institutions, that the risk is not significant.

	September 30,2014		December 31,2013
(In thousands)	(Unaudited)
Prepaid expenses	$	12,218	$	20,604
Other assets		5,855		5,015
	$	18,073	$	25,619

Restricted Cash

~~Prepaid~~Restricted ~~expenses~~cash astotaled of$1.1 ~~September 30,~~million ~~2014~~as ~~and~~of ~~December~~March 31, ~~2013~~2015. ~~consist~~A ~~primarily~~portion of ~~expenses relating~~restricted tocash ~~insurance,~~consisted ~~gaming~~of ~~taxes,~~$0.8 ~~marketing,~~million ~~operations,~~tokes ~~property~~(tips) ~~maintenance~~earned ~~and~~by our ~~other~~CoStars ~~taxes.~~in ~~Other~~the ~~assets~~Company’s asslot ofand ~~September 30,~~table ~~2014~~games departments and ~~December 31,~~$0.3 ~~2013~~million ~~consist~~represents ~~primarily~~the ofcash ~~imprest~~account ~~funds~~funded ~~relating~~by our partners to ~~our~~be ~~partner~~used ~~restaurants~~for ~~and security~~certain ~~deposits.~~capital expenditures.

6.Designated ~~Property~~Cash ~~and Equipment, Net~~

~~Net~~As ~~property~~of December 31, 2014, the Company established a designated cash account which consists primarily of the net working capital as a result of the Sale and ~~equipment~~amounts ~~are~~funded ~~stated~~by atthe Predecessor to fund payments for certain executives under the ~~lower~~various executive incentive plans. The designated cash balance of ~~cost~~$36.0 ormillion ~~fair~~at ~~value~~March 31, 2015, was comprised of $29.9 million of net working capital and ~~consist~~$6.1 million for incentive awards under the Management Exit Award Plan (the “Exit Award Plan”), as discussed in Note 8. On April 27, 2015, the $29.9 million of net working capital was paid to Deutsche Bank as final payment related to the ~~following:~~Sale of the Company.

	September 30,2014			December 31,2013
(In thousands)	(Unaudited)
Land	$	110,454		$	110,454
Buildings and buildings and land improvements		2,744,404			2,743,416
Furniture, fixtures and equipment		501,873			493,221
Construction in progress		12,075			6,652
Less: accumulated depreciation		(623,147	)		(498,753	)
	$	2,745,659		$	2,854,990

Accounts Receivable and Credit Risk

~~Depreciation~~Accounts ~~expense~~receivable, ofnet ~~$41.3~~including ~~million~~casino and ~~$42~~hotel receivables, are typically non-interest bearing and are initially recorded at cost.3 ~~million~~The Company ~~was~~issues ~~incurred~~credit ~~during~~in the ~~three~~form ~~months~~of ~~ended September 30,~~“markers” ~~2014~~to ~~and~~approved ~~2013,~~casino ~~respectively,~~customers ~~and~~following ~~$124~~investigations of creditworthiness.4 ~~million~~Accounts ~~and~~are ~~$131~~written off when management deems them to be uncollectible.6 ~~million~~Recoveries ~~was~~of ~~incurred~~accounts ~~during~~previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the ~~nine~~Company’s ~~months~~receivables ~~ended~~to ~~September 30~~their carrying amount, ~~2014~~which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as management’s experience with collection trends in the gaming and ~~2013,~~hospitality ~~respectively~~industry and current economic and business conditions.

The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. Interest of $0.3 million and $0.1 million was capitalized for the three months ended September 30, 2014 and 2013, respectively. For the nine months ended September 30, 2014 and 2013, interest of $0.3 million and $0.1 million, respectively, was capitalized.

In July 2014, the Company announced the closure of the Vegas Nocturne live entertainment performance show at Rose. Rabbit. Lie. As a result, the Company determined that certain long-lived assets related specifically to the show may be impaired. Accordingly, the Company estimated the undiscounted future cash flows to be generated from the identified long-lived assets over their remaining useful life to continue to be negative, resulting in a $1.5 million write-down of the identified assets, which was reported as an asset impairment in the Company’s condensed consolidated statements of operations for the three months ended June 30, 2014 and the nine months ended September 30, 2014. No potential impairment charges were identified or recorded by the Company during the prior year periods or for the three months ended September 30, 2014.

7.The ~~Other~~activity ~~Assets~~related to the allowance for accounts receivable for the period below is as follows (in thousands):

Other long-term assets primarily consist of the Company’s base stock of china, glassware, uniforms, etc., as well as a deposit for workers’ compensation claims incurred but not reported (“IBNR”), a loss payout account for the Company’s owner controlled insurance program (“OCIP”). The IBNR reserve estimate is determined on our actual historical expense experience and reporting patterns.


	Successor
	Three Months Ended March 31, 2015
	Beginning Balance		Write-offs, Net of Recoveries			Provision			Ending Balance
Allowance for doubtful accounts(1)	$	—	$	(363	)	$	(3,189	)	$	(3,552	)

~~During~~(1) ~~certain~~As ~~construction~~part ~~periods,~~of the ~~Company~~adoption ~~maintains~~of apurchase ~~comprehensive~~accounting ~~OCIP~~related ~~for~~ to the ~~following~~Sale ~~insurance~~of ~~coverage:~~the ~~workers’~~Company ~~compensation,~~(refer ~~primary~~to ~~general~~Note ~~liability~~3), ~~excess liability, contractors’ pollution legal liability, builders’ risk and project professional liability. The general contractor and all of~~ the ~~subcontractors~~ ~~working~~accounts onreceivables ~~the Property~~ were ~~required~~recorded toat ~~enroll~~their infair ~~the program~~value.

~~The~~Inventories Company is exposed on a first dollar loss basis for claims filed under either the workers compensation or general liability portions of the OCIP. The Company retains the first $250,000 of the builders’ risk of loss, and $500,000 of each general liability, employer’s liability, and workers’ compensation claims. Claims that exceed the maximum loss amount of $500,000 per claim are covered by a traditional insurance program. The loss payout account receives interest at a rate based on the terms of the policy. The loss payout account will remain open and continue to pay claims until all claims are paid and closed or until the Company’s obligations have been met. The completed operations and professional liability claims period remains open for ten years following the completion of the Property in compliance with Nevada regulations. For insurance coverage purposes, the project completion date was established as December 1, 2010. Workers’ compensation claims remain open until all claims are settled or benefits paid. Once all claims are paid and all obligations are settled, any residual funds in the loss payout account will be returned to the Company. The Company believes the existing balance in the loss payout account of $19.3 million at September 30, 2014 is sufficient to pay all existing and expected future claims related to the Property.

8.Inventories ~~Accrued~~consist of retail merchandise, food and ~~Other~~beverage ~~Liabilities~~items which are stated at the lower of cost or market value. Cost is determined by the weighted average identification method.

~~Accrued~~Derivative ~~and~~Financial ~~other~~Instruments ~~liabilities consist of the following:~~

	September 30,2014		December 31,2013
(In thousands)	(Unaudited)
Accrued accounts payable	$	13,537	$	12,846
Accrued payroll costs		29,994		21,566
Deposits — patrons		3,232		5,098
Advance deposits		14,199		12,896
Chip liability		2,717		5,767
Taxes payable		10,762		7,147
Other liabilities		16,896		17,726
	$	91,337	$	83,046

The Company has managed its market risk, including interest rate risk associated with variable rate borrowings, with the use of a derivative financial instrument. The fair value of the derivative financial instrument is recognized as an asset or liability at each balance sheet date, with changes in fair value affecting net loss. The Company’s interest rate cap did not qualify for hedge accounting. Accordingly, changes in the fair value of the interest rate cap are presented as an increase (decrease) in interest expense in the accompanying condensed consolidated statements of operations.

~~During~~Fair ~~the~~Value ~~three and nine months ended September 30, 2014, the Company recognized $7.6 million and $12.7 million, respectively, in expense related to The Cosmopolitan~~ of ~~Las~~Financial ~~Vegas~~Instruments Incentive Award Plan, The Cosmopolitan of Las Vegas Management Exit Award Plan and The Cosmopolitan of Las Vegas Retention Bonus Plan associated with the signing of the Purchase Agreement. These amounts were included within corporate operating expenses on the condensed consolidated statements of operations. Additional amounts of up to $5.6 million could be payable under the agreements upon closing of the Company Sale.

The Company applies the provisions of FASB Topic 820, “Fair Value Measurements” (Topic 820), to its financial assets and liabilities. Fair value is defined as a market-based measurement intended to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Topic 820 also established a fair value hierarchy, which requires an entity to maximize the use of observable inputs when measuring fair value. These inputs are categorized as follows:

•

Level 1 — quoted prices in an active market for identical assets or liabilities;

•

Level 2 — quoted prices in an active market for similar assets or liabilities, inputs other than quoted prices that are observable for similar assets or liabilities, inputs derived principally from or corroborated by observable market data by correlation or other means; and

•

Level 3 — valuation methodology with unobservable inputs that are significant to the fair value measurement.

The carrying values of the Company’s cash and cash equivalents, restricted cash, designated cash, receivables and accounts payable approximate fair value because of the short term maturities of these instruments. The carrying value of the Company’s debt at March 31, 2015, is consistent with fair value due to the variable interest rates in place.

Debt Financing Costs

Direct and incremental costs incurred in obtaining loans or in connection with the issuance of long-term debt are amortized using the effective interest method over the terms of the related debt agreements. For the period ended March 31, 2015, $1.5 million of debt financing costs and debt discounts were amortized to interest expense. Unamortized debt financing costs of $10.9 million were presented as a direct deduction to the debt obligation at March 31, 2015.

9The deferred financing costs previously reported in other assets at December 31, 2014 of $2.1 ~~Loan~~million ~~Payable~~were ~~and~~reclassified ~~Interest~~to ~~Payable~~a direct deduction to ~~Affiliate~~the debt. See below for discussion regarding adoption of Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs.

~~The~~Property Company maintains a $3.9 billion credit facility which includes a $1.6 billion committed line of credit with DBCI. DBCI has no obligation to provide the Company with additional funding beyond the Credit Facility. The current expiration of the Credit Facility is December 2015. Borrowings carry an interest rate of LIBOR plus a margin of 85 basis points (0.85%). Interest on the loan is payable in arrears and isEquipment, ~~due~~Net ~~and payable on the first business day of each quarter. The Credit Facility does not include any financial covenants.~~

~~Under~~Property ~~the~~and ~~terms~~equipment ofare ~~the~~stated ~~Credit~~at ~~Facility,~~the ~~proceeds~~lower ~~may~~of becost ~~used~~or tofair ~~pay~~value. ~~for~~As ~~(i) the~~part ~~costs~~ of ~~constructing~~the ~~and~~purchase ~~completing~~accounting ~~our~~in ~~fully-integrated resort;~~connection ~~(ii) Property~~with ~~operating~~the ~~deficits;~~Sale ~~and, (iii) payment~~ of ~~interest on~~ the Company, ~~Credit Facility to~~ the ~~extent~~estimated ~~that~~useful ~~cash~~lives ~~flow~~of ~~from~~property ~~the~~and ~~Property~~equipment iswere ~~insufficient~~evaluated tobased ~~pay~~on ~~such~~their ~~interest~~remaining ~~after~~economic ~~paying~~life ~~the~~resulting ~~cost~~in ofmodified ~~operating~~estimated ~~the~~useful ~~Property~~lives. ~~All outstanding~~Depreciation ~~debt~~is ~~becomes~~provided ~~due~~over ~~and~~the ~~payable~~estimated ~~upon~~useful alives ~~change~~ of ~~control~~the ofassets using the straight-line ~~Company.~~method as follows:

The total amount of the loan payable to affiliate at September 30, 2014 and December 31, 2013 is $3.4 billion and $3.5 billion, respectively. Additionally, at September 30, 2014 and December 31, 2013, the Company has an interest payable to affiliate of $9.5 million and $9.9 million, respectively, with a September 30, 2014 interest rate of 1.1% and, for the nine months ended September 30, 2014, a weighted average interest rate of approximately 1.1%.


Building and improvements			29 years
Land improvements			11 years
Furniture, fixtures and equipment			4 to 6 years

~~The~~Leasehold ~~Company~~improvements ~~classifies~~are ~~construction-related~~generally ~~accounts~~amortized ~~payable,~~on ~~retention~~a ~~and accrued and other liabilities as long~~straight-~~term~~line ~~liabilities~~basis asover ~~they~~the ~~are financed~~shorter byof the ~~Company’s~~estimated useful ~~Credit~~life ~~Facility~~of ~~and,~~the ~~therefore,~~assets ~~will~~or ~~not require~~ the ~~use~~lease ~~of working capital~~term.

AsThe ~~discussed~~remaining inestimated ~~Note~~useful 1lives ~~— Organization and Description~~ of ~~Business~~assets —are ~~Company~~periodically ~~Overview~~reviewed —and ~~Sale~~adjusted oras necessary. ~~Transfer~~Costs ofrelated ~~Members’~~to ~~Equity~~improvements ~~Interests,~~are ~~on May 15~~capitalized, ~~2014,~~while ~~the~~costs ~~Company~~of ~~entered~~repairs ~~into~~and ~~the~~maintenance ~~Purchase~~are ~~Agreement~~charged ~~for~~to ~~the~~expense ~~Company~~as ~~Sale~~incurred. The ~~Purchase~~cost ~~Agreement~~and ~~provides that~~accumulated ondepreciation ~~or prior to the closing~~ of ~~the~~property ~~Company~~and ~~Sale,~~equipment ~~Deutsche~~retired ~~Bank~~ or ~~its~~otherwise ~~applicable~~disposed ~~affiliate~~of ~~will~~are ~~release~~eliminated ~~and discharge the Company~~ from ~~all further obligations under~~ the ~~Credit~~respective ~~Facility~~accounts atand noany ~~cost~~resulting togain ~~the Purchaser~~ or ~~the~~loss ~~Company~~is orincluded ~~its subsidiaries~~in operations.

~~10.~~Goodwill ~~Related~~and ~~Party~~Intangibles ~~Transactions~~

~~The~~We ~~Company~~have is$236.0 ~~involved~~million in ~~significant~~goodwill ~~financing~~ and ~~other~~intangible ~~transactions~~assets ~~with~~in ~~certain~~our ofcondensed ~~its~~consolidated ~~affiliates~~balance ~~and~~sheet ~~Deutsche~~at ~~Bank. The~~March 31, ~~following~~2015, ~~table~~resulting ~~sets~~from ~~forth~~the Sale ~~amounts~~as ~~held~~discussed ~~with,~~in ~~receivable~~Note ~~from~~3. ~~and~~Intangible ~~payable~~assets determined to ~~affiliates~~have ~~and~~a ~~Deutsche~~finite ~~Bank~~life are amortized on a straight-line basis over the determined useful life of the asset as follows:

	September 30,2014		December 31,2013
(In thousands)	(Unaudited)
Cash held with Deutsche Bank	$	23,596	$	32,867
Due from affiliate		26,905		56,413
Loan payable to affiliate		3,428,094		3,499,917
Interest payable to affiliate		9,472		9,859

•

Trade name — 30 years

~~Prior~~• toCustomer ~~January 1,~~distribution ~~2014,~~arrangement ~~Deutsche~~— ~~Bank~~16 ~~provided~~years, ~~certain~~based ~~administrative~~on ~~and other support services to~~ the ~~Company,~~ ~~including~~remaining ~~accounting,~~terms ~~development management, procurement logistics, and legal. The Company was charged $0.1 million during each~~ of the ~~respective three and nine months ended September 30, 2013.~~ agreement

On• ~~October 21,~~Backlog ~~2010,~~— the Company entered into an agreement with Nevada Voteco to pay for all expenses relating to Nevada Voteco and the Nevada Voteco members including costs incurred for the services of all advisors and consultants to the extent such costs are reasonable and documented. On behalf of Nevada Voteco, the Company paid $0.2 ~~million during each of the three months ended September 30, 2014 and 2013, respectively, and $0.6 million and $0.7 million during the nine months ended September 30, 2014 and 2013, respectively.~~ years

•

Customer relationships — 3 years

•

Property easement — 5 years, based on the remaining life of the easement right

The Company is required to perform an annual goodwill impairment review, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when its carrying amount exceeds its estimated fair value. Goodwill is reviewed for impairment annually on the first day of the Company’s fourth fiscal quarter (October 1) or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, or a loss of key personnel.

Reclassifications

For the period ended December 31, 2014, we reclassified certain balance sheet accounts on the condensed consolidated balance sheets to conform all periods to the adoption of Accounting Standard Update No. 2015-03. See below for further discussion.

~~The~~Recently ~~Purchase~~Issued ~~Agreement~~Accounting ~~provides~~Pronouncements that on or prior to the closing of the Company Sale, Deutsche Bank or its applicable affiliate will release and terminate all intercompany agreements and all accounts receivable and all accounts payable in connection with the Purchase Agreement, at no cost to the Purchaser or the Company or its subsidiaries.

~~Effective~~In ~~January 1,~~May ~~2012~~2014, ~~pursuant~~the toFASB aissued ~~broader~~ASU ~~tax reorganization~~No. 2014-09, ~~the~~(Topic ~~Company~~606): ~~became~~Revenue ~~part~~from ofContracts awith UCustomers (“ASU No.S 2014-09”). ~~Consolidated Group owned by a~~ASU ~~subsidiary of Deutsche Bank~~No. ~~As of September~~ ~~30,~~ 2014-09 ~~and~~affects ~~December 31,~~any ~~2013,~~entity ~~the~~that ~~Company~~either ~~had~~enters ainto ~~current~~contracts ~~tax-effected~~with ~~net~~customers ~~operating~~to ~~loss~~transfer ofgoods ~~$26.9~~or ~~million~~services ~~and~~or ~~$56.4~~enters ~~million,~~into ~~respectively,~~contracts ~~which~~for ~~will~~the betransfer ~~utilized~~of bycertain ~~the~~nonfinancial Uassets.S ASU No. 2014-09 ~~Consolidated~~is ~~Group, and~~effective ~~which~~for isfiscal ~~presented~~years asbeginning after aDecember 15, ~~component~~2016, ofincluding ~~the~~interim ~~receivable~~periods ~~from~~within ~~affiliate~~that inreporting ~~the~~period. ~~accompanying~~Early ~~condensed~~application ~~consolidated~~is ~~balance~~not ~~sheets~~permitted. ~~During~~Management ~~the~~is ~~three~~currently ~~months~~assessing ~~ended~~the ~~June 30,~~impact ~~2014,~~of the ~~Company~~adoption ~~was~~of ~~reimbursed~~this ~~$56.4~~accounting ~~million~~pronouncement ~~for~~on the ~~utilization~~Company’s ~~of its~~condensed ~~net~~consolidated ~~operating~~financial ~~losses~~statements in ~~prior~~future periods ~~by the U~~.S. ~~Consolidated Group.~~

In ~~addition~~August 2014, the ~~Company~~FASB ~~generated~~issued ~~$23~~ASU No.7 ~~million ($8.3 million~~2014-15, ~~tax-effected)~~Presentation of ~~net~~Financial Statements ~~operating~~— ~~losses~~Going inConcern ~~the~~— ~~three~~Disclosure ~~months~~of ~~ended~~Uncertainties ~~September 30,~~about ~~2014~~an ~~which~~Entity’s ~~are~~Ability ~~presented~~to Continue as a ~~component~~Going ofConcern ~~due~~(Subtopic ~~from~~205-40) ~~affiliate~~(“ASU inNo. 2014-15”). ~~the~~ASU ~~accompanying~~No. 2014-15 ~~condensed~~requires ~~consolidated~~management ~~balance~~to ~~sheet.~~provide ~~The~~an ~~Company~~interim ~~generated~~and ~~$29.8 million~~annual ~~($10.4 million,~~assessment ~~tax-effected)~~concerning ofan ~~net~~entity’s ~~operating~~ability ~~losses~~to incontinue ~~the~~as ~~three~~a ~~months~~going ~~ended September 30~~concern, ~~2013~~and also requires disclosures under certain circumstances. ~~For~~ASU ~~the~~No. 2014-15 ~~respective~~is ~~nine~~effective ~~months~~for ~~ended~~fiscal ~~September~~years beginning after December 3015, ~~2014~~2016, and ~~2013,~~for annual ~~the~~periods ~~Company~~and ~~generated~~interim ~~$64~~periods thereafter.9 ~~million~~Early ~~($23~~application is permitted.~~3 million,~~ ~~tax-effected)~~It ~~and~~is ~~$107.0~~management’s ~~million~~intent ~~($37.6~~to ~~million,~~adopt ~~tax-effected)~~this ofaccounting ~~net~~pronouncement ~~operating~~upon ~~losses~~the effective date.

11During the fourth quarter of 2014, ASU No. 2014-17, ~~Commitments~~Business Combinations (Topic 805): Pushdown Accounting (“ASU 2014-17”) was issued. ASU No. 2014-17 gives all entities the option to apply pushdown accounting when they are acquired by another entity. In conjunction with the issuance of ASU 2014-17, ~~Contingencies~~the ~~and~~SEC ~~Litigation~~eliminated its guidance related to pushdown accounting. ASU No. 2014-17 was effective upon issuance. See our application of ASU No. 2014-17 within the Pushdown Accounting section of this Note as well as Note 3, Purchase Accounting in Connection with the Sale of the Company.

~~Prior~~In toApril 2015, the ~~issuance~~FASB ofissued ~~any~~ASU ofNo. 2015-03, ~~its~~Simplifying ~~quarterly or annual financial results and for~~ the ~~purposes~~Presentation of ~~accrual~~Debt ~~and/or~~Issuance ~~disclosure, we~~Costs ~~analyze~~(Subtopic ~~each~~835-30) of(“ASU No. 2015-03”), ~~our~~which ~~material~~requires ~~legal~~debt ~~proceedings~~issuance ~~and~~costs ~~other~~to ~~contingencies~~be topresented ~~determine~~in ~~whether~~the anbalance ~~estimate~~sheet ofas a ~~probable~~direct ordeduction ~~reasonably~~from ~~possible~~the ~~loss~~carrying orvalue ~~range~~ of ~~loss~~the ~~can~~associated bedebt ~~made~~liability, ~~based~~consistent ~~upon~~with the ~~facts~~presentation ~~and legal assessment~~ of ~~such~~a ~~matters~~debt discount. ~~During such~~ASU ~~assessment,~~No. 2015-03 weis ~~consider~~effective ~~all~~for ~~factors~~fiscal ~~that~~years ~~may~~beginning ~~impact~~after ~~this assessment~~December 15, ~~including~~2015, ~~without~~and ~~limitation,~~for ~~(a) the~~annual ~~stage~~periods ~~of the proceeding; (b) the damages, penalties~~ and ~~costs~~interim ~~sought;~~periods ~~(c) the~~thereafter. ~~factual~~Early ~~matters~~application ~~that~~is ~~remain~~permitted. toTo besimplify ~~resolved; and (d)~~ the ~~legal~~presentation ~~principles that are the subject~~ of ~~the~~debt ~~proceeding.~~related Itcosts, ismanagement ~~often~~adopted ~~not possible to estimate~~ the requirements ~~loss or a range~~ of ~~possible~~ASU ~~loss, particularly where (i)~~No. ~~the~~2015-03 ~~damages~~in ~~sought are unsubstantiated or indeterminate; (ii)~~ the ~~discovery~~ orcurrent ~~other~~interim ~~material~~period. ~~legal~~Debt ~~proceedings~~financing ~~are~~costs ~~incomplete;~~of ~~(iii) the~~$2.1 ~~proceedings~~million ~~are~~previously reported in ~~the~~other ~~early~~assets ~~stages~~were ~~and~~reclassified ~~there~~as isan ~~insufficient~~offset ~~information available~~ to ~~assess~~debt ~~the~~obligations ~~viability~~as of ~~the stated grounds; (iv)~~March ~~the~~31, ~~matters~~2015. ~~present~~Adoption ~~legal uncertainties;~~of ~~or (v)~~ASU No. ~~there~~2015-03 ~~are~~was ~~significant~~applied ~~facts~~retrospectively inand ~~dispute.~~the ~~In such cases~~December 31, ~~there~~2014 ~~are~~balances ~~considerable~~for ~~uncertainties~~other ~~regarding~~assets ~~the~~and ~~resolution~~debt ofobligations ~~the~~were ~~proceeding,~~adjusted ~~which~~by ~~may~~$2.1 ~~preclude~~million. ~~the~~At ~~determination~~March 31, of2015, the ~~reasonably~~unamortized ~~possible~~debt ~~loss~~financing orcost ~~range~~was or$10.9 ~~loss~~million.

~~Class~~No ~~Action~~other ~~Suits~~new accounting pronouncements issued or effective during this period had or are expected to have a material impact on the Company’s financial position or results of operations.

a.A variety of proposed or otherwise potential accounting standards are ~~Wage~~currently under review and ~~Hour~~study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of any such proposed or revised standards would have on our condensed consolidated financial statements.

~~During~~3. ~~late~~Purchase ~~2012,~~Accounting ~~the~~in ~~Company~~Connection ~~was put on notice and/or served~~ with ~~two separate purported class action lawsuits related to alleged unpaid compensation for time incurred by CoStars’ while on Property for donning and doffing of~~ the ~~CoStars’~~Sale ~~required uniform, alleged improper rounding~~ of ~~time for hours worked and various other claims related to alleged unpaid compensation. One of~~ the ~~purported~~Company wage and hour class action lawsuits is pending in the Eighth Judicial District Court for Clark County, Nevada (“Nevada State Court”), and one is pending in the U.S. District Court for the District of Nevada. The discovery period as to liability has closed in both cases.

InAs ~~2014~~discussed in Note 1, ~~the~~Nevada ~~plaintiffs’~~Mezz, inan ~~the~~affiliate ~~Nevada~~of ~~State~~Deutsche ~~Court action~~Bank, ~~filed~~completed aits ~~motion~~previously toannounced ~~certify~~sale ~~all~~of ~~proposed~~the ~~classes. Additionally~~Company to Spade Mezz, inan ~~June~~affiliate ~~2014,~~of Blackstone for cash consideration of $1.73 billion plus the ~~plaintiffs~~Company’s ~~filed~~working ~~various~~capital ~~liens~~of ~~against~~$49.4 million as determined pursuant to the ~~Property~~provisions of the purchase agreement. On April ~~The~~21, ~~Company~~2015, ~~has~~Deutsche ~~opposed~~Bank and Blackstone reached final agreement on the ~~motion~~$49.4 tomillion ~~certify~~working ~~all~~capital ~~classes~~amount and ~~filed~~final ~~motions~~payment ~~for~~was ~~summary judgment~~made ~~and~~to ~~dismissal. In~~Deutsche ~~September~~Bank ~~2014~~on April 27, ~~the~~2015. ~~Nevada~~The ~~State~~Sale ~~Court~~was ~~ordered~~accounted ~~the~~for ~~plaintiffs’~~in ~~liens~~accordance towith beASC ~~expunged. No~~805, ~~decisions~~Business onCombination. ~~the~~The ~~dispositive~~Company ~~motions~~elected ~~have~~to apply ~~been~~pushdown ~~issued~~accounting.

Effective March 2015, Nevada Mezz and Spade Mezz entered into the Second Amendment to the Purchase Agreement (the “Second Amendment”) to amend the agreement to account for the release of $12.3 million to the Company from the owner controlled insurance program as further discussed in Note 9. The Second Amendment

~~With~~ specifies ~~respect~~that toNevada Mezz would receive a credit in the Uexcess net working capital amount equal to $6.S.4 ~~District~~million, ~~Court~~representing ~~for~~50% of the ~~District~~released ofamount ~~Nevada~~plus ~~actions,~~broker ~~during~~fees. ~~2014~~As a result, the net ~~Company~~working ~~filed~~capital apreviously ~~motion~~estimated at $43.0 million increased to ~~decertify~~$49.4 million, increasing the ~~one~~aggregate ~~conditionally~~purchase ~~certified~~price ~~class~~from $1.77 billion to $1.78 billion. The estimated fair market values of the tangible and ~~for~~intangible ~~summary~~assets ~~judgment~~acquired and liabilities ~~dismissal. Plaintiff~~assumed ~~filed~~did anot ~~motion~~change tofrom ~~certify~~those ~~all~~recorded ~~classes~~at ofDecember 19, ~~employees~~2014. ~~under~~The additional excess of the ~~federal~~purchase ~~rules. All~~price of ~~these~~$6.4 ~~motions~~million ~~remain~~was ~~pending~~recorded as goodwill at ~~this~~ ~~time~~March 31, 2015.

~~During~~The ~~the~~following ~~second~~table ~~quarter~~reflects ~~of 2013, as part of an ongoing assessment of our wage and hour cases, we accrued an estimated loss contingency of $3.0 million (reported as a corporate operating expense in~~ the ~~condensed~~allocation ~~consolidated statement~~ of ~~operations beginning with~~ the ~~June 30,~~purchase ~~2013~~price ~~quarterly~~to ~~reporting period). A portion of~~ the ~~loss~~tangible ~~contingency~~and ~~was~~identifiable ~~utilized~~intangible inassets ~~the October~~acquired ~~2013 settlement of a third purported wage~~ and ~~hour class action matter~~liabilities assumed, with ~~subsequent payment occurring during~~ the ~~first~~excess ~~quarter~~recorded ~~of 2014. We will continue evaluating the adequacy of this accrual~~ as ~~the~~goodwill cases develop. Specific additional factors applicable to each case that prevent the Company from providing an estimate of reasonably possible loss in excess of amounts accrued or range of loss include, but are not limited to: (~~1) whether class certification will be granted and the scope of any class or subclass; (2) the quantification of highly variable damages claimed by the purported classes and subclasses asserted~~ in ~~separate, but overlapping litigation are unspecified or indeterminate; and (3~~thousands) ~~the outcome of any future settlement negotiations, should they occur, as they may apply to limit the class or eliminate all class claims~~. ~~Legal fees associated with the cases are recognized as incurred when the legal services are rendered, and are, therefore, not recognized as part of the loss contingency accrual.~~

The Company believes that it has meritorious defenses with respect to the remaining open matters and intends to defend its positions vigorously.


Current and other assets	$	174,703
Property and equipment, net		1,433,898
Goodwill		31,963
Intangible assets, net		216,344
Other non-current assets		34,223

Total assets	$	1,891,131

Current liabilities		(107,152	)
Other long-term liabilities		(4,483	)

Total liabilities		(111,635	)

Total equity purchase price	$	1,779,496

b.The ~~Alleged~~following ~~Unlawful~~table ~~Taping/Recording~~presents the unaudited pro forma results as if the Sale had occurred at January 1, 2014 (in thousands).

A purported class action lawsuit was filed during the quarterly period ended September 30, 2012 in Superior Court in the State of California against the Company, alleging violation of the California Penal Code regarding the unlawful taping or recording of calls. On August 31, 2012, the Company moved the case to U.S. District Court for the Southern District of California. Subsequently, the Company filed a motion to dismiss, or in the alternative, to strike the class allegations. On July 15, 2013, the U.S. District Court for the Southern District of California issued an order denying these motions.


	Three Months Ended March 31, 2014
Net revenues	$	182,866
Operating expenses		179,524
Operating income		3,342
Other income (expense)		(7,277	)
Loss before income taxes		(3,935	)
Income tax (expense)/benefit		—

Net loss	$	(3,935	)

~~Significant~~4. ~~discovery~~Accounts ~~has commenced and depositions have occurred~~Receivable, ~~but~~Net no motions to certify a class or subclasses have been filed. All discovery that relates to class certification issues must be completed by January 2015 and the plaintiff must file a motion for class certification by March 2015. The Company will file its opposition to any motion for class certification by April 2015. The U.S. District Court for the Southern District of California will set a pretrial schedule after its ruling on the class certification motion.

~~Substantial~~Accounts ~~questions of law and fact are unresolved. Specific additional factors applicable to this case that prevent the Company from providing an estimate of reasonably possible loss or range of loss include~~receivable, ~~but~~net ~~are~~consists ~~not limited to: (1) whether class certification will be granted and the scope~~ of ~~any class or subclass; (2)~~ the ~~quantification~~following: of highly variable damages claimed by the purported class are unspecified or indeterminate; and (3) the outcome of any future settlement negotiations, should they occur, as they may apply to limit the class or eliminate all class claims. As a result, the Company cannot at this time determine the potential impact of the lawsuit on the consolidated financial position, cash flows, or results of operations of the Company. The Company believes that it has meritorious defenses with respect to this matter and intends to defend its position vigorously.

Given the uncertainty of the procedural and substantive legal and factual matters set forth above, no estimate of the reasonably possible loss or range of loss in excess of amounts accrued, if any, can be made at this time with respect to the wage and hour and alleged unlawful taping/recording purported class action lawsuits, nor can the Company determine when it will be able to make such an estimate. Our assessment of these matters may change based on future unexpected events. An unexpected adverse judgment could cause a material impact on our business operations, results of operations or financial position. Unless otherwise expressly stated, we believe costs associated with litigation will not have a material impact on our financial position or liquidity, but may be material to the results of operations in any given period.


	Successor
(In thousands)	March 31, 2015			December 31, 2014
Casino	$	36,395		$	26,244
Hotel		21,895			16,393
Other		9,828			9,169

		68,118			51,806
Less: allowance for doubtful accounts		(3,552	)		—

	$	64,566		$	51,806

Accounts receivable, including casino and hotel receivables, are typically non-interest bearing. The Company issues credit to approved casino customers following investigations of creditworthiness. The allowance is estimated based on specific review of customer accounts as well as management’s experience with collection trends in the gaming and hospitality industry and current economic and business conditions.

~~Commitments~~5. Prepaid Expenses and Other ~~Legal~~Current ~~Proceedings~~Assets

a.Prepaid ~~Property~~expenses ~~General~~and ~~Contractor~~other ~~and~~current ~~Other~~assets ~~Purchase~~consist ~~Obligations~~of the following:

During 2012, the Company engaged Penta Building Group (“Penta”) to act as the general contractor for certain Property projects. Penta operates under a guaranteed maximum price (“GMP”) contract that defines the scope of work to be performed, establishes the budget for the scope of work, and sets the general time scale of the job. At September 30, 2014 and December 31, 2013, the respective remaining amounts expected to be paid to Penta under the GMP and approved change orders total $0.0 million and $9.5 million.


	Successor
(In thousands)	March 31, 2015		December 31, 2014
Prepaid expenses	$	15,217	$	15,754
Other assets		3,383		5,760

	$	18,600	$	21,514

AsPrepaid expenses as of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013,~~2014 ~~the~~consist ~~Company~~primarily ~~had~~of ~~total~~expenses ~~construction~~relating to ~~commitments~~insurance, ofgaming ~~$1.8~~taxes, ~~million~~marketing, operations, property maintenance and ~~$17~~other taxes.7 ~~million~~Other assets as of March 31, ~~respectively.~~ 2015 and December 31, 2014 consist primarily of imprest funds relating to our partner restaurants and security deposits.

~~Within the Company’s credit line of $3~~6.9 ~~billion~~Property from DBCI is a revolving line of credit of $20.0 million reserved for purposes of issuing standby letters of credit. At September 30, 2014, the Company maintained two standby letters of credit totaling $2.6 million pursuant to agreements related to insurance and ~~an administrative office lease. There were no outstanding borrowings against these standby letters of credit as of September 30~~Equipment, ~~2014.~~Net

~~Subsequent~~Property toand ~~September 30~~equipment, ~~2014,~~net ~~the $2.2~~are ~~million~~stated ~~standby~~at ~~letter~~the lower of ~~credit~~cost ~~relating~~or tofair ~~insurance~~value ~~services~~and ~~was~~consist ~~cancelled.~~of the following:

b. Condominium Hotel Litigation


	Successor
(In thousands)	March 31, 2015			December 31, 2014
Land and land improvements	$	107,352		$	107,352
Buildings and improvements		1,208,276			1,206,191
Furniture, fixtures and equipment		108,856			108,734
Construction in progress		14,185			12,337
Less: accumulated depreciation		(18,947	)		(2,316	)

	$	1,419,722		$	1,432,298

AsDepreciation ~~disclosed~~expense ~~in prior periods, the Company was a named defendant in a number~~ of ~~lawsuits and arbitrations concerning the purchase and sale of condominium hotel units located within the East and West Towers of the Property~~$16.6 ~~The~~million ~~thrust~~was ofincurred ~~the~~during ~~claims were virtually~~ the ~~same~~three inmonths ~~every~~ended ~~matter. The plaintiffs alleged~~March 31, ~~among other things~~2015, ~~that~~for the Successor ~~project~~period ~~had materially changed~~ and ~~that~~$41.3 ~~delays~~million ~~in the~~for ~~completion of~~ the ~~Property~~three ~~constituted~~months aended ~~material~~March 31, ~~breach by the Company~~2014, ~~thus~~for ~~permitting~~ the ~~plaintiff/purchaser~~Predecessor ~~to rescind their contract and receive a full refund of their earnest money deposit, plus interest thereon~~period. ~~The Company was represented in each of these matters by outside legal counsel.~~

OnThe orinterest ~~about~~cost associated ~~August 26,~~with ~~2013,~~major adevelopment ~~purported~~and ~~class~~construction ~~action~~projects ~~lawsuit~~is ~~was filed~~capitalized ~~against~~and ~~the~~included ~~Company~~ in the ~~U.S.~~cost ~~District~~of ~~Court for~~ the ~~Central District of California, captioned Lenny Spangler v~~project. ~~Nevada~~Interest ~~Property~~capitalization 1ceases ~~LLC,~~once eta ~~al.,~~project ~~alleging,~~is ~~among~~substantially ~~other~~complete ~~things,~~or ~~that~~no ~~former~~longer ~~class~~undergoing ~~action~~construction ~~settlements~~activities ~~entered~~to ~~into~~prepare ~~by the Company~~it ~~with~~for ~~buyers~~its ofintended ~~condominium~~use. ~~hotel~~For ~~units in~~ the ~~project~~three ~~were~~months ~~fraudulently~~ended ~~induced~~March 31, 2015 and ~~seeking to recover all amounts paid to or retained by the Company in such settlements. During~~ 2014, ~~the~~no ~~plaintiff~~interest ~~agreed~~expense ~~to dismiss the case in exchange for a waiver and release by the Company of its claims for costs related to the lawsuit. A formal order of dismissal~~ was ~~subsequently entered with the U~~capitalized.S. ~~District Court for the District of Nevada.~~

~~At December 31, 2013, there were two condominium hotel units remaining under contract at The Cosmopolitan (the “Okada Unit” and the “Mastej Unit”)~~7. ~~During~~Goodwill ~~the three months ended March 31, 2014, the Company prevailed in its efforts to confirm~~ and ~~enforce~~Intangibles ~~prior arbitration awards for each of the Okada Unit and the Mastej Unit. As such, the applicable earnest money deposits were released to the Company.~~

OnGoodwill orconsists ~~about March 3, 2014, a complaint was filed against the Company in the U.S. District Court for the Central District~~ of ~~California, captioned Donald Okada v. Nevada Property 1 LLC, et al., alleging, among other things, that former class action settlements entered into by~~ the ~~Company~~following: with buyers of condominium hotel units in the project were fraudulently induced thus permitting the plaintiff to recover the full earnest money deposit and related attorney fees. During July 2014, the complaint against the Company was dismissed without prejudice and the plaintiff was granted leave to file an amended complaint. On or about July 21, 2014, the plaintiff filed an amended complaint in the U.S. District Court for the Central District of California. Subsequently, the U.S. District Court for the Central District of California granted the Company’s motion to transfer venue of the case to the U.S. District Court for the District of Nevada. In October 2014, the Company submitted a motion in the case to compel the matter to binding arbitration.


	Successor
(In thousands)	March 31, 2015		December 31, 2014
Goodwill	$	31,963	$	25,549
Less: accumulated impairment		—		—

	$	31,963	$	25,549

~~With~~Intangible ~~respect to the Mastej Unit~~assets, onnet orconsist ~~about April 1, 2014, a Notice~~ of ~~Appeal was filed with~~ the ~~Nevada~~following: ~~Supreme Court regarding the grant of the Company’s motion to confirm and enforce the arbitration award. That matter is in the earliest stages of proceedings.~~

c. Hearst Trademark


	Successor
(In thousands)	March 31, 2015			December 31, 2014
Trade name	$	100,000		$	100,000
Customer distribution agreement		21,000			21,000
Backlog		48,000			48,000
Customer relationships		39,000			39,000
Property easement		8,344			8,344
Less: accumulated amortization		(12,346	)		(1,516	)

	$	203,998		$	214,828

InIntangibles ~~December~~are ~~2009,~~amortized over the ~~Company~~respective ~~entered~~useful ~~into~~lives ~~a co-existence agreement with Hearst Communications, Inc. (“Hearst”), which resulted in a settlement and dismissal~~ of ~~all trademark infringement claims that were~~ the ~~subject~~assets ofranging anfrom ~~ongoing~~two ~~lawsuit~~to ~~between~~thirty ~~the Company and Hearst~~years. Amortization ~~The~~expense ~~co-existence~~related ~~agreement~~to ~~provides~~intangibles ~~that~~was ~~the Company may utilize the “Cosmopolitan” name and marks within certain defined parameters~~$10.8 ~~Specifically,~~million ~~the~~for ~~co-existence agreement provides that~~ the ~~Company~~period ~~should~~ended ~~use (i)~~March ~~the~~31, ~~word “the” preceding the word “Cosmopolitan” (e.g. “The Cosmopolitan”)~~2015, orfor ~~(ii) words identifying physical locations or attractions of our hotel-casino properties preceding or following~~ the ~~word~~Successor ~~“Cosmopolitan”~~period ~~(e.g., “Cosmopolitan Residences” or “Cosmopolitan Beach Club”), or (iii) “Las Vegas” preceding~~ and~~/or~~ ~~following the word “Cosmopolitan” (e~~$0.~~g.,~~4 ~~“Cosmopolitan~~million ~~Las~~for ~~Vegas”, etc.). The co-existence agreement further provides that~~ the ~~use~~three ofmonths ~~the~~ended ~~“Cosmopolitan” marks be limited to the operation~~March 31, ~~promotion,~~ ~~marketing~~2014, ~~and advertising of hotel-casino properties and related products and services. The co-existence agreement also provides~~ for ~~certain limitations regarding~~ the ~~use~~Predecessor ~~of “Cosmopolitan” marks in connection with women’s fashion products and the use of the term “Cosmo”~~period.

d8. ~~Patent~~Restricted ~~Infringement~~and Designated Cash

OnAs ~~July~~of March 1431, ~~2013~~2015, the Company’s ~~filed~~restricted acash ~~lawsuit~~account ~~against~~consisted ~~Activision~~of ~~TV,~~tokes ~~Inc.~~ (~~“Activision”~~tips) inearned ~~the~~by ~~U.S.~~our ~~District~~CoStars ~~Court~~in ~~for~~ the ~~District~~Company’s ofslot ~~Nevada~~and ~~for~~table agames ~~declaration~~departments ~~that~~of it$0.8 ismillion ~~not~~and ~~infringing~~the oncash ~~various~~account ~~patents~~funded ~~owned~~ by ~~Activision~~our ~~relating~~partners to ~~digital~~be ~~displays~~used ~~installed~~for atcertain ~~the~~capital ~~Property~~expenditures byof ~~third-party vendors~~$0.3 ~~During the quarter ended June 30, 2014, the Company resolved the case with no financial impact~~million.

eAs of March 31, 2015, the Company’s designated cash account consisted of $29.9 ~~Vegas~~million ~~Nocturne~~of net working capital as a result of the Sale and $6.1 million designated by the Predecessor to fund payments for certain executives under the Exit Award Plan.

InOn ~~July 2014~~April 27, 2015, the ~~Company~~$29.9 ~~announced~~million ~~the closure~~ of ~~the~~net ~~Vegas~~working ~~Nocturne~~capital ~~live~~was ~~entertainment~~paid ~~performance~~to ~~show~~Deutsche atBank ~~Rose.~~as ~~Rabbit.~~final ~~Lie.,~~payment ~~and, based~~related ~~upon~~to ~~contractual terms,~~ the ~~cessation~~Sale of ~~its relationship with Spiegelworld CSC, LLC (“Spiegelworld”). On August 6, 2014, Spiegelworld filed a complaint in~~ the ~~District Court of Clark County, Nevada, alleging among other things, causes of action for breach of contract and declaratory relief~~Company.

On9. orOther ~~about~~Assets August 28, 2014, the Company filed an answer and counterclaim against Spiegelworld in the District Court of Clark County, Nevada, alleging, among other things, causes of action for breach of contract, fraud, breach of fiduciary duties and injunctive relief.

~~This~~Other ~~matter~~long-term isassets inprimarily ~~the~~consist ~~earliest stages~~ of ~~proceedings. As a result,~~ the Company’s ~~cannot~~base atstock ~~this time determine the potential impact~~ of ~~the complaint~~china, onglassware, ~~the consolidated financial position~~uniforms, ~~cash flows~~etc., oras ~~results~~well ~~of operations of~~ as the ~~Company.~~loss ~~The~~payout ~~Company~~account ~~believes~~for ~~that~~its itowner ~~has~~controlled ~~meritorious~~insurance ~~defenses~~program ~~with respect to this matter and intends to defend its position vigorously~~(“OCIP”).

fThe Company maintained a comprehensive OCIP that provided insurance coverage for the Property during construction. ~~Other~~The ~~Matters~~program provided the following coverage: workers’ compensation, primary general liability, excess liability, contractors’ pollution legal liability, builders’ risk and project professional liability. The general contractor and all of the subcontractors working on the Property were required to enroll in the program. We also maintain a reserve for workers’ compensation claims incurred but not reported (“IBNR”). The IBNR reserve estimate is determined on our actual historical expense experience and reporting patterns.

~~The~~In January 2015, the Company, isDeutsche ~~also~~Bank ~~subject~~and toNational ~~various~~Union ~~other~~Fire ~~ordinary~~Insurance ~~and~~Company ~~routine~~of ~~claims~~Pittsburgh, ~~and~~PA ~~litigation~~(“Union ~~arising~~Fire inInsurance”) entered into a Closeout Agreement whereby the ~~normal~~parties ~~course~~agreed ofto ~~business.~~closeout Inall the general liability and workers ~~opinion~~compensation insurance policies established under the OCIP. As part of ~~management~~the Closeout Agreement, ~~all~~the ~~pending~~parties ~~other~~agreed ~~legal~~to ~~matters~~a ~~are~~final ~~either~~single ~~adequately~~payment ~~covered~~amount byof ~~insurance~~$7.0 ~~or,~~million ifpaid ~~not~~to ~~insured,~~Union ~~will~~Fire ~~not~~Insurance ~~have~~and arepresents ~~material~~full ~~adverse~~and ~~impact~~final onsettlement of all obligations arising from the ~~consolidated~~closeout ~~financial~~policies. ~~position~~In return, ~~cash~~Union ~~flows,~~Fire orInsurance waives and releases the ~~results~~Company ofwith ~~operations~~respect ofto all future obligations and assumes 100% first loss position under and with respect to the ~~Company~~ closeout policies.

In addition, the Closeout Agreement provided for the final distribution to the Company of the remaining funds in the cash collateral account of $12.3 million which the Company received in February and March and is reflected in our cash and cash equivalents balance at March 31, 2015. As a result of the Closeout Agreement, the Company recognized a settlement expense of $3.6 million which is reflected in corporate expense in our condensed consolidated statements of operations.

At December 31, 2014, the IBNR reserve was $1.5 million and the OCIP fund balance was $19.3 million.

1210. ~~Membership~~Accrued ~~Interests~~and Other Liabilities

~~The~~Accrued ~~Company’s membership interests are comprised of Class A~~ and ~~Class~~other Bliabilities ~~membership~~consist ~~interests. Holders~~ of ~~Class A~~ ~~membership interests are entitled to vote on any matter to be voted upon by~~ the ~~Members.~~following: ~~Holders of Class B membership interests have all the economic interests in the Company and, except as provided by law, do not have any right to vote.~~

At and for the nine months ended September 30, 2014, Nevada Voteco holds 100% of the Company’s Class A membership interests and Nevada Mezz holds 100% of the Company’s Class B membership interests.


	Successor
(In thousands)	March 31, 2015		December 31, 2014
Accrued accounts payable	$	5,908	$	10,782
Accrued payroll costs		24,624		28,844
Deposits — patrons		4,090		7,272
Advance deposits		17,214		14,422
Chip liability		3,181		5,234
Taxes payable		9,114		6,473
Other liabilities		34,268		29,183

	$	98,399	$	102,210

~~See~~11. ~~Note~~Debt 1Obligations ~~— Organization and Description of the Business — Company Overview — Sale or Transfer of Members’ Equity Interests for a discussion concerning the Company Sale.~~

The significant components of our long-term debt are as follows:


	Successor
(In thousands)	March 31, 2015			December 31, 2014
Non-current long-term debt
Mortgage Loan (term loan)(1)	$	875,000		$	875,000
Less: unamortized discount and debt financing costs		(10,854	)		(12,383	)

Long-term debt	$	864,146		$	862,617

(1)	Certain affiliates of Blackstone Real Estate Partners VII LP have provided a guaranty of certain customary non-recourse carve-out liabilities in connection with the Mortgage Loan.

The Company chose early adoption of Accounting Standard Update No. 2015-03 as discussed in Note 2 and retrospectively applied the requirements by presenting deferred financing costs as a direct reduction of the underlying debt.

Mortgage Loan Agreement

The Company and Propco (collectively, the “Mortgage Borrowers”) entered into a Mortgage Loan agreement, dated December 19, 2014, with JPMorgan, pursuant to which the Mortgage Borrowers borrowed $875 million under a term loan. The proceeds of the Mortgage Loan were used to pay a portion of the purchase price payable in the Sale. The Mortgage Loan had an initial maturity date of January 9, 2017 and the Company has the unilateral right to three successive one-year extensions, subject to customary debt covenant compliance requirements. The Mortgage Loan has an initial interest rate equal to LIBOR plus 2.95% per annum. As of December 31, 2014, LIBOR was 0.165% and the total rate was 3.12%. The Mortgage Loan is secured by a first lien on the Property and all of the other assets of the Company, including the Mortgage Interest Rate Cap as described in Note 12.

Our total capital expenditures for the three months ended March 31, 2015 was less than the required capital expenditures per the Mortgage Loan. Under the terms of the Mortgage Loan, the difference between the required capital expenditure amount and the actual capital expenditures during the quarter should be deposited into a replacement reserve account. The Company is in the process of segregating the funds into a separate account. Our capital activity will increase in future quarters and expect to meet the required capital expenditures per the Mortgage Loan.

~~Disclosure~~On ~~Pursuant~~March 30, 2015, the Company executed the First Amendment to ~~Section 13~~the Mortgage Loan agreement (r“First Amendment”) with JPMorgan. The First Amendment reduced the weighted average interest rate to LIBOR plus 2.80%. Under the First Amendment, the revised interest rate spread was allocated among each Component listed below. In addition, for the purpose of computing interest payable from time to time, the ~~Exchange~~principal ~~Act~~amount ~~[Pending~~of ~~Deutsche~~the ~~Bank~~loan ~~update]~~and certain other computations, the principal balance of the loan shall be divided into Components A-1 through A-6. The principal amounts of the Components are as follows:

Section 13(r) of the Exchange Act requires a public reporting issuer to disclose in its reports whether it or any of its affiliates has knowingly engaged in specified activities relating to Iran. The Company itself has nothing to report. However, Deutsche Bank AG may be viewed as our affiliate. Deutsche Bank AG has provided us the disclosure set forth below describing the ITRA-relevant activities of it and its affiliates for the quarter ended September 30, 2014. All references in this quoted disclosure to “we,” “us” and “our” are to Deutsche Bank AG and its affiliates. None of the disclosed activities or transactions was conducted by the Company.


Component	Principal Amount (In thousands)		Interest Rate Spread
A-1	$	287,000		1.37	%
A-2	$	78,000		1.92	%
A-3	$	70,000		2.37	%
A-4	$	222,200		3.42	%
A-5	$	146,100		4.07	%
A-6	$	71,700		5.37	%

	$	875,000

~~“Disclosures~~Pursuant ~~Under~~to ~~Iran~~the ~~Threat~~terms ~~Reduction~~of the Mortgage Loan, the Company is required to establish and ~~Syria~~maintain ~~Human~~certain specified ~~Rights~~cash ~~Act~~accounts through the term of ~~2012~~ the Mortgage Loan. Refer to Note 2 for further detail.

~~Under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the U~~12.~~S. Securities~~ ~~Exchange~~Interest ~~Act~~Rate ofCap ~~1934,~~Agreement as amended, an issuer of securities registered under the Securities Exchange Act of 1934 is required to disclose in its periodic reports filed under the Securities Exchange Act of 1934 certain of its activities and those of its affiliates relating to Iran and to other persons sanctioned by the U.S. under programs relating to terrorism and proliferation of weapons of mass destruction that occurred during the period covered by the report. We describe below a number of potentially disclosable activities of Deutsche Bank AG and its affiliates. Disclosure is generally required regardless of whether the activities, transactions or dealings were conducted in compliance with applicable law.

~~Legacy~~In ~~Financing~~connection ~~Arrangements.~~with ~~Despite~~the ~~having~~Sale, ~~ceased~~Propco ~~entering~~entered into ~~new~~an ~~business~~interest inrate orcap ~~with~~agreement ~~Iran~~ in ~~2007,~~order ~~we continue~~ to bemanage ~~engaged~~interest ~~as lender,~~rate ~~sponsoring bank and/or facility agent or arranger in several long-term financing agreements~~ risk relating to ~~the~~its ~~construction~~Mortgage ~~or acquisition of plant or equipment for the petroleum and petrochemical industries, under which Iranian entities were the direct or indirect borrowers~~Loan. ~~Before~~The ~~2007,~~interest asrate ~~part~~cap ofagreement ~~banking~~is ~~consortia,~~intended weto ~~entered~~hedge ~~into~~ a ~~number~~portion of ~~financing arrangements, four of which remained outstanding as of September 30, 2014, with~~ the ~~National~~underlying ~~Iranian~~interest ~~Oil~~rate ~~Company~~risk ~~(NIOC),~~on ~~the National~~borrowings ~~Petrochemical Company (NPC) and their respective group entities as borrowers. The latest final maturity~~ under ~~these loan facilities is in 2019. These loan facilities were guaranteed by national export credit agencies representing two European governments and one Asian national government. In principle,~~ the ~~obligations~~Mortgage ~~of the borrowers under these loan facilities are secured by assignments of receivables from oil and oil products exported by NIOC, NPC and/or their trading subsidiaries to buyers, mostly in Asia~~Loan. ~~These~~Under ~~delivery obligations, however, were waived for the period covered by~~ this ~~report,~~interest ~~due~~rate tocap ~~the current sanctions environment. For some of these arrangements~~agreement, ~~we act as escrow agent, holding escrow accounts for~~ the ~~Iranian~~Company ~~borrowers mentioned above, into which receivables are, in principle,~~ paid ~~by the buyers of the oil and oil products~~$0.4 ~~During~~million ~~the~~for ~~period covered by this report, no such receivables were paid to the said escrow accounts. Such accounts~~a ~~are~~maximum ~~pledged~~interest inrate ~~favor~~ of ~~the relevant banking consortium~~3.74% Weon ~~have~~$875 nomillion ~~involvement~~of inborrowings under the ~~contractual~~Mortgage ~~arrangements~~Loan ~~related to, or~~ in ~~the~~exchange ~~physical~~for ~~settlement~~receipts ~~of,~~on the ~~oil~~same ~~and~~amount ~~oil~~at ~~product~~a ~~exports~~variable ~~mentioned~~interest ~~above.~~rate ~~The~~based ~~Iranian entities in whose names the escrow accounts are held are not permitted to draw~~ on ~~these accounts, either because they are sanctioned parties or, where this is not~~ the ~~case,~~applicable ~~due~~LIBOR toat ~~our business decision to not allow access to~~ the ~~accounts~~time ~~in light~~ of ~~the overall sanctions environment~~payment.

~~During~~The Company measured the ~~third~~fair ~~quarter~~value of ~~2014,~~its ~~approximately~~interest €rate ~~100~~cap ~~was~~on ~~paid~~a ~~into~~recurring ~~the~~basis ~~escrow~~pursuant ~~account~~to accounting standards for fair value measurements. ~~We,~~The inCompany ~~our~~categorizes ~~role~~this interest rate cap as ~~agent~~Level 2, ~~distributed~~ refer to ~~the~~Note ~~participants~~2 infor the ~~banking~~levels ~~consortia~~of €fair ~~1 million~~value ~~including~~hierarchy. ~~portions~~The ~~attributable~~fair tovalue usof ~~totaling~~the ~~approximately~~Company’s €interest rate cap agreement was $46 thousand and $0.252 million at March 31, 2015 and December 31, 2014, respectively and was included in other non-current assets in the accompanying condensed consolidated balance sheets.

~~We generated revenues in the third quarter of 2014 of approximately € 0~~13.6 ~~million~~Related inParty ~~respect~~Transactions of these financing arrangements, of which approximately € 0.5 million consisted of escrow account revenues, € 27,000 consisted of loan interest revenues and € 9,000 consisted of fee revenues. The net profits were less than these amounts.

AsThe ofCompany ~~September 30,~~entered ~~2014,~~into wean ~~have~~agreement anwith ~~undrawn~~Nevada ~~commitment~~Voteco ofto ~~approximately~~pay ~~€ 1.3 million~~for ~~under~~all ~~one~~expenses ofrelating to Nevada Voteco and the ~~financing~~Voteco ~~agreements~~members ~~referred~~including tocosts ~~above.~~incurred ~~Due~~for the services of all advisors and consultants to the ~~export~~extent ~~credit~~such ~~agency~~costs ~~coverage,~~are ~~this~~reasonable ~~remainder~~and ~~cannot~~documented berelated ~~cancelled~~to ~~without~~and ~~German~~for ~~government~~the ~~approval,~~benefit ~~for~~of ~~which~~the weCompany. ~~have~~The ~~applied~~Company ~~but~~paid ~~have~~$0.1 ~~not~~million ~~yet~~and ~~received~~$0.2 Wemillion dofor ~~not~~the ~~intend~~three months toended ~~make~~March 31, ~~further~~2015 ~~disbursements~~and ~~upon this~~2014, ~~undrawn~~respectively, ~~commitment~~for such expenses incurred by Nevada Voteco on behalf of the Company.

~~Our~~Mezzanine ~~portion of the remaining loan facilities amounted to approximately € 29 million as of~~Loans September 30, 2014. We intend to continue pursuing repayment and fulfilling our administrative role under these agreements, but we do not intend to engage in any new extensions of credit to these or other Iranian entities.

~~Legacy~~In ~~Contractual~~connection ~~Obligations~~with ~~Related~~the toSale, ~~Guarantees~~affiliates ~~and~~of ~~Letters~~Blackstone entered into the Mezzanine Loans with JPMorgan for a total aggregate principal amount of ~~Credit~~$425 million. ~~Prior~~The tofirst ~~2007,~~mezzanine weloan ~~provided~~(the ~~guarantees~~“Mezzanine toA Loan”) was for a ~~number~~principal amount of ~~Iranian~~ ~~entities~~$295 million, with an interest rate of LIBOR plus 6.5% per Inannum. ~~almost~~The ~~all~~second mezzanine loan (the “Mezzanine B Loan”) was for a principal amount of ~~these~~$130 ~~cases~~million, wewith ~~issued~~an ~~counter-indemnities~~interest inrate ~~support~~of LIBOR plus 8.75% per annum. The principal amount was borrowed and used, amongst other things, to pay a portion of ~~guarantees~~the ~~issued~~purchase byprice ~~Iranian~~in ~~banks~~the ~~because~~Sale. The Company is not a borrower under the ~~Iranian~~Mezzanine ~~beneficiaries~~Loans; ofhowever, the ~~guarantees~~amounts ~~required~~payable ~~that~~under ~~they~~such beloans ~~backed~~are, ~~directly~~in each case, secured by ~~Iranian~~an ~~banks.~~equity Ininterest ~~2007,~~in wethe Company (for the Mezzanine A Loan) and an equity interest in the entity residing directly above the Company (for the ~~made~~Mezzanine aB ~~decision~~Loan), among other ancillary rights afforded to ~~discontinue~~equity ~~issuing~~owners. ~~new~~The ~~guarantees~~Mezzanine Loans are also secured by a lien on the assets held in the segregated cash accounts held with JPMorgan. Further, the Company is required to ~~Iranian~~pay orinterest ~~Iran-~~on the Mezzanine Loans. Since the

~~related~~Company ~~beneficiaries.~~is ~~Although~~not ~~the~~a ~~pre-existing~~named ~~guarantees~~borrower ~~stipulate~~under ~~that~~the ~~they~~Mezzanine ~~must~~Loans, bepayments ~~either extended or honored if~~ we ~~receive~~make ~~such~~for ainterest ~~demand~~on ~~and~~these weloans are ~~legally~~considered ~~not~~equity ~~able~~distributions to ~~terminate~~our ~~these guarantees, we decided in 2011 to reject any “extend or pay” demands under such guarantees~~Members. ~~Even~~For ~~though~~the weperiod ~~exited,~~ended ~~where possible~~March 31, ~~many of these guarantees~~ 2015, ~~guarantees~~the ~~with~~total aninterest ~~aggregate~~paid ~~face~~was ~~amount of approximately € 7~~$3.6 2 million ~~are~~and ~~still outstanding as of September 30, 2014~~$1.9 ~~The~~million ~~gross~~for ~~revenues~~the ~~from~~Mezzanine ~~this~~A ~~business~~Loan ~~were~~and ~~approximately~~Mezzanine €B 11Loan,~~000~~ respectively, and ~~the~~is ~~net~~presented ~~profit~~as wedistribution ~~derived~~to ~~from~~Members ~~these~~in ~~activities~~the ~~was~~condensed ~~less~~consolidated ~~than~~balance ~~this~~sheet ~~amount~~at March 31, 2015.

~~We also have outstanding legacy guarantees in relation to a Syrian bank sanctioned by the U~~14.S. ~~under~~Income ~~its~~Taxes non-proliferation program. The aggregate face amount of these legacy guarantees was approximately € 11.1 million, the gross revenues received from non-Syrian parties for these guarantees were approximately € 27,000 and the net profit we derived from these activities was less than this amount. The amount of legacy guarantees is higher than the amount reported in the last quarter (which was € 9.0 million) because a recent analysis identified additional legacy guarantees, dating from or before 2007, with regard to this Syrian bank booked in one of the Bank’s (non-German) European locations. We intend to exit these guarantee arrangements as soon as possible.

~~Payments~~For ~~Received.~~the Wethree ~~received~~months ~~less~~ended ~~than~~March 31, 302015 ~~payments~~and ~~adding~~2014, upthe toeffective ~~approximately~~income ~~€ 5.2~~tax ~~million~~rate inwas ~~favor~~0% ofand ~~non-Iranian~~(37.4%), ~~clients~~respectively. As ina ~~Germany~~result of the Sale, ~~Belgium~~the ~~and~~Company is organized as a limited liability company with one member that holds all of the ~~Netherlands~~Class B Membership Interests, which ~~payments~~have ~~stemmed~~all ~~ultimately~~the ~~from~~economic ~~relevant~~interests ~~Iranian~~in ~~entities.~~the ~~Revenues~~Company, ~~for~~Spade ~~these~~Mezz, ~~incoming~~an ~~payments~~affiliate ~~were~~of ~~less~~Blackstone, ~~than~~as described ~~€ 7~~in Note 1,~~000~~ “Sale or Transfer of Members’ Equity Interests and Corporate Structure.” ~~These~~As ~~figures~~a ~~include~~limited ~~relevant~~liability ~~payments~~company, inthe ~~favor~~Company ofis ~~clients~~considered ofa ~~our subsidiary~~flow-through ~~Postbank~~entity for U.S. Weincome ~~expect~~tax ~~that~~purposes weresulting ~~will~~in ~~also~~its ~~have~~owner tobeing obligated ~~accept~~for any U.S. federal income taxes resulting from its operations. Accordingly, such ~~transactions~~taxes inare the ~~future~~responsibility of its Member and no provision has been made for U.S. Federal Income Taxes.

~~Operations~~Due ofto Iranian Bank Branches and Subsidiaries in Germany. Several Iranian banks, including Bank Melli Iran, Bank Saderat and Europäisch-Iranische Handelsbank, have branches or offices in Germany, even though their funds and other economic resources are frozen under European law. As part of the ~~payment~~September ~~clearing~~2014 ~~system~~opening in Germany, when these branches or offices need to make payments in Germany to cover their day-to-day operations such as rent, taxes, insurance premia and salaries for their remaining staff, or for any other kind of ~~banking-related~~a ~~operations~~Canadian ~~necessary~~satellite ~~to wind down their legacy trade business~~office, the ~~German~~Company ~~Bundesbank~~is ~~accepts~~now ~~fund~~subject ~~transfers from these Iranian banks and disburses them~~ to ~~the~~income ~~applicable~~tax ~~(mainly~~filing ~~German)~~requirements ~~payees,~~in ~~some of whom hold accounts with us~~Canada. ~~In the third quarter of 2014~~As such, ~~we received approximately €1 million in such disbursements in approximately 200 transactions via~~ the ~~German~~Company’s ~~Bundesbank~~tax injurisdictions ~~respect~~are ~~of payments from~~ the ~~above-mentioned~~United ~~Iranian~~States ~~banks,~~ and ~~the gross revenues derived from these payments were less than € 1,000~~Canada. ~~Relevant transactions of our subsidiary Postbank are included in these figures. We expect that we will also have to accept such transactions in the future.~~

~~Maintaining~~During ~~of Accounts for Iranian Consulates and Embassies. In~~ the ~~third~~ quarter ofended ~~2014~~June 30, ~~Iranian~~2013, ~~embassies~~the ~~and consulates in Germany~~IRS ~~and~~notified the ~~Netherlands~~Company ~~were~~that ~~holding~~its ~~accounts~~2011 ~~with~~federal usincome astax ~~well~~return aswas ~~with~~selected ~~Postbank~~for examination. ~~This~~As ~~includes the provision by a subsidiary~~ of ~~Postbank~~March 31, to2015, the ~~Iranian~~IRS ~~consulate~~has ofnot ~~girocard~~commenced ~~(debitcard/ATM)~~an ~~terminals~~audit ason ~~well as~~ the ~~processing~~aforementioned oftax ~~transactions~~year ~~of cardholders~~period ~~using~~nor ~~the~~have ~~terminals;~~we ~~the~~received ~~terminals~~any ~~are~~additional ~~used~~correspondence regarding ~~to facilitate~~ the ~~payment of fees for the issuance of visas and other administrative measures by the consulate~~matter. The ~~additional~~Company ~~purpose~~believes ofthat ~~these~~it ~~accounts~~has ~~was~~no ~~the~~uncertain ~~funding~~tax ofpositions; ~~day-to-day operational costs of the embassies and consulates~~however, ~~such~~there asis ~~salaries,~~no ~~rent,~~assurance ~~and~~that ~~electricity. One of~~ the ~~account~~taxing ~~relationships~~authorities ~~was~~will ~~between~~not ~~Deutsche~~propose ~~Bank~~adjustments ~~Netherlands~~that ~~N.V.~~are ~~and~~different ~~the~~than ~~Agent Bureau of~~ the ~~Embassy~~Company’s ofexpected ~~the~~outcome ~~Islamic~~and ~~Republic~~impact ~~of Iran in The Hague~~the ~~(which~~provision ~~is responsible~~ for ~~all~~income ~~Iran-U~~taxes.S. ~~Claims~~As ~~Tribunal~~applicable, ~~activities).~~we ~~The~~recognize ~~total~~accrued ~~volume~~penalties ofand ~~outgoing~~interest ~~payments~~related ~~from~~to ~~these~~unrecognized ~~accounts~~tax ~~was~~benefits ~~approximately € 12 million~~ in the ~~third~~provision ~~quarter~~for ofincome ~~2014,~~taxes. ~~which~~For ~~payments were made with~~ the ~~involvement~~three ~~of the~~months ~~competent~~ended ~~authorities in the relevant European countries under applicable law. We derived gross revenues of approximately €~~March 1431,~~000~~ ~~and~~2015, ~~net~~there ~~profits which~~ were ~~less~~no ~~than~~accrued ~~this~~penalties ~~amount from these activities. The relevant European~~and/or ~~governments have requested that we continue to provide these services in the future to enable the Government of Iran to conduct its diplomatic relations~~interest.

~~Relationships with Corporate Clients~~15. We maintain a business relationship with one corporate client registered in Germany who was sanctioned by the US in the first quarter of 2014 pursuant to Executive Order 13382. We did not terminate this relationship but imposed several restrictive measures to mitigate the relevant risks. In the third quarter of 2014 the revenues derived from this relationship were less than € 4Commitments,~~000~~ Contingencies and ~~the~~Litigation ~~net profits were less than this amount. On October 16, 2014, the client’s name was removed from the U.S. Office of Foreign Asset Control’s Specially Designated Nationals List.~~

~~Activities~~Prior to the issuance of ~~Entities~~any inof ~~Which~~its Wequarterly ~~Have~~or ~~Interests~~annual financial results and for the purposes of accrual and/or disclosure, we analyze each of our material legal proceedings and other contingencies to determine whether an estimate of a probable or reasonably possible loss or range of loss can be made based upon the facts and legal assessment of such matters. ~~Section~~During such assessment, we consider all factors that may impact this assessment, including, without limitation, (a) 13the stage of the proceeding; (rb) the ~~requires~~damages, uspenalties toand ~~provide~~costs sought; (c) the ~~specified~~factual ~~disclosure~~matters ~~with~~that ~~respect~~ remain to ~~ourselves~~be resolved; and (d) the ~~our~~legal ~~“affiliates~~principles that are the subject of the proceeding. It is often not possible to estimate the loss or a range of possible loss,” asparticularly ~~defined~~where (i) the damages sought are unsubstantiated or indeterminate; (ii) the discovery or other material legal proceedings are incomplete; (iii) the proceedings are in ~~Exchange~~the ~~Act~~early ~~Rule~~stages and there is insufficient information available to assess the viability of the stated grounds; (iv) ~~12b-2~~the matters present legal uncertainties; or (v) there are significant facts in dispute. ~~Although~~In wesuch ~~have~~cases, ~~minority~~there ~~equity~~are considerable uncertainties regarding the resolution of the proceeding, which may preclude the determination of the reasonably possible loss or range or loss.

Class Action Suits

a. Wage and Hour

During late 2012, the Company was put on notice and/or served with two separate purported class action lawsuits related to alleged unpaid compensation for time incurred by CoStars while on Property for donning and doffing of the CoStars’ required uniform, alleged improper rounding of time for hours worked and various other claims related to alleged unpaid compensation. One of the purported wage and hour class action lawsuits is pending in the Eighth Judicial District Court for Clark County, Nevada (“Nevada State Court”), and one is pending in the U.S. District Court for the District of Nevada.

~~interests~~In inearly ~~certain~~April ~~entities~~2015, ~~that~~the ~~could~~Company ~~arguably~~commenced ~~result~~arms-length insettlement ~~these~~negotiations ~~entities~~leading ~~being~~to ~~deemed~~an agreement ~~“affiliates,”~~in weprinciple doto ~~not~~resolve ~~have~~both the ~~authority~~Nevada orState Court and the ~~legal~~U.S. ~~ability~~District toCourt ~~acquire~~lawsuits. inThe ~~every~~proposed ~~instance~~resolution ~~the information~~includes ~~from~~a ~~these~~total ~~entities~~payment ~~that~~of ~~would~~approximately be$7.0 ~~necessary~~million toinclusive ~~determine~~of ~~whether~~the ~~they~~opposing ~~are~~counsel ~~engaged~~fees inand ~~any~~all ~~disclosable~~costs ~~activities~~of ~~under~~administering the ~~Section 13(r)~~settlement. InAfter ~~some~~such ~~cases~~expenses are paid, ~~legally~~the ~~independent~~remaining ~~entities~~amount ~~are~~will ~~not~~comprise ~~permitted~~a tosettlement ~~disclose~~fund. Of this amount the ~~details~~Company ofwill ~~their activities~~pay toout usonly ~~because~~that ofportion ~~German~~actually ~~privacy~~claimed ~~and~~by ~~data~~putative ~~protection~~class ~~laws~~members. orThe proposed settlement is subject to approval by the ~~applicable~~courts. ~~banking~~The ~~laws~~Company ~~and~~recorded ~~regulations~~the $7.0 million Inproposed ~~such~~settlement ~~cases,~~agreement ~~voluntary~~in ~~disclosure~~accrued ofand ~~such~~other ~~details~~liabilities ~~could~~in ~~violate~~the ~~such~~condensed ~~legal~~consolidated ~~and/or~~balance ~~regulatory~~sheet ~~requirements~~as of March 31, 2015 and ~~subject~~in corporate expense in the ~~relevant~~condensed consolidated ~~entities~~statement toof ~~criminal~~operations ~~prosecution~~for orthe ~~regulatory~~three ~~investigations~~months ended March 31, 2015.”

b. Alleged unlawful taping/recording

During the quarterly period that ended September 30, 2012, a purported class action lawsuit against the Company was filed in the Superior Court of the State of California, claiming violation of the California Penal Code regarding the alleged unlawful taping or recording of telephone calls to and from the Company. On August 31, 2012, the Company removed the case to the United States District Court for the Southern District of California. Subsequently, the Company filed a motion to dismiss, or in the alternative, to strike the class allegations. On July 15, 2013, the U.S. District Court issued an order denying these motions.

The Company continues to deny all liability to the putative class members but, at a mediation held on February 20, 2015, the Company agreed to settle all of the claims against it in this matter for a total payment of $14.5 million, inclusive of all attorneys’ fees to the putative class counsel and all costs of administering the settlement. The Company, the plaintiff and the putative class counsel have reached a settlement agreement and presented their settlement agreement for preliminary approval by the U.S. District Court on May 8, 2015. The matter is presently under consideration by the Court. If the settlement agreement is preliminarily approved, the Court will schedule a final fairness hearing, at which it will determine whether the settlement is fair, reasonable and adequate and whether judgment should be entered.

Commitments and Other Legal Proceedings

a. Condominium Hotel Litigation

As disclosed in prior periods, the Company was a named defendant in a number of lawsuits and arbitrations concerning the purchase and sale of condominium hotel units located within the East and West Towers of the Property. The thrust of the claims were virtually the same in every matter. The plaintiffs alleged, among other things, that the project had materially changed and that delays in the completion of the Property constituted a material breach by the Company, thus permitting the plaintiff/purchaser to rescind their contract and receive a full refund of their earnest money deposit, plus interest thereon. The Company was represented in each of these matters by outside legal counsel. At March 31, 2015, there were two condominium hotel units remaining under litigation. The Company and the putative class counsel are presently negotiating a formal settlement agreement with no definite progress to date. Management has determined that based on the proceedings to date, it is currently unable to determine the probability of the outcome of this action. However, any settlement amount is not expected to have a material effect on the Company’s condensed consolidated financial statements.

b. Vegas Nocturne

In July 2014, the Company announced the closure of the Vegas Nocturne live entertainment performance show at Rose. Rabbit. Lie., and, based upon contractual terms, the cessation of its relationship with Spiegelworld CSC, LLC (“Spiegelworld”). On August 6, 2014, Spiegelworld filed a complaint in the District Court of Clark County, Nevada, alleging among other things, causes of action for breach of contract and declaratory relief.

On August 28, 2014, the Company filed an answer and counterclaim against Spiegelworld in the District Court of Clark County, Nevada, alleging, among other things, causes of action for breach of contract, fraud, breach of fiduciary duties and injunctive relief. On November 17, 2014, the District Court issued an order dismissing the Company’s fraud claim without prejudice. On March 18, 2015, the Company and

~~Item 2~~ Spiegelworld —tentatively ~~Management’s~~agreed ~~Discussion~~upon terms to settle this matter, but such settlement is subject to final documentation and ~~Analysis~~approval ofby ~~Financial~~the parties and the court. On May 7, 2015, the ~~Condition~~Company and ~~Results~~Spiegelworld entered into a settlement agreement. Neither party admits any liability to the other and both have agreed to dismissal of ~~Operations~~ the lawsuit. The terms of the settlement did not have a material impact to the condensed consolidated financial statements for the period ended March 31, 2015.

~~Cautionary~~c. ~~Note~~Other ~~Regarding~~Matters ~~Forward-Looking Statements~~

~~Any~~The ~~statements~~Company ~~made~~is inalso ~~this~~subject ~~report that are not statements of historical fact or that refer~~ to ~~estimated~~various orother ~~anticipated~~ordinary ~~future~~and ~~events~~routine ~~are forward-looking~~claims statements. These statements may include, or be preceded or followed by, the words “may,” “will,” “should,” “might,” “could,” “potential,” “possible,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “hope” or similar expressions. We have based our forward-looking statements on management’s beliefs and ~~assumptions~~ ~~based~~litigation onarising ~~information~~in ~~available to our management at~~ the ~~time~~normal ~~these~~course ~~statements are made. Although we believe our expectations are based upon reasonable assumptions within the bounds~~ of ~~our knowledge of our~~ business ~~and operations, our actual results may materially differ from expected results~~. ~~Factors~~In that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from our expectations include, but are not limited to: continuing recessionary economic and market conditions, particularly in levels of spending in the ~~Las Vegas hotel, resort and casino industry; changes in the competitive environment in our industry; the seasonal nature of the hotel,~~ ~~resort~~opinion ~~and casino industry; the capital intensive nature~~ of ~~the Las Vegas hotel~~management, ~~resort~~all and casino industry; costs associated with compliance with extensive regulatory requirements; diminishing value of our name, image and brand; maintaining the integrity of customer information; the loss of key members of our senior management; dependence on various third-party operators to provide key amenities; the outcome of pending orother ~~future~~ legal ~~proceedings;~~matters ~~cyber~~are ~~security~~either ~~risk;~~adequately ~~our~~covered ~~ability~~by ~~to collect~~insurance gaming receivables from our credit players; and the other risks discussed in the sections entitled “Item 1A — Risk Factors” in our Annual Report on Form 10-K which was filed with the SEC on March 21or, ~~2014~~if ~~and~~not ~~in “Part II — Other Information — Item 1A — Risk Factors” of this Quarterly Report on Form 10-Q. In addition~~insured, ~~new~~will ~~risks and uncertainties emerge from time to time, and it is~~ not ~~possible~~have ~~for~~a usmaterial toadverse ~~predict or assess the~~ impact ~~of every factor that may cause our actual results to differ from those contained in any forward-looking statements. Undue reliance should not be placed~~ on ~~such statements, which speak only as of~~ the ~~date~~consolidated offinancial ~~this document or the date of any document that may be incorporated by reference into this document. Consequently~~position, ~~readers~~cash ~~of this Quarterly Report on Form 10-Q should consider these forward-looking statements only as our current plans~~flows, ~~estimates~~or ~~and beliefs. We do not undertake and specifically decline any obligation to publicly release~~ the results of ~~any~~operations ~~revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date~~ of ~~such statements or to reflect~~ the ~~occurrence of~~ anticipated or unanticipated events. Among the forward-looking information set forth in this report is a discussion of the Purchase Agreement that we recently entered into. Risks, uncertainties and assumptions related to the Purchase Agreement include, but are not limited to: (1) the risk that the Company Sale may not close, (2) risks relating to the announcement of the transaction and (3) the risk of the effect of other strategic alternatives that may be pursued by Deutsche Bank if the Company Sale is not completed. We undertake no obligation to update or revise any forward-looking statements in this Quarterly Report on Form 10-Q or in our Annual Report on Form 10-K to reflect any new events or any change in conditions or circumstances.

~~Sale~~16. orMembership ~~Transfer of Members’ Equity~~ Interests

On ~~May~~December 1518, 2014, weSpade ~~reported~~Voteco inreceived ~~the~~approval ~~Company’s~~from ~~Current Report on Form 8-K filed with~~ the ~~Securities~~Gaming ~~and Exchange~~ Commission ~~that Nevada~~to ~~Mezz,~~acquire ~~Deutsche~~control ~~Bank~~of ~~AG (“Deutsche Bank”) and~~ the Company. ~~had~~In connection ~~entered~~with ~~into~~such aapproval ~~Purchase~~and ~~Agreement (the “Purchase Agreement”)~~ with ~~BRE Spade Mezz 1 LLC, an affiliate of Blackstone Real Estate Partners VII L.P., for~~ the ~~sale~~completion of ~~all~~ of the ~~Company’s~~ Class B ~~non-voting~~Sale, ~~membership~~on ~~interests~~December 19, ~~held~~2014, by Nevada ~~Mezz. The Purchase Agreement also provides for the transfer to BRE Spade~~ Voteco ~~LLC,~~transferred a100% ~~newly-formed affiliate~~ of ~~Blackstone Real Estate Partners VII L.P., of all of~~ the ~~Company’s~~ Class A ~~voting~~Membership ~~membership~~Interests ~~interests~~in ~~held by~~ Nevada ~~Voteco,~~Property ~~together~~to ~~with the sale of Class B interests, the “Company Sale.” BRE~~ Spade ~~Mezz 1 LLC and BRE Spade~~ Voteco ~~LLC~~for ~~are~~nominal ~~collectively referred to as the “Purchaser” in this Quarterly Report on Form 10-Q~~consideration.

~~Subject~~As toa ~~potential~~result ~~net~~of ~~working capital~~the ~~adjustments~~Sale, ~~the~~Spade ~~all~~Voteco ~~cash~~now ~~consideration~~has ~~for~~100% voting control over Nevada Property through its ownership of all of the ~~membership~~Class A Membership ~~interests~~Interests ~~totals~~and ~~approximately~~Spade ~~$1.73~~Mezz ~~billion.~~now ~~The~~holds ~~Purchase~~100% ~~Agreement~~economic ~~was~~control ~~unanimously~~over ~~approved~~Nevada Property through its ownership of all of the Class B Membership Interests. Except as provided by law, the ~~Company’s~~Class ~~Board~~B ofMembership ~~Directors~~Interests have no voting rights.

~~The~~17. ~~consummation~~Subsequent ofEvents ~~the Company Sale is subject to the receipt of certain regulatory approvals, along with other customary closing conditions.~~

In early April 2015, the Company commenced arms-length settlement negotiations leading to an agreement in principle to resolve both the Nevada State Court and the U.S. District Court lawsuits related to the wage and hour cases. The proposed resolution includes a total payment of approximately $7.0 million as discussed in Note 15. The Company recorded the $7.0 million proposed settlement agreement in accrued and other liabilities in the condensed consolidated balance sheet as of March 31, 2015 and in corporate expense in the condensed consolidated statement of operations for the three months ended March 31, 2015.

~~Operations~~Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Sale or Transfer of Members’ Equity Interests and Corporate Structure

On December 18, 2014, Spade Voteco, received approval from the Gaming Commission to acquire control of the Company. In connection with such approval, and with the completion of the Class B Sale (as defined below), on December 19, 2014, Nevada Voteco transferred 100% of the Class A Membership Interests in Nevada Property to Spade Voteco for nominal consideration.

On December 19, 2014, Nevada Mezz, an affiliate of Deutsche Bank, completed its previously announced sale (the “Class B Sale”) of 100% of the Class B Membership Interests to Spade Mezz, an affiliate of Blackstone for cash consideration of $1.73 billion plus Nevada Property’s working capital of $49.4 million as as determined pursuant to the provisions of the purchase agreement.

As a result of the Sale, Spade Voteco now has 100% voting control over Nevada Property through its ownership of all of the Class A Membership Interests and Spade Mezz now holds 100% economic control over Nevada Property through its ownership of all of the Class B Membership Interests. Except as provided by law, the Class B Membership Interests have no voting rights.

Spade Voteco and Spade Mezz are collectively referred to as the “Members” within this Quarterly Report on Form 10-Q.

The Cosmopolitan

Property Location

The Cosmopolitan comprises approximately 8.75 acres of land and is located on the Las Vegas Strip directly between MGM Resorts International’s Bellagio and City Center properties. The Cosmopolitan is connected to City Center to the south via an elevated pedestrian bridge and to the east side of the Las Vegas Strip via a second pedestrian bridge, and has ground floor public access from the Bellagio to the north. ~~The Cosmopolitan opened its doors to the public at 8:00 p.m. Pacific Standard Time on December 15, 2010.~~

The Casino

The ~~approximately 110~~100,000 -square-foot ~~feet~~ casino features the latest in gaming technology offered in a modern, energetic atmosphere. At ~~September~~ March 3031, ~~2014~~2015, the casino floor included 1,~~359~~371 slot machines and ~~123~~129 table games, with immediate guest access from each of the East and West Towers and is accessible ~~just~~directly ~~steps~~ from the Las Vegas Strip. The casino level also contains several destination bar/lounge areas, aincluding the three-story ~~feature~~“Chandelier ~~attraction~~Bar” ~~using~~a anfeature ~~innovative~~attraction ~~light and music display,~~ as well as an intimate entertainment lounge used to bring live performances to the gaming floor. The casino also has two separate ~~areas~~ ~~for~~ high limit ~~table~~areas ~~games and slots, centrally located but distinct from the main gaming floor,~~ catering specifically to our higher limit clientele.

The Hotel

As of the Phase I opening on December 15, 2010, the 50-story East and 52-story West Towers comprised 1,998 hotel and condominium hotel style rooms ranging in size from 730 -square -feet to over 5,400 -square -feet in addition to ten three-story bungalow-style suites adjacent to the west pool deck. The rooms feature contemporary bespoke room décor featuring spacious living areas, luxurious bathrooms, state-of-the-art technology control panels, flat-screen televisions, entertainment systems, wireless internet and a custom in-room bar. The condominium hotel style rooms offer expansive terraces with dazzling views of the Strip. Subsequent to the completion of Phase I, completion of Phase II resulted in an additional 961 hotel and condominium hotel -style units located in the West Tower, bringing the total rooms available to ~~approximately~~ 2,~~960~~959.

~~The~~In ~~top~~late ~~four~~2014, ~~floors of~~ the ~~East~~Company ~~Tower~~began ~~and~~ a ~~restaurant~~redesign ~~space~~project ~~will~~with berespect ~~completed~~to atcertain afloors ~~later~~of ~~date~~the asWest ~~management~~Tower ~~deems~~which ~~appropriate~~is ~~based~~expected onto ~~various~~add ~~factors,~~47 ~~including~~additional rooms. ~~market~~The ~~conditions~~project is expected to be completed in late 2015.

Food and Beverage and the Restaurant Collection

The Cosmopolitan offers a number of casual dining options for our guests, including a premier buffet, a poolside grill, a casual restaurant on the casino level, a pizzeria, and in-room dining options available twenty-four hours a day, seven days a week. The Cosmopolitan also incorporates a number of bars, lounges, and destination venues which collectively feature a comprehensive cocktail and wine program, offering our guests a wide range of the finest in beverage options. In addition, The Cosmopolitan offers a collection of distinctive restaurants, managed and operated by experienced world class third-party restaurateurs. On December 30, 2013, we opened Rose. Rabbit. Lie., an innovative combination of restaurant, bar, club and live entertainment venue. Rose. Rabbit. Lie. encompasses 23,000 square feet.

Retail

Our retail offerings showcase nine eclectic retail boutiques on the second level of the podium in approximately 60,000 square feet of contiguous space. A sizeable amount of foot traffic naturally flows through our second floor retail space, as this is the primary pathway for Las Vegas visitors to travel north and south between City Center and Bellagio. Our retail operators were selected to fit with our overall brand image and profile, and offer our guests a range of accessible, distinctive retail options.

~~Nightclub~~The top four floors of the East Tower and ~~Recreation~~an ~~Deck~~undeveloped restaurant space will be completed at a later date as the Company deems appropriate based on various factors, including market conditions.

~~The~~Food Cosmopolitan features an integrated entertainment venue of approximately 53,000 square feet including a cutting edge, world class nightclub operation called “Marquee Nightclub & Dayclub at The Cosmopolitan” (“Marquee”). The Marquee is approximately 31,000 square feet, and isBeverage ~~located~~Including at the ~~top of the podium between the two hotel towers. The Marquee~~ ~~encompasses~~Restaurant ~~all~~Collection of the features of a major Las Vegas integrated resort nightclub, including two distinct ultra-lounge experiences and a Dayclub. The Dayclub operates from April through October, and was first opened in April 2011. It features 22,000 square feet of entertainment space including two pools, several bars, a gaming area comprised of nine table games, and grand cabanas with individual infinity pools.

The Cosmopolitan offers a number of casual dining options for our guests, including a premier buffet, a poolside grill, a casual restaurant on the casino level, a pizzeria and in-room dining options available twenty-four hours a day, seven days a week. The Cosmopolitan also incorporates a number of bars, lounges and destination venues which collectively feature a comprehensive cocktail and wine program, offering our guests a wide range of the finest in beverage options. In addition, The Cosmopolitan offers a collection of eight distinctive restaurants, managed and operated by experienced world class third-party restaurateurs.

Retail

Our retail offerings showcase nine eclectic retail boutiques on the second level of the podium in 36,000-square-feet of contiguous space. A sizeable amount of foot traffic naturally flows through our second floor retail space, as this is the primary pathway for Las Vegas visitors to travel north and south between City Center and Bellagio. Our retail operators were selected to fit with our overall brand image and profile, and offer our guests a range of accessible, distinctive retail options.

Nightclub, Recreation Deck and Event Center

The Cosmopolitan features an integrated entertainment venue of 56,000-square-feet including a cutting edge, world class nightclub operation called “Marquee Nightclub & Dayclub at The Cosmopolitan” (“Marquee”). The 31,000-square-feet Marquee Nightclub is located at the top of the podium between the two hotel towers. The Marquee encompasses all of the features of a major Las Vegas integrated resort nightclub, including two distinct ultra-lounge experiences and a Dayclub. The Dayclub operates from April through October, and was first opened in April 2011. It features 25,000-square-feet of entertainment space including two pools, several bars, a gaming area comprised of nine table games and grand cabanas with individual infinity pools. On December 29, 2013, we opened The Chelsea, our 65,000-square-foot, multi-use event center and entertainment venue that can accommodate up to 3,200 guests. This performance space and group venue allows our group customers to book entertainment offerings, larger conventions, presentations and dinners as well as product launches and other branding events.

Spa, Salon and Fitness Centers

Our integrated resort offers a 50,000 -square-foot ~~feet~~ spa and hammam facility, located at the base of the West Tower ~~which is easily accessible from any room in The Cosmopolitan~~. Our spa and hammam is a key element in the overall offerings to our guests, and offers a level of quality, service and experience that we believe competes with the best spa offerings in the Las Vegas market.

Separately, the Property also offers two fitness centers, one in the East Tower and the other in the West Tower (including tennis courts), offering our guests twenty-four hours a day, seven days a week access to high quality fitness and exercise equipment.

Convention and Banquet Facility

Our ~~approximately 185~~152,000 -square-foot ~~feet~~ convention and banquet facility is located on the second, third and fourth levels of the podium. The space is designed for maximum flexibility, and can accommodate everything from small group meetings to large conferences. Directly beneath the hotel towers, the location of the ballroom space is unique to the Las Vegas market, allowing ~~convention~~ convention attendees immediate, direct access from the hotel towers to the meeting space. The space features full high speed Wi-Fi coverage, and support capabilities to enable all modern meeting technology requirements.

Event Center

On December 29, 2013, we opened The Chelsea, our 65,000 square feet, approximately 3,000-seat multi-use event center. This performance space and group venue is intended to encourage companies to book entertainment offerings, larger conventions, as well as product launches and other branding events.

Basis of Presentation

References in this Quarterly Report on Form 10-Q to “Successor” and “Successor Period” refer to the Company on or after December 19, 2014 and reflect assets and liabilities at fair value by allocating the Company’s enterprise value to its assets and liabilities pursuant to accounting guidance related to business combinations. References to “Predecessor” and “Predecessor Period” refer to the Company on or before December 18, 2014 and reflect the historical accounting basis in the Predecessor’s assets and liabilities.

We have presented the results of the Predecessor for the quarter ended March 31, 2014 for comparison purposes. The discussion of our results of operations contains a comparison of our results for the quarter ended March 31, 2015 and the results for the Predecessor for the quarter ended March 31, 2014. The application of accounting guidance related to business combinations did not materially affect the Company’s continuing operations; however, the quarter ended March 31, 2014 may reflect results that are not fully comparable on a period-by-period basis, particularly with respect to depreciation, amortization and interest expense.

Results of Operations

The following tables present selected historical financial data from the condensed consolidated statements of operations for the periods indicated. The historical results are not necessarily indicative of the results of operations to be expected in the future.

The Company’s operations are conducted entirely at the Property, which includes hotel, casino, food and beverage, retail and other related operations. ~~As discussed above, the Company opened The Chelsea and Rose. Rabbit. Lie. during late-December 2013.~~ Given the integrated nature of the Property’s operations, the Company is considered to have one operating segment.

	Three Months EndedSeptember 30,
	Successor					Predecessor
(Unaudited — In thousands)	~~2014~~Three Months EndedMarch 31, 2015			~~2013~~		Three Months EndedMarch 31, 2014		~~$ Change~~			~~% Change~~
Net revenues	$	~~188~~189,~~963~~837		$	~~170,094~~	$	182,866	$	~~18,869~~			~~11.1~~	%
Operating expenses		203,473			190,044				13,429			7.1	%
Operating expenses, excluding depreciation and amortization		160,331					152,064
Operating loss		(14,510	)		(19,950	)			(5,440	)		(27.3	%)
Depreciation and amortization		27,460					41,690
Other income (expense)		(9,179	)		(9,892	)			713			7.2	%
Operating income/(loss)		2,046					(10,888	)
Loss before income taxes		(23,689	)		(29,842	)			(6,153	)		(20.6	%)
Other expense		(7,435	)				(9,382	)
Income tax benefit		8,340			10,437				(2,097	)		(20.1	%)
Loss before income taxes		(5,389	)				(20,270	)
Net loss		(15,349	)		(19,405	)			(4,056	)		(20.9	%)
Income tax benefit		—					7,582
	Nine Months EndedSeptember 30,
Net loss		(5,389	)				(12,688	)
(Unaudited — In thousands)	2014			2013				$ Change			% Change
Net revenues	$	571,939		$	500,803			$	71,136			14.2	%
Operating expenses		608,905			577,803				31,102			5.4	%
Operating loss		(36,966	)		(77,000	)			(40,034	)		(52.0	%)
Other income (expense)		(27,968	)		(29,952	)			1,984			6.6	%
Loss before income taxes		(64,934	)		(106,952	)			(42,018	)		(39.3	%)
Income tax benefit		23,305			37,608				(14,303	)		38.0	%
Net loss		(41,629	)		(69,344	)			(27,715	)		(40.0	%)

Operating Measures

Certain gaming and hospitality industry specific statistics are included in the discussion of our operating performance. These statistics are defined below:

•

The table games hold percentage is the percentage of drop (amount of cash and markers issued; net markers paid at the gaming table with cash or chips) that is won by the Property and recorded as revenue.

•

Average Daily Rate (“ADR”) is calculated by dividing total hotel revenue by total rooms occupied.

•

Revenue per Available Room (“REVPAR”) is calculated by dividing total hotel revenue by total rooms available.

Our financial results are dependent upon the number of patrons that we attract to our Property and the amounts those guests spend per visit. Additionally, our operating results may be affected by, among other things, overall economic conditions impacting the disposable income of our guests, weather conditions affecting our Property, achieving and maintaining cost efficiencies, competitive factors, gaming tax increases and other regulatory changes, the commencement of new gaming operations, charges associated with debt refinancing, construction at our existing facility and general public sentiment regarding travel. We may experience significant fluctuations in our quarterly operating results due to seasonality, variations in gaming hold percentages and other factors. Consequently, our operating results for any quarter or fiscal year are not necessarily comparable and may not be indicative of future periods’ results.

Three Months Ended ~~September~~March 3031, ~~2014~~2015 Compared to the Three Months Ended ~~September~~March 3031, ~~2013~~ 2014

Revenues

As compared to the three months ended ~~September~~March 3031, ~~2013~~2014, our gross and net revenues for the three months ended ~~September~~March 3031, ~~2014~~2015 increased by 154.08% and 113.18%, respectively, representing incremental gross and net revenue dollar increases of $3010.2 5 million and $187.9 0 million, respectively.

Our revenues for the applicable periods were as follows:

Three Months EndedSeptember 30,

Successor

Predecessor

(Unaudited — In thousands)

~~2014~~Three Months EndedMarch 31, 2015

~~2013~~

Three Months EndedMarch 31, 2014

~~$ Change~~

~~% Change~~

Revenues:

Casino

5558,~~567~~447

~~44,374~~

49,119

~~11,193~~

~~25.2~~

Hotel

80,~~346~~610

~~66,902~~

75,767

~~13,444~~

~~20.1~~

Food and beverage

8381,~~480~~879

~~81,312~~

85,399

~~2,168~~

~~2.7~~

Entertainment, retail and other

128,~~200~~175

~~8,816~~

8,286

~~3,384~~

~~38.4~~

Gross revenues

~~231~~229,~~593~~111

~~201,404~~

218,571

~~30,189~~

~~15.0~~

Less — promotional allowances

(4239,~~630~~274

)

~~(31,310~~

)

(35,705

)

~~(11,320~~

)

~~36.2~~

Net revenues

~~188~~189,~~963~~837

~~170,094~~

182,866

~~18,869~~

~~11.1~~

~~Our~~For ~~casino~~the ~~revenues~~comparable ~~consist~~2015 ofand ~~table~~2014 ~~games~~periods, ~~and~~our ~~slots.~~casino ~~For~~revenues ~~the~~consisted ~~comparable~~of ~~2014~~table games and ~~2013 reporting periods~~slots, with our casino revenues ~~increased~~increasing by 2519.20% asover ~~compared to the three months ended September 30, 2013~~2014. The table games hold percentage for the three months ended ~~September~~March 3031, ~~2014~~2015 was 1615.92%, ~~(our~~up ~~expected~~from ~~range is 10~~13.06% toin ~~14.0%)~~2014, ancomplementing ~~increase~~the ~~from 16.1%~~growth ~~for~~in ~~the~~our ~~three~~slot ~~months~~revenues ~~ended~~of ~~September 30, 2013~~28%. Our focus continues to be on supplementing the level of table ~~game~~games play at the Property, from both domestic and international customers. We also continue to focus our efforts on increasing the volume of slot play through leveraging our unique Identity Membership ~~Program~~and ~~(“Identity”)~~Rewards Program, building our database of slot customers, expanding our alliance program and continuing to introduce a variety of slot promotions, ~~including~~such as the Million Dollar Slot Series ~~tournaments~~tournament which began ~~during~~in July 2014.

For the three months ended ~~September~~March 3031, ~~2014~~2015, hotel revenues grew 206.14% compared to the ~~third~~first quarter of ~~2013. ADR and occupancy for the three months ended September 30,~~ 2014 ~~were $306 and 96~~.~~3%,~~ ~~respectively,~~The ~~generating~~increase ~~REVPAR~~was ofdriven ~~$294.~~by ~~ADR and occupancy for the three months ended~~a ~~September 30, 2013 were $268 and 91~~10.50%, ~~respectively, generating REVPAR of $245. The~~ increase in ADR ~~and~~from ~~REVPAR~~$302 ~~when compared~~ to ~~the~~$332 ~~same~~and ~~2013~~an ~~period~~occupancy ~~primarily~~decrease ~~reflects~~of ~~the~~2.9 ~~direct~~percentage ~~and~~points. ~~indirect~~The ~~effects~~lower ofoccupancy ~~strong~~levels ~~demand~~ in the ~~group~~period ~~and convention~~ended ~~categories.~~March 31, We2015 ~~also~~reflect ~~experienced~~decreased ~~growth~~room innights from free independent travelers~~. Lastly~~, ~~the~~which ~~January 1,~~was ~~2013~~due ~~resort fee implementation continues~~ to difficulties ~~positively~~filling ~~contribute~~1-2 tomid-week ~~hotel revenues as our group business grows. The 2014 higher~~ occupancy ~~levels~~ ~~primarily~~gaps ~~reflect~~created by increased ~~room bookings from Identity patrons, as well as continuing growth in our~~ group room nights ~~associated with the late-December 2013 opening of The Chelsea~~.

~~Food~~The ~~and~~table ~~beverage~~below ~~revenues~~sets ~~for~~forth ~~the~~our ~~three months ended September 30, 2014 increased $2.2 million or 2.7%, when compared to the same period in 2013. Food and beverage revenues generated from restaurants, banquets and conventions, in-~~room ~~dining~~ and ~~bars include revenues from all Company-operated outlets, as well as the third-party operated food and beverage outlets which are~~ ~~wholly-owned~~occupancy bymeasures ~~the~~related ~~Company. We continue~~ to ~~experience food and beverage revenue growth from the Company-operated and third-party operated dining establishments due to (i) strong growth in~~ our group and convention business which directly contributes to higher revenues generated from banquet and buffet services; (ii) the high volume of customers visiting our restaurants; (iii) the increased number of customers visiting and or staying at our Property; and, (iv) the late-December 2013 opening of Roseoperations. ~~Rabbit. Lie., a 23,000 square feet social club representing an innovative combination of restaurant, bar, club and live entertainment.~~


	Three Months Ended March 31,
	2015			2014			Percent Change (a)
Occupancy		90.63	%		93.56	%		(2.9	)
ADR	$	332		$	302			10.0
RevPAR	$	301		$	283			6.5

(a)	Except occupancy, which is presented as a percentage point change.

~~Entertainment,~~Food ~~retail~~ and ~~other~~beverage revenues ~~are~~for ~~generated from~~ the ~~Property’s~~three ~~spa~~months ~~and~~ended ~~salon~~March 31, ~~retail~~ ~~outlets~~2015, ~~concerts,~~decreased ~~boxing~~$3.5 ~~events~~million or (4.1%), ~~group~~when ~~cancellations~~compared ~~fees,~~to ~~and~~the ~~other~~three ~~miscellaneous~~months ~~activities.~~ended ~~Entertainment~~March 31, ~~retail~~2014. Food and ~~other~~beverage revenues ~~for~~generated ~~the~~from ~~three~~restaurants, ~~months~~banquets ~~ended~~and ~~September 30~~conventions, ~~2014~~in-room dining and ~~2013~~bars ~~were~~include ~~$12.2~~revenues ~~million~~from ~~and~~all ~~$8.8~~Company-operated ~~million~~outlets, as well as the ~~respectively,~~third-party ~~representing~~operated anfood ~~increase~~and ofbeverage ~~$3.4~~outlets ~~million~~which orare 38wholly-owned by the Company.~~4%.~~ The ~~quarter-over-quarter~~factors ~~increase~~that incontributed ~~entertainment,~~to ~~retail~~the ~~and~~decrease ~~other~~in ~~revenues~~food ~~primarily~~and ~~reflects~~beverage ~~higher~~revenue ~~revenues~~growth ~~generated~~were ~~from~~(i) during anthe ~~increased~~quarter, ~~number~~we ofexperienced ~~entertainment~~a ~~events~~$1.5 ~~and~~million ~~higher~~decline in ~~revenue~~revenues ~~from~~at ~~retail,~~Rose. ~~spa~~Rabbit. ~~services~~Lie. ~~and~~attributable ~~various~~to ~~fees.~~the Ascancellation ~~previously~~of ~~announced~~the Spiegelworld management agreement, wediscussed ~~completed~~in Note 15; (ii) higher group mix in the ~~build-out~~quarter ~~and~~(group ~~opened~~guests ~~our~~are ~~planned~~typically ~~65,000~~committed ~~square~~during ~~feet,~~lunch/dinner ~~approximately~~meals ~~3,000-seat~~periods); ~~multi-use~~and (iii) lower ~~event~~occupancy ~~center,~~which ~~The~~impacted ~~Chelsea~~business ~~during~~in ~~late-December~~our ~~2013~~nightclub, bars and restaurants.

~~Revenues~~Entertainment, ~~for~~retail ~~the 2014~~ and ~~2013~~other ~~operating~~revenues ~~quarterly~~are generated ~~periods~~from ~~include~~ the ~~retail~~Property’s ~~value~~spa ofand ~~accommodations~~salon, ~~food~~retail ~~and~~outlets, ~~beverage~~concerts, boxing events, and other ~~services~~ ~~furnished~~miscellaneous ~~to our guests without charge~~activities. InEntertainment, ~~accordance~~retail ~~with~~and ~~industry~~other ~~practice,~~revenues ~~these~~for ~~promotional~~the ~~allowances~~three ormonths ~~complimentaries~~ended ~~(“comps”)~~March 31, ~~are~~2015 ~~deducted~~and ~~from~~the ~~revenues.~~three ~~While~~months ~~quarter-over-quarter~~ended March 31, ~~gross~~2014, ~~revenues~~were ~~increased by 15~~$8.0%2 ~~for the~~million ~~2014~~ and ~~2013~~$8.3 ~~operating~~million, ~~periods~~respectively, ~~promotional~~representing ~~allowances as~~ a ~~percentage~~decrease of ~~gross~~$0.1 ~~revenues,~~million ~~increased~~or ~~from 15~~(1.53% ~~to 18~~).4% ~~between~~The ~~the~~quarter-over-quarter ~~respective~~decrease ~~quarterly~~in ~~periods.~~entertainment, Weretail ~~believe~~and ~~the~~other ~~level~~revenues ofprimarily ~~promotional~~reflects ~~allowances~~lower orrevenues ~~comps~~generated ~~incurred for the~~from ~~respective~~a ~~2014~~decreased ~~and~~number ~~2013~~of ~~periods~~entertainment ~~were~~events ~~necessary~~for ~~to continue to drive customer awareness, build our customer database and create customer loyalty. For~~ the three months period ended ~~September~~March 3031, ~~2014,~~2015. ~~this~~Lower ~~increase~~occupancy iscontributed ~~also due~~ to ~~targeted~~a ~~direct marketing~~decrease ~~efforts~~in ~~which~~business ~~resulted~~activity in ~~higher~~our ~~casino~~Property’s ~~player~~spa ~~room~~and ~~comps.~~salon, Weand ~~expect~~retail ~~this level of promotional allowance or comps expense to vary period-over-period~~outlets.

Revenues for the 2015 and 2014 operating quarterly periods include the retail value of accommodations, food and beverage, and other services furnished to our guests without charge. In accordance with industry practice, these promotional allowances or complimentaries (“comps”) are deducted from revenues. While quarter-over-quarter gross revenues increased by 4.8% for the 2015 operating period compared to the 2014 operating period, promotional allowances as a percentage of gross revenues, increased from 16.4% to 17.1% between the respective periods. We believe the level of promotional allowances or comps incurred for the respective 2015 and 2014 periods were necessary to continue to drive customer awareness, build our customer database and create customer loyalty.

Operating Expenses

~~Our~~For ~~operating~~the three ~~expenses~~months ~~increased~~ended ~~7.1%~~March 31, ~~notably~~2015, ~~below~~our ~~the~~operating ~~15.0%~~expenses, ~~increase~~excluding indepreciation ~~our~~and ~~gross revenues~~amortization, ~~for~~increased 5.4% when compared to the three months ended ~~September~~March 3031, 2014. asThe ~~compared~~5.4% toincrease is modestly higher than the ~~three~~growth ~~months~~in ~~ended~~gross ~~September 30~~revenues for the current period, ~~2013~~up 4.8% for the comparable 2014 period. The increase in ~~overall~~the operating expenses, excluding depreciation and amortization, is partially reflective of (i) a settlement of $7.0 million related to the wage and hour cases, discussed in Note 15; (ii) the growth in gross revenues for the three months ended ~~September~~March 3031, ~~2014~~2015 over the comparable ~~2013~~2014 period; as(iii) a ~~well~~decrease ~~as,~~in food and beverage due to the decrease in occupancy gaps created by increased group room nights; (iiiv) ana ~~increase~~decrease inof ~~corporate~~the ~~operating~~overall ~~expenses~~marketing ~~for~~and ~~certain~~advertising ~~incentive~~spending, ~~and~~as ~~retention plan~~well ~~amounts~~as, ~~related~~(v) the tosettlement of the ~~Company~~OCIP ~~Sale~~agreement of $3.6 million. Our ongoing efforts are focused on ~~restraining~~containing ~~the growth,~~ and in ~~some cases,~~ reducing department operating expenses, resulting in higher operating margins.

	Three Months Ended September 30,
(Unaudited — In thousands)	2014		2013		$ Change			% Change
Operating expenses:
Casino	$	34,145	$	28,582	$	5,563			19.5	%
Hotel		8,602		9,921		(1,319	)		(13.3	%)
Food and beverage		54,599		54,567		32			0.1	%
Entertainment, retail and other		11,424		8,203		3,221			39.3	%
Sales and marketing		12,620		11,445		1,175			10.3	%
General and administrative		27,620		29,568		(1,948	)		(6.6	%)
Corporate		12,787		3,193		9,594			N/A
Pre-opening		—		1,727		(1,727	)		N/A
Loss on disposal of assets		2		79		(77	)		(97.5	%)
Asset impairment		—		—		—			N/A
Depreciation and amortization		41,674		42,759		(1,085	)		(2.5	%)
Total operating expenses	$	203,473	$	190,044	$	13,429			7.1	%

Departmental Operating Expenses

Departmental operating expenses include operations associated with casino, hotel, food and beverage, entertainment, retail and other. During the three months ended September 30, 2014, departmental expenses cumulatively increased by $7.5 million or 7.4% over the respective 2013 period. In general, the increase in departmental operating expenses reflects higher incremental expenses generated from our period-over-period revenue growth, e.g., casino player comps, departmental labor and hotel linen replacement.

The ~~increase~~following intables ~~casino~~present our operating expenses for the ~~2014~~periods quarterly reporting period primarily reflects higher room occupancies and other operating departmental usage by our Identity members, food and beverage and other costs associated with comps offered to our customers, as well as higher commissions for independent representatives generated from the Property’s expanded domestic and international host program. indicated:

In general for prior periods, hotel operating costs have trended as a function of the occupancy level and related servicing of our rooms. However, in comparing the three months ended September 30, 2013 to the three months ended September 30, 2014, hotel operating expenses decreased by $1.3 million. Additionally, for the three months ended September 30, 2014 the occupancy levels increased to 96.3% from the respective 2013 occupancy level of 91.5%. This is primarily reflective of higher volume of room occupancy by our Identity members with these related costs included as a charge to the casino operating expenses which contributed to the decrease in hotel operating expenses.


	Successor		Predecessor
(Unaudited — In thousands)	Three Months Ended March 31, 2015		Three Months Ended March 31, 2014
Operating expenses:
Casino	$	38,292	$	30,950
Hotel		8,223		9,224
Food and beverage		47,978		55,631
Entertainment, retail and other		6,695		7,693
Sales and marketing		15,680		20,649
General and administrative		27,490		25,061
Corporate		15,973		2,740
Gain on disposal of assets		—		116
Depreciation and amortization		27,460		41,690

Total operating expenses	$	187,791	$	193,754

~~Food~~Casino ~~and beverage~~ operating expenses increased for the ~~three~~period ended March 31, 2015, when compared to the three months ended ~~September~~March 3031, 2014, ~~remained~~primarily ~~flat~~as a result of higher comps offered to our customers, as well as higher commissions for independent representatives associated with ~~the~~our ~~respective~~expanded ~~2013~~domestic ~~period~~and international host program. In addition, the ~~reflecting~~increase ~~management’s~~is ~~efforts~~commensurate towith ~~control~~the ~~costs~~increase ~~despite~~in ~~the~~Casino revenue ~~increases~~coupled with an increase in bad debt expense of $1.8 million.

~~The~~Hotel operating ~~$3.2~~costs ~~million~~are ~~increase~~associated inwith ~~2014~~the ~~quarterly period’s~~occupancy ~~operating~~level ~~expenses~~and ~~within~~related servicing of our ~~entertainment,~~rooms. ~~retail~~In ~~and~~comparing ~~other~~the ~~departments~~three ~~primarily~~months ~~reflects~~ended ~~the~~March 31, ~~inclusion~~2015 into ~~2014~~the ofthree ~~our~~months ~~multi-use~~ended ~~event~~March 31, ~~center~~2014, ~~The~~hotel ~~Chelsea,~~operating ~~and~~expenses ~~our~~decreased ~~expanded~~by ~~entertainment~~$1.0 ~~calendar~~million. Our ~~Costs~~occupancy ~~may~~levels ~~fluctuate~~decreased ~~between~~to ~~periods as~~90.6% ain ~~result~~2015 ofas ~~the~~compared ~~number~~to ~~of shows and~~ the ~~underlying~~2014 ~~cost~~occupancy ~~for~~level ~~each~~of ~~show~~93.6%. ~~The~~This ~~third~~is ~~quarter~~primarily reflective of ~~2014~~lower ~~reflects~~volume ~~more~~of ~~shows~~room ~~than~~occupancy ~~the~~due ~~comparable~~to ~~prior year quarter, driving~~ the ~~expense~~decrease ~~increase.~~in ~~Entertainment~~room isnights afrom ~~key~~free ~~component~~independent oftravelers, ~~the~~which ~~overall~~was ~~marketing~~due to ~~and~~difficulties ~~position~~filling ~~strategy~~1-2 ofmid-week ~~the~~occupancy ~~Property,~~gaps ~~and~~created isby anincreased ~~important~~group ~~driver~~room ~~of visitation to the Property~~nights.

~~Sales~~Food and ~~Marketing~~beverage expenses decreased for the three months ended March 31, ~~General~~2015, when compared to the three month ended March 31, 2014, as a result of the decrease in revenue in food and beverage. The higher group mixes in the quarter, lower occupancy and the decline in revenues at ~~Administrative~~Rose. Rabbit. Lie., affected the volume of business in our Company, our third-party operated restaurants and ~~Corporate~~bars. ~~Expenses~~In addition, this caused a reduction in management and incentive fees owed to third-party operated restaurants and the Marquee for performing at lower profitability levels per their respective agreements.

~~For~~Entertainment, retail and other operating expenses decreased for the ~~comparative~~three ~~2014~~months toended ~~2013~~March 31, ~~periods~~2015, ~~the~~primarily ~~$1.2~~due ~~million~~to ~~increase~~a decrease in ~~sales~~the ~~and~~number ~~marketing primarily~~of ~~reflects~~entertainment ~~differences~~events inas compared to the 2014 period~~-to-period~~. ~~timing~~A ~~for~~decrease in the ~~placement~~number of ~~our~~shows ~~advertising~~resulted ~~and~~in ~~comparative~~a ~~spending~~decrease ~~levels.~~in ~~Marketing~~the ~~and~~underlying ~~advertising~~cost ~~spending~~for ~~enhances~~each ~~our~~show. ~~strong~~The lower ~~brand~~occupancy ~~identity,~~levels ~~helping~~contributed to ~~drive~~a ~~traffic~~decrease toin business activity in our Property’s spa and salon, and retail outlets.

~~General~~Sales and marketing ~~administrative~~decreased ~~expenses~~ for the ~~2014~~three ~~quarterly~~months ~~period~~ended March 31, as2015, when compared to the ~~same~~three ~~period~~months inended ~~2013~~March 31, ~~decreased~~2014, bydue ~~$1.9~~to ~~million~~the orshift ~~6.6%, reflecting~~in ~~our~~strategy ~~continuing~~of ~~efforts~~overall tomarketing ~~control expenses. General~~ and ~~administrative~~advertising ~~expenses~~spending ~~include~~for ~~salaries,~~the ~~property~~Company ~~taxes~~ and ~~insurance~~third-party operated restaurants.

~~Corporate~~General ~~expenses, which generally include corporate salaries~~ and ~~legal~~administrative expenses, increased ~~by $9.6 million~~ for the three months ended ~~September~~ March 3031, ~~2014~~2015, as compared to the ~~same~~three months ~~2013 period. In the quarter~~ ended ~~September~~March 3031, 2014, ~~the~~primarily ~~Company~~due ~~recognized~~to ~~approximately~~an ~~$7.6~~increase ~~million~~ in ~~expense~~facility ~~related~~repairs toand ~~The~~maintenance ~~Cosmopolitan~~for ofour ~~Las~~property ~~Vegas~~as ~~Incentive~~well ~~Award~~for ~~Plan,~~our ~~The~~third-party ~~Cosmopolitan of~~operated ~~Las~~restaurants ~~Vegas Management Exit Award Plan~~ and ~~The~~bars. ~~Cosmopolitan~~In ofaddition, ~~Las~~there ~~Vegas~~was ~~Retention~~an ~~Bonus~~increase ~~Plan~~in ~~associated~~bonus ~~with~~expense ~~the~~related ~~signing~~to of the Company’s ~~Purchase~~Annual ~~Agreement,~~Incentive asPlan ~~noted~~compared ~~earlier. Additional amounts of up~~ to ~~$5.6 million could be payable under~~ the ~~agreements upon~~prior ~~closing~~year. ofGeneral ~~the Company Sale,~~ and ~~are~~administrative ~~expected~~expenses toinclude besalaries, ~~accrued~~property intaxes ~~the~~and ~~fourth quarter, 2014~~insurance.

Pre-opening Expenses

Costs incurred during a development and construction period that are not related to development and construction are included within pre-opening expenses. Such costs include, but are not limited to, direct marketing and advertising of the project prior to opening, consultants hired to assist the Company in the opening of a project, training of new CoStars, payroll for specific CoStars in our non-development and construction groups specifically assigned to the project, the cost of incremental office lease space associated with the project and used by the Company prior to opening, legal and other consulting fees, general and administrative expenses and other non-construction-related expenses.

No pre-opening expenses were incurred during the three months ended September 30, 2014. Pre-opening expenses of $1.7 million for the three months ended September 30, 2013 reflect such costs related to The Chelsea and Rose. Rabbit. Lie., which both opened in late-December 2013.

Corporate expenses, which generally include corporate salaries and legal expenses, increased by $13.2 million for the three months ended March 31, 2015, as compared to the three months ended March 31, 2014, primarily due to the settlement of the OCIP agreement of $3.6 million, a settlement agreement of $7.0 million related to the wage and hour cases, $1.1 million in severance related expenses, $0.5 million in corporate expenses from the Company’s Annual Incentive Plan and $1.0 million of professional fees, mainly attributable to the fair value valuation services and other purchase accounting matters.

Depreciation and Amortization Expenses

Depreciation and amortization charges were $4127.75 million ~~for the three months ended September 30, 2014~~ and $4241.87 million for the ~~comparable~~ ~~2013 quarterly period. For the~~ three months ended ~~September~~March 3031, 2015 and 2014, respectively. ~~the~~The decrease in depreciation expense reflected the ~~placing~~effect ~~into~~of ~~service~~the acquisition method of ~~the~~accounting ~~capital~~adopted ~~assets~~in ~~associated~~connection with ~~The~~the ~~Chelsea~~Sale ~~and~~of ~~Rose.~~the ~~Rabbit.~~Company ~~Lie.~~revaluation of the fixed assets, partially offset by ~~the effect~~an ofincrease ~~fully~~in ~~depreciating~~amortization expense ~~various~~of ~~non-idle~~the ~~capital~~new ~~assets~~intangible ~~during 2013~~assets.

Other Income (Expense)

Other income and expense for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~the three months ended March 31, 2014 were as follows:

	Three Months Ended September 30,
	Successor					Predecessor
(Unaudited — In thousands)	~~2014~~Three Months EndedMarch 31, 2015			~~2013~~		Three Months EndedMarch 31, 2014		~~$ Change~~			~~% Change~~
Other income (expense):
Other income/(expense):
Interest and other income		8			11				(3	)		(26.1	%)
Net settlements and default income	$	—				$	149
Interest expense due to affiliate, net of amounts capitalized		(9,187	)		(9,903	)			716			7.2	%
Interest and other income		5					15
Total other income (expense)	$	(9,179	)	$	(9,892	)		$	713			7.2	%
Interest expense, net of amount capitalized		(7,440	)				(9,546	)
Total other expense	$	(7,435	)			$	(9,382	)

~~Interest Expense Due to Affiliate,~~ Net ofSettlement ~~Amounts~~and ~~Capitalized~~Default Income

~~The~~There ~~Company~~was ~~had~~no ~~weighted~~settlement ~~average~~and ~~borrowings~~default ofincome ~~$3.5~~for ~~billion~~the ~~for~~three ~~each~~months ofended ~~the~~March 31, ~~respective~~2015 ~~quarterly~~as ~~periods~~compared to the three months ended ~~September~~March 3031, 2014. The net settlement and ~~2013~~ default income of $0.1 Atmillion ~~September~~recorded for the three months ended March 3031, 2014 represents certain purchasers within the East and/or ~~2013~~the West Towers, who had previously opted out of the ~~stated~~settlement ~~interest~~offers, ~~rates~~settling their ~~for~~claims ~~these~~with ~~respective~~us ~~periods~~in ~~were~~individual ~~each~~transactions ~~approximately~~on 1terms identical to the applicable class action settlement.1% At March 31, 2015, no condominium hotel units remain under contract at The Cosmopolitan.

~~Income~~Interest ~~Taxes~~ Expense Net of Amounts Capitalized

~~For~~The ~~the~~decrease ~~quarters~~in ~~ended~~interest ~~September 30,~~expense ~~2014~~is ~~and~~attributable ~~2013,~~to ~~our~~the ~~income~~termination ~~tax~~of ~~benefit~~the ~~was~~Company’s ~~$8.3~~credit ~~million~~facility ~~and~~with ~~$10.4 million,~~Deutsche Bank AG New York ~~respectively~~Branch. ~~Effective~~The ~~January 1,~~outstanding ~~2012,~~balances ~~pursuant~~of tothe aloans ~~broader~~thereunder ~~tax~~were ~~reorganization,~~forgiven ~~the~~at ~~Company~~no iscost ~~part~~to ofthe aCompany. ~~Corporate~~The ~~Consolidated~~principal ~~Tax~~balance ~~Group~~of (the ~~“U.S.~~Company’s ~~Consolidated~~debt ~~Group”)~~obligations ~~owned~~were by$875 amillion ~~subsidiary~~as of ~~Deutsche~~March 31, ~~Bank~~2015. The UCompany paid $4.S.5 ~~Consolidated~~million in interest ~~Group~~expense isassociated ~~expected~~with tothe ~~generate~~new ~~more~~debt ~~than~~obligations ~~sufficient~~for ~~taxable~~the ~~income~~three ~~annually~~months toended ~~utilize~~March 31, 2015. Interest expense for the ~~Company’s~~three ~~net~~months ~~operating~~ended ~~losses~~March 31, ~~and~~2015 ~~realize~~includes ~~the~~$1.5 ~~Company’s~~million ~~deferred~~as ~~tax~~amortization ~~assets~~of debt discount and debt financing costs.

Our effective income tax rates of (35.2%) and (35.0%) for each of the respective three months ended September 30, 2014 and 2013, includes the statutory tax rate benefit for being a party to the U.S. Consolidated Group tax sharing agreement.

Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013

Revenues

Gross revenues for the nine months ended September 30, 2014 increased $98.4 million or 16.7%, when compared to the same period in 2013. For the comparable nine month periods, net revenues increased $71.1 million or 14.2%. Our revenues for the nine months ended September 30, 2014 and 2013 were as follows:

	Nine Months Ended September 30,
(Unaudited — In thousands)	2014			2013			$ Change			% Change
Revenues:
Casino	$	156,067		$	115,895		$	40,172			34.7	%
Hotel		236,886			201,900			34,986			17.3	%
Food and beverage		264,159			246,038			18,121			7.4	%
Entertainment, retail and other		30,784			25,647			5,137			20.0	%
Gross revenues		687,896			589,480			98,416			16.7	%
Less — promotional allowances		(115,957	)		(88,677	)		(27,280	)		30.8	%
Net revenues	$	571,939		$	500,803		$	71,136			14.2	%

Our casino revenues increased 34.7% compared to the nine months ended September 30, 2013. The table games hold percentage for the nine months ended September 30, 2014 was 15.6% (our expected range is 10.0% to 14.0%), up from 13.2% for the nine months ended September 30, 2013, complementing growth in our slot revenues.

For the nine months ended September 30, 2014, hotel revenues, ADR and REVPAR increased over the same period in 2013, primarily reflecting continued strong demand in the free independent traveler and group sales categories, as well as the Company’s January 1, 2013 resort fee implementation. ADR and occupancy for the nine months ended September 30, 2014 were $308 and 95.0%, respectively, generating REVPAR of $293. ADR and occupancy for the nine months ended September 30, 2013 were $274 and 91.0%, respectively, generating REVPAR of $250. The 2014 higher occupancy levels primarily reflect increased room bookings from Identity patrons, as well as continuing growth in our group room nights associated with the late-December 2013 opening of The Chelsea.

Food and beverage revenues for the nine months ended September 30, 2014 increased $18.1 million or 7.4%, when compared to the same period in 2013. Revenue growth for the nine months ended September 30, 2014 is primarily attributable to the high volume of customers staying and visiting our Property directly contributing to higher revenues generated from restaurant, banquet and buffet services. In addition, during late-December 2013, we also opened Rose. Rabbit. Lie., an innovative combination of restaurant, bar, club and live entertainment.

Entertainment, retail and other revenues for the nine months ended September 30, 2014 and 2013 were $30.8 million and $25.7 million, respectively, representing an increase of $5.1 million or 20.0%. The period-over-period increase in entertainment and other revenues primarily reflects higher revenues generated from an increased number of The Chelsea entertainment events and higher revenue from retail, spa services and various fees. We expect continued revenue growth from The Chelsea during the remainder of 2014.

Revenues for the nine months ended September 30, 2014 and 2013 include the retail value of accommodations, food and beverage, and other services furnished to our guests without charge. In accordance with industry practice, these promotional allowances or comps are deducted from revenues. While gross revenues increased by 16.7% for the comparable nine month periods, promotional allowances as a percentage of gross revenues increased from 15.0% to 16.9% for the same comparable nine month periods. We believe the level of promotional allowances or comps incurred for the respective 2014 and 2013 periods were necessary to continue to drive customer awareness, build our customer database and create customer loyalty. We expect this level of promotional allowance or comps expense to vary period-over-period.

Operating Expenses

Our operating expenses increased 5.4% for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013, lower than the growth in gross revenues of 16.7% and net revenues growth of 14.2% for the same operating period. The Company has ongoing efforts focused on restraining the growth, and in some cases, reducing departmental operating expenses, resulting in higher operating margins.

	Nine Months Ended September 30,
(Unaudited — In thousands)	2014		2013		$ Change			% Change
Operating expenses:
Casino	$	96,644	$	83,973	$	12,671			15.1	%
Hotel		27,151		30,279		(3,128	)		(10.3	%)
Food and beverage		174,102		162,520		11,582			7.1	%
Entertainment, retail and other		29,826		22,263		7,563			34.0	%
Sales and marketing		50,102		49,383		719			1.5	%
General and administrative		79,278		80,466		(1,188	)		(1.5	%)
Corporate		24,563		13,856		10,707			77.3	%
Pre-opening		—		2,172		(2,172	)		N/A
Loss on disposal of assets		117		85		32			38.0	%
Asset impairment		1,506		—		1,506			N/A
Depreciation and amortization		125,616		132,806		(7,190	)		(5.4	%)
Total operating expenses	$	608,905	$	577,803	$	31,102			5.4	%

Departmental Operating Expenses

During the nine months ended September 30, 2014, departmental operating expenses consisting of operations associated with casino, hotel, food and beverage, entertainment, retail and other, increased by $28.7 million or 9.6% over the respective 2013 period. In general, the increase in departmental operating expenses is reflective of higher incremental expenses generated from our period-over-period revenue growth. The increase in casino operating expenses for the nine months ended September 30, 2014 includes higher commissions for independent representatives generated from our expanded host program, as well as continuing refinement of hotel, food and beverage and other costs associated with complimentary goods and services offered to our customers. Per their respective agreements, we also incurred higher management and incentive fees owed to partner restaurants for performing at higher profitability levels.

Sales and Marketing, General and Administrative and Corporate Expenses

For the nine months ended September 30, 2014, the $0.7 million increase in sales and marketing primarily reflects the timing and variability of spending in certain national target markets. The 1.5% decrease in general and administrative expenses for the nine months ended September 30, 2014 as compared to the same 2013 period is attributable to the Company’s previously disclosed efforts to control these costs in conjunction with operating revenue growth. For the nine months ended September 30, 2014, related to the Company Sale, the Company recognized approximately $12.7 million in corporate expense from The Cosmopolitan of Las Vegas Incentive Award Plan, The Cosmopolitan of Las Vegas Management Exit Award Plan and The Cosmopolitan of Las Vegas Retention Bonus Plan. Additional amounts of up to $5.6 million could be payable under the agreements upon closing of the Company Sale, and are expected to be accrued in the fourth quarter, 2014. Included in corporate expenses for the nine month, 2013 period is the $3.0 million recognition of a loss contingency as an estimate of what we believe may be the eventual and reasonably possible loss associated with certain legal cases.

Pre-opening Expenses

No pre-opening expenses were incurred during the nine months ended September 30, 2014. Pre-opening expenses of $2.2 million for the nine months ended September 30, 2013 reflects costs related to the late-December 2013 opening of The Chelsea.

Asset Impairment

In July 2014, the Company announced the closure of the Vegas Nocturne show at Rose. Rabbit. Lie. As a result, for the three and six months ended June 30, 2014, the Company determined that certain long-lived assets related specifically to the show may be impaired. Accordingly, the Company estimated the undiscounted future cash flows to be generated from the identified long-lived assets over their remaining useful life to continue to be negative, resulting in a $1.5 million write-down of the identified assets, which is reported as an asset impairment in the Company’s condensed consolidated statements of operations during the nine months ended September 30, 2014. No potential impairment charges were identified or recorded by the Company during the prior year periods.

Depreciation and Amortization Expenses

Depreciation and amortization charges were $125.6 million for the nine months ended September 30, 2014 and $132.8 million for the nine months ended September 30, 2013. As previously discussed, for the nine months ended September 30, 2014, the decrease in depreciation expense is due to the effect of fully depreciating various non-idle capital assets during 2013. The decrease is partially offset by additional depreciation from capital assets associated with The Chelsea and Rose. Rabbit. Lie., which were placed into service in late 2013.

Other Income (Expense)

Other income and expenses for the nine months ended September 30, 2014 and 2013 were as follows:

	Nine Months Ended September 30,
(Unaudited — In thousands)	2014			2013			$ Change		% Change
Other income (expense):
Net settlement and default income	$	245		$	217		$	28		12.7	%
Interest and other income		38			28			10		35.9	%
Interest expense due to affiliate, net of amounts capitalized		(28,251	)		(30,197	)		1,946		(6.4	%)
Total other income (expense)	$	(27,968	)	$	(29,952	)	$	1,984		6.6	%

Net Settlement and Default Income

Through the nine months ended September 30, 2014 and 2013, certain purchasers of condominium hotel units located within the East and West Towers of the Property agreed to settle and release their claims against the Company. No condominium hotel units remain under contract for sale at September 30, 2014.

Interest Expense Due to Affiliate, Net of Amounts Capitalized

The Company had weighted average borrowings of $3.5 billion at September 30, 2014 and 2013. For the nine months ended September 30, 2014 and 2013, the weighted average interest rate was approximately 1.1% for each respective period.

Income Taxes

~~For~~As a result of the ~~nine~~Sale ~~months~~and ~~ended~~beginning ~~September~~on December 3019, 2014 ~~and 2013~~, ~~our~~no ~~income~~provision ~~tax~~has ~~benefit~~been ~~was~~made ~~$23~~for U.3S. ~~million~~federal ~~and~~income ~~$37~~taxes.~~6 million,~~ ~~respectively.~~The ~~Our~~Company is ~~effective~~organized ~~income~~as ~~tax~~a ~~rate~~limited ~~was~~liability ~~(35.9%) and~~company ~~(35.2%) for~~with one member that holds all of the ~~nine~~Class ~~months~~B ~~ended~~Membership ~~September 30~~Interests, ~~2014~~which ~~and~~have ~~2013,~~all ~~respectively.~~the ~~Effective~~economic ~~January 1,~~interests ~~2012,~~in the Company, isSpade ~~part~~Mezz, an affiliate of aBlackstone, ~~Consolidated~~as ~~Group~~described ~~owned~~in byNote a1, ~~subsidiary~~“Sale or Transfer of ~~Deutsche~~Members’ ~~Bank~~ Equity Interests and isCorporate ~~party~~Structure.” toAs a ~~tax~~limited ~~sharing~~liability ~~agreement~~company, ~~with~~ the ~~Consolidated~~Company ~~Group.~~is ~~The~~considered ~~effective~~a flow-through entity for U.S. income tax ~~rate~~purposes ~~for~~resulting ~~the~~in ~~nine~~its ~~months~~owner ~~ended~~being ~~September 30,~~obligated ~~2013~~for ~~includes~~any ~~the~~U.S. ~~benefit~~federal ~~for~~income ~~being~~taxes resulting afrom ~~party~~its tooperations. Accordingly, such ~~tax~~taxes ~~sharing~~are ~~agreement.~~the ~~The~~responsibility ~~Consolidated~~of ~~Group~~its ~~is expected~~Member. toFor ~~generate~~the ~~more~~quarters ~~than~~ended ~~sufficient~~March 31, ~~taxable~~2015 and 2014, our income ~~annually~~tax tobenefit ~~utilize~~was ~~the~~$0 ~~Company’s~~million ~~deferred~~and $7.6 million and our effective income tax ~~assets~~rates were 0% and (37.4%), respectively.

Non-U.S. GAAP Measures — EBITDA and Adjusted EBITDA

EBITDA and ~~Adjusted~~adjusted EBITDA are used by management as the primary measures of operating performance of ~~The~~ ~~Cosmopolitan~~the Company. Adjusted EBITDA is calculated as the net income (loss) attributable to the Company before interest, income taxes, depreciation and amortization, pre-opening expenses, ~~loss from asset impairment,~~ rent expenses and corporate expenses.

The Company’s condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Management has presented EBITDA and ~~Adjusted~~adjusted EBITDA information as supplemental disclosures to the reported U.S. GAAP measures because it believes ~~that~~ these measures are widely used to assess the operating performance in the gaming and hospitality industry. Certain items excluded from EBITDA and ~~Adjusted~~adjusted EBITDA may be recurring in nature and should not be disregarded in the evaluation of our earnings performance. However, management believes that the exclusion of such items provides a meaningful analysis of current results and trends as these items can vary significantly depending on specific underlying transactions or events that are not comparable between the periods being presented.

EBITDA and ~~Adjusted~~adjusted EBITDA should not be construed as alternatives to operating income or net income, as indicators of our performance, as alternatives to cash flows from operating activities, as measures of liquidity, or as any other measures determined in accordance with U.S. GAAP. Also, other companies in the gaming and hospitality industries that report EBITDA and ~~Adjusted~~adjusted EBITDA information may calculate EBITDA and ~~Adjusted~~adjusted EBITDA in a different manner.

The following table presents a reconciliation of EBITDA and ~~Adjusted~~adjusted EBITDA to net loss for the ~~three~~periods ~~and nine months ended September 30, 2014 and 2013~~indicated:

	Three Months EndedSeptember 30,							Nine Months EndedSeptember 30,
	Successor					Predecessor
(Unaudited — In thousands)	~~2014~~Three Months EndedMarch 31, 2015			~~2013~~		Three Months EndedMarch 31, 2014		~~2014~~			~~2013~~
Net loss	$	(155,~~349~~389	)	$	~~(19,405~~	)$	(12,688	$)	~~(41,629~~	)	$	~~(69,344~~	)
Interest, net		97,~~179~~436			~~9,892~~		9,531		~~28,213~~			~~30,169~~
Income tax benefit		~~(8,340~~—	)		~~(10,437~~	)	(7,582	)	~~(23,305~~	)		~~(37,608~~	)
Depreciation and amortization		4127,~~674~~460			~~42,759~~		41,690		~~125,616~~			~~132,806~~
EBITDA		2729,~~164~~507			~~22,809~~		30,951		~~88,895~~			~~56,023~~
Corporate expenses		1215,~~787~~973			~~3,193~~		2,740		~~24,563~~			~~13,856~~
Pre-opening expenses		—			1,727				—			2,172
Rent expenses		495					471
Asset impairment		—			—				1,506			—
Adjusted EBITDA	$	45,975				$	34,162
Rent expenses		472			460				1,391			1,050
Adjusted EBITDA	$	40,423		$	28,189			$	116,355		$	73,101

3027

Liquidity and Capital Resources

Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, funding of capital projects and our compliance with ~~certain non-financial~~ covenants contained in the ~~Credit~~Lease ~~Facility~~and in the Mortgage Loan.

	Nine Months EndedSeptember 30,
(Unaudited — In thousands)	2014			2013
Net cash provided by operating activities	$	138,470		$	128,137
Net cash used in investing activities		(32,584	)		(49,440	)
Net cash used in financing activities		(71,823	)		(60,478	)

The following table summarizes our historical cash flows:

As of September 30, 2014, we had $92.7 million in available cash and cash equivalents.


	Successor			Predecessor
(Unaudited — In thousands)	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Net cash provided by/(used in) operating activities	$	29,596		$	(1,892	)
Net cash used in investing activities		(10,848	)		(12,023	)
Net cash provided by/(used in) financing activities		1,289			(4,664	)

As of March 31, 2015, we had $75.5 million in available cash and cash equivalents.

Cash Flows — Operating Activities

Net cash provided by operating activities during the ~~nine~~three ~~months~~month ended ~~September~~March 3031, ~~2014~~2015, ~~and~~is ~~2013~~primarily ~~includes~~attributable ~~$56.4~~to ~~million~~the ~~and~~change ~~$83.1~~in prepaid ~~million,~~expenses ~~respectively,~~and ofother ~~U.S.~~assets ~~Consolidated~~due ~~Group~~to ~~reimbursements~~the ~~for~~receipt of the ~~utilization~~excess funds of ~~the~~$12.3 ~~Company’s~~million ~~prior~~from ~~period~~the ~~net~~OCIP ~~operating~~fund ~~losses~~and $7.0 ~~For~~million ~~the~~as ~~nine~~closeout ~~months~~of ~~ended~~the ~~September 30,~~fund ~~2014,~~as ~~the~~discussed ~~net~~in ~~cash~~Note ~~provided~~9. byWe ~~operating~~continue ~~activities~~to ~~was~~improve ~~also primarily~~accounts ~~impacted~~receivable bycollections, but for the ~~timing~~first quarter of ~~payments~~2015, ~~for~~these ~~certain~~cash ~~significant~~inflows ~~prepaid~~from ~~expenses~~receivables ~~and~~were ~~accrued~~offset ~~liabilities,~~by ~~including~~increasing ~~insurance,~~receivables ~~property~~attributable ~~taxes~~to the operating period’s casino and ~~contractual~~banquet ~~concert~~and ~~fees~~group revenue growth.

~~For~~Net ~~the~~cash ~~nine~~used ~~months~~by ~~ended~~operating ~~September 30,~~activities ~~2013,~~during the ~~net~~three ~~cash~~month ~~provided~~ended byMarch 31, ~~operating~~2014, ~~activities~~is ~~was~~primarily ~~also~~attributable ~~impacted~~to bythe ~~timing~~change ofin ~~prepaid~~the amount ~~expenses~~due ~~and~~from ~~accrued~~affiliates ~~expenses~~ and by the ~~purchase~~timing of ~~higher~~payments ~~liquor~~for ~~inventories~~certain toaccrued ~~take advantage of pricing efficiencies~~liabilities.

Cash Flows — Investing Activities

~~The~~As ~~ordinary~~discussed ~~and~~in ~~major~~Note ~~capital~~3, per ~~expenditures~~the ofSecond ~~$32.6~~Amendment ~~million~~signed ~~incurred~~in ~~during~~April ~~the nine months ended September 30~~2015, ~~2014~~the ~~are~~net ~~primarily~~cash ~~related~~paid ~~to (i) retention and construction payments~~ for ~~certain~~the ~~significant~~acquisition ~~new~~increased ~~components of our integrated resort, The Chelsea and Rose~~by $6. ~~Rabbit~~4 million. ~~Lie.~~The ~~(our~~increase ~~new~~in ~~venues~~the ~~which~~cash ~~opened~~paid inincreased ~~late-December~~the ~~2013); and~~goodwill ~~(ii) ordinary~~for ~~capital~~the ~~expenditures~~same amount.

~~For~~The ordinary and major capital expenditures incurred during the ~~nine~~three months ended ~~September~~March 3031, ~~2013,~~2015 ~~major~~were ~~capital expenditures incurred of~~ $374.24 million. There were ~~primarily~~no ~~related~~significant tomajor ~~construction~~capital ofexpenditures ~~certain~~during ~~components~~the ofperiod ~~our~~ended ~~integrated resort~~March 31, ~~including The Chelsea~~2015.

InFor ~~addition to~~the ~~direct~~three ~~costs~~months ofended ~~construction~~March 31, ~~included~~2014, inmajor ~~construction in progress and ordinary~~ capital expenditures ~~(as~~incurred ~~applicable)~~of ~~are soft or indirect costs~~$12.0 ~~These~~million ~~soft~~were ~~costs~~primarily ~~are~~related ~~generally incurred prior~~ to ~~commencement of the project~~ construction ~~and can~~of ~~include~~certain ~~permits,~~components ~~architectural~~of ~~fees,~~our ~~engineering~~integrated ~~fees~~resort, ~~real~~including ~~estate~~The ~~commissions~~Chelsea and ~~fees,~~Rose. ~~marketing,~~Rabbit. ~~taxes, insurance, interest payments, leasing and general administrative costs, etc~~Lie. ~~For~~(our ~~the~~new ~~nine~~venues ~~months~~which ~~ended~~opened ~~September 30, 2014 and 2013, we capitalized related soft costs~~ in ~~the~~late-December ~~amount of $1~~2013).~~2 million~~ ~~and $7.3 million, respectively.~~

In addition to direct costs of construction included in construction in progress and ordinary capital expenditures (as applicable) are soft or indirect costs. These soft costs are generally incurred prior to commencement of the project construction and can include permits, architectural fees, engineering fees, real estate commissions and fees, marketing, taxes, insurance, interest payments, leasing and general administrative costs, etc. For the three months ended March 31, 2015 and 2014, no soft costs were capitalized.

Cash Flows — Financing Activities

~~The~~For ~~Company~~the ~~maintains~~three amonths ~~$3.9~~ended ~~billion~~March 31, ~~Credit Facility with DBCI~~2015, ~~$3.4~~the ~~billion~~net ofcash ~~which~~provided ~~was~~by ~~outstanding~~financing asactivities of ~~September 30,~~ ~~2014~~$1.3 ~~Deutsche~~million ~~Bank~~includes ~~has~~(i) a nocredit ~~obligation to provide the Company with additional funding beyond the Credit Facility~~of $6.4 million ~~Amounts~~for ~~under~~ the ~~total~~excess ~~Credit~~net ~~Facility~~working ~~are~~capital ~~drawn~~amount ~~down~~representing in50% ~~tranches~~of ~~which have varying maturity dates and are automatically renewed upon their expiration at~~ the ~~prevailing~~released ~~interest~~amount ~~rates. Borrowings carry an interest rate of LIBOR~~ plus abroker ~~margin~~fees, ofrefer 85to ~~basis~~Note 9; ~~points~~and (~~0.85%~~ii). for ~~The Credit Facility does not include any financial covenants. The current expiration of~~ the ~~Credit~~period ~~Facility~~ended isMarch 31, ~~December~~ 2015., ~~See further discussion below in~~ the ~~Liquidity~~total ~~and~~distributions ~~Capital~~to ~~Resources~~members ~~section~~related ~~regarding~~to the Mezzanine ~~Purchase~~A ~~Agreement~~Loan ~~for~~and ~~the~~Mezzanine ~~Company~~B ~~Sale~~Loan ~~and~~of ~~the~~$3.2 million ~~potential~~and ~~effect~~$1.9 onmillion, ~~the~~respectively, ~~Company’s~~refer ~~Credit~~to ~~Facility~~Note 13.

3128

For the ~~nine~~three months ended ~~September~~March 3031, 2014, the net cash used in financing activities of $714.8 7 million includes $95.83 million in borrowings against ~~our~~the ~~Credit~~credit ~~Facility~~facility maintained by the Predecessor which was offset by related principal repayments totaling $8110.6 0 million. ~~Our~~The draws against the ~~Credit~~credit ~~Facility~~facility were primarily utilized for construction costs relating to The Chelsea and Rose. Rabbit. Lie., and to a lesser degree, to finance the operations at the Property.

~~For~~Liquidity the nine months ended September 30, 2013, the net cash used in financing activities balance of $60.5 million includes $37.6 million in borrowings against our Credit Facility which was offset by related principal repayments totaling $98.1 million.

~~Liquidity~~Our integrated resort will have an ongoing need for renovations and ~~Capital~~other ~~Resources~~capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment. Certain capital expenditure requirements may be necessary to comply with any changes in applicable laws and regulations. We estimate capital expenditures will range between $40.0 million to $50.0 million during the year ended December 31, 2015.

~~Our~~We ~~integrated~~intend ~~resort~~to ~~will~~pay ~~have an ongoing need~~ for ~~renovations~~the ~~and other~~ capital ~~improvements~~expenditures tothrough ~~remain~~the ~~competitive,~~use ~~including replacement, from time to time,~~ of ~~furniture,~~working ~~fixtures and equipment~~capital. ~~Certain~~We ~~capital~~may ~~expenditure~~require ~~requirements~~additional ~~may~~financing beto ~~necessary~~support tofuture growth. ~~comply~~Because ~~with~~we ~~any~~are ~~changes~~an inindirectly ~~applicable~~owned ~~laws~~subsidiary ~~and~~of ~~regulations.~~Blackstone, Wefunding ~~estimate~~for major capital expenditures ~~will~~may ~~approximate~~be ~~$40~~provided ~~million~~by ~~for~~Blackstone ~~the full~~or ~~year,~~one ~~2014~~of its affiliates.

Under the terms of our Credit Facility, proceeds from the Credit Facility may be used to pay for (i) the costs of constructing and completing the Property; (ii) Property operating deficits; and, (iii) payment of interest on the loan to the extent that cash flow from the Property is insufficient to pay such interest after paying the cost of operating the Property. As discussed in Note 1 — Organization and Description of Business — Company Overview — Sale or Transfer of Members’ Equity Interests, on May 15, 2014, the Company entered into the Purchase Agreement for the Company Sale. The Purchase Agreement provides that on or prior to the closing of the Purchase Agreement, Deutsche Bank AG or its applicable affiliate will release and discharge the Company from any further obligations under the Credit Facility, such that the Company no longer has any obligations under the Credit Facility.

All outstanding debt becomes due and payable upon a change of control of the Company. As such, with the final execution and closing of the Company Sale, the Company may need to seek other financing sources to support any working capital requirements and/or future growth. However, due to the existing uncertainty in the capital and credit markets, access to capital may not be available on terms acceptable to us or at all. The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Continued turbulence in the U.S. and international markets and economies and prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers, including our ability to refinance maturing liabilities, as applicable, and access to capital markets to meet liquidity needs.

The Company classifies construction-related accounts payable, retention and accrued and other liabilities as long-term liabilities as they are financed by the Credit Facility, and therefore, will not require the use of working capital. At September 30, 2014, these construction-related costs totaled $1.8 million.

Short-Term Liquidity Requirements

We generally consider our short-term liquidity requirements to consist of those items that are expected to be incurred or come due within the next twelve months. We believe those requirements consist primarily of funds necessary to pay construction payables and retention ~~related to the build-out of The Chelsea and Rose. Rabbit. Lie.~~, normal on-going capital expenditures, interest payments, and on-going working capital requirements. We believe that ~~borrowings under the existing Credit Facility and~~ operating cash flows generated by the Property will be sufficient to meet our short-term liquidity requirements. ~~Within~~We ~~the~~estimate ~~next twelve months,~~ short-term liquidity requirements ~~are~~will ~~estimated~~range tobetween ~~be approximately~~ $140.0 million to $150.0 million during the year ended December 31, 2015.

Long-Term Liquidity Requirements

We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next twelve months and believe these requirements consist primarily of funds necessary to finance future ~~capital and~~ renovation projects and to finance ongoing operational costs. We intend to satisfy our long-term liquidity requirements through ~~borrowings under the existing Credit Facility and~~ operating cash flows generated by the Property.

32The debt structure described above will require the Company to generate sufficient cash flow to pay the current interest due on the outstanding borrowings on a monthly basis. Since interest rates will reset monthly based on the value of LIBOR at the reset date, the Company will have a variable interest obligation that may cause volatility in our cash flows. In order to control the volatility in our cash flows, we, along with our Members, purchased an interest rate cap from the Commonwealth Bank of Australia.

~~Table~~Off-Balance ofSheet ~~Contents~~Arrangements

~~The Credit Facility debt structure described above will require the Company to generate~~In ~~sufficient~~connection ~~cash~~with ~~flows to pay~~ the ~~current~~Sale, ~~interest~~affiliates ~~due on the outstanding borrowings on a quarterly basis. Since interest rates will reset quarterly based on the value~~ of ~~LIBOR~~Blackstone atentered ~~the~~into ~~reset~~two ~~date,~~Mezzanine ~~the~~Loan ~~Company~~agreements ~~will~~with ~~have~~JPMorgan afor ~~variable interest obligation that may cause volatility in our cash flows. The interest rate structure described above does not include~~ a ~~credit~~total ~~risk~~aggregate ~~premium~~principal inamount ~~the spread over the base rate. The lack~~ of a$425 ~~risk premium in the interest rate reflects the fact that the Company is a wholly-owned subsidiary of Deutsche Bank~~million. ~~This~~Refer ~~interest rate is not representative of third-party interest rates that the Property would have~~ to ~~ordinarily~~Note ~~bear~~13 if— ~~funding~~for ~~were~~discussion ~~obtained~~on ~~from an unrelated party. Upon a change of control event, we expect that~~ the ~~Company~~Mezzanine ~~will be required to pay a credit risk premium to any lender that provides financing~~Loans. ~~In addition, base interest rates are at historic low levels and interest rates will likely increase over time.~~

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments about the effects of matters that are inherently uncertain. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. The critical accounting policies are summarized in Note 2 to our condensed consolidated financial statements included in Item 8 — Financial Statements and Supplementary Data in our ~~2013~~2014 Annual Report on Form 10-K filed on March 2127, ~~2014~~2015.

Newly Issued Accounting Pronouncements

Refer to related disclosure within Note 2 — Basis of Presentation, ~~Principles of Consolidation~~ and Summary of Significant Accounting ~~Principles~~Policies to our condensed consolidated financial statements included in Item 1 — Notes to Condensed Consolidated Financial Statements (unaudited) in this Quarterly Report on Form 10-Q.

~~Item 3~~Item3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. The outstanding debt under our ~~Credit~~Mortgage ~~Facility~~Loan has a variable interest rate. AsIn ofconnection ~~September 30,~~with ~~2014~~the Mortgage Loan, Propco purchased an ~~increase~~interest inrate ~~market~~cap ~~rates~~from the Commonwealth Bank of ~~interest~~Australia byin ~~1.0%~~the ~~would~~notional ~~have~~amount ~~increased~~of ~~our~~the Mortgage ~~annual~~Loan ~~interest~~with ~~cost~~a bystrike ~~approximately $34~~rate for LIBOR of 3.474% ~~million~~and a term ending on January 15, 2017.

Item 4. Controls and Procedures

~~Evaluation of~~ Disclosure Controls and Procedures

We maintain disclosure controls and procedures ~~designed~~(as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act, ~~our~~ the Company’s management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. As of ~~September~~ March 3031, ~~2014~~2015, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures ~~were effective~~ as of ~~the~~March 31, ~~end~~2015, ofwere ~~the period covered by this Quarterly Report on Form 10-Q~~effective.

33Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Changes in Internal Controls

There have not been any changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

See Note 1115 — Commitments, Contingencies and Litigation to our condensed consolidated financial statements included in Item 1 — Notes to Condensed Consolidated Financial Statements (unaudited) in this Quarterly Report on Form 10-Q for a description of our significant current legal proceedings, which is incorporated herein by reference.

Item 1A. Risk Factors

In addition to the other information contained in this Quarterly Report on Form 10-Q, you should carefully consider other risk factors discussed in Item 1A — Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on March 2127, ~~2014~~2015, in evaluating our business, financial position, future results, and prospects. Although there have been no material changes to the risk factors described in the Annual Report on Form 10-K, the risks described therein are not the only risks facing our Company. Additional risks that we do not presently know or that we currently believe are not material could also materially adversely affect our business, financial position, future results and prospects.

The consummation of the Company Sale pursuant to the Purchase Agreement we entered into on May 15, 2014 is subject to conditions, including receipt of certain regulatory approvals, including, gaming licensing approvals, which are outside of our control.

On May 15, 2014, we entered into a Purchase Agreement relating to the Company Sale. The respective obligations of the parties to the Purchase Agreement to consummate the Company Sale are subject to the receipt of certain regulatory approvals, along with the satisfaction or waiver of certain other customary closing conditions.

We cannot predict whether and when these conditions will be satisfied and, as such, there is no assurance that the sale contemplated by the Purchase Agreement will be consummated.

Whether or not the Company Sale is consummated, the announcement of the Company Sale may have an adverse effect on the Company’s business relationships, operating results and business generally.

Whether or not the Company Sale is consummated, our business may be harmed because:

• management’s and our employees’ attention may be diverted from our day-to-day business because matters related to the Company Sale may require additional commitments of their time and resources;

• employees may perceive uncertainty about their future roles with us, which might adversely affect our ability to retain and hire key personnel and other employees;

• our relationships with customers, partners, including Marriott International, Inc. (“Marriott”), and suppliers may be adversely affected as a result of uncertainties regarding the Purchaser’s plans with respect to our products, employees and business;

• certain relationships with customers, partners, including Marriott, and suppliers may give rise to certain “change of control” or other contractual termination rights, which such party and/or the Company could elect to exercise in the event of a sale;

• we have agreed to restrict certain of our activities (unless we obtain Purchaser consent) pending the consummation of the Company Sale; and

• we have incurred, and will continue to incur, certain costs, expenses and fees for professional services and other transaction costs in connection with the Company Sale, which costs, expenses and fees are payable by us whether or not the sale is consummated.

If the Company Sale is not completed, Deutsche Bank is likely to consider other strategic alternatives to divest ownership of the Company that are subject to risks and uncertainties.

If the Company Sale is not completed, we would anticipate that Deutsche Bank would continue to review and consider various alternatives available to them to divest ownership of the Company, including among others, attempting to implement a sale to a financial or strategic buyer. These alternative transactions may involve various additional risks to our business, including among others, distraction of our management team and associated expenses, our ability to consummate any such alternative transaction and other variables which may adversely affect our operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities by the Company.

Item 3. Defaults Upon Senior Securities

None.

Item 4 3. ~~Mine~~Defaults ~~Safety~~Upon ~~Disclosures~~Senior Securities

~~Not applicable~~None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On ~~November~~April 73, ~~2014~~2015, the Company entered into ~~amendments~~a second amendment to the three-year employment ~~agreements~~agreement with Lisa Marchese, the ~~Company’s~~ ~~Chief Marketing Officer, and Thomas McCartney, the~~ Company’s Chief ~~Operating~~Marketing Officer, pursuant to which such employment ~~agreements~~agreement ~~were~~was extended for a period of ~~ninety~~sixty days. Ms. Marchese’s employment agreement, which was scheduled to ~~terminate~~ ~~on January 2, 2015, will now~~ terminate on April 3, 2015~~. Mr. McCartney’s employment agreement~~, ~~which was scheduled to terminate on December 31, 2014,~~ will now terminate on ~~April 1~~ June 3, 2015. No other terms of ~~these~~this employment ~~agreements were~~agreement was amended.

36As of April 10, 2015, Ronald G. Eidell, the Company’s Chief Financial Officer is transitioning from the position of Chief Financial Officer to a senior advisory role at the Company and will be available to the Company in this capacity for the remainder of 2015.

As of April 10, 2015, the Company’s Board of Directors (the “Board”) appointed Michelle F. Adams, age 42, who was the Company’s Vice President of Finance and Corporate Controller, as the Company’s Chief Financial Officer. Ms. Adam’s appointment was effective immediately, subject to receipt of the required regulatory approvals by the Nevada Gaming Commission.

On April 16, 2015, the Board of Directors (the “Board”) of Nevada Property 1 LLC (the “Company”) elected Andrea L. Drasites as a member of the Board, effective immediately, subject to the required regulatory approvals by the Nevada Gaming Commission. Ms. Drasites will become a member of the Company’s Audit Committee.

Iran Threat Reduction and Syria Human Rights Act of 2012

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the Exchange Act, we hereby incorporate by reference herein Exhibit 99.1 of this report. Exhibit 99.1 includes disclosures regarding Travelport Worldwide Limited, which may be considered an affiliate of The Blackstone Group L.P. and therefore, our affiliate.

Item 6. Exhibits

Exhibit
10.4*†		First Letter Amendment to Employment Agreement, dated November 7, 2014, between Nevada Property 1 LLC and Thomas J. McCartney
10.1*†		Second Letter Amendment to Employment Agreement, dated April 3, 2015, between Nevada Property 1 LLC and Lisa Marchese
10.5*†		First Letter Amendment to Employment Agreement, dated November 7, 2014, between Nevada Property 1 LLC and Lisa Marchese
10.2*		First Amendment to Loan Agreement, dated as of March 30, 2015, among JPMorgan Chase Bank, National Association, TCOLV Propco LLC, Nevada Property 1 LLC and the subsidiaries of Nevada Property 1 LLC named therein.
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the SEC on November 7, 2014 formatted in Extensible Business Reporting Language (XBRL):
99.1*		Exchange Act Section 13(r) Disclosure.
		i. the condensed consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013;
101*		The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 13, 2015 formatted in Extensible Business Reporting Language (XBRL):
		ii. the condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013;
		i. the Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014;
		iii. the condensed consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013; and
		ii. the Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014;
		iv. the notes to condensed consolidated financial statements.
		iii. the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; and
		iv. the Notes to Condensed Consolidated Financial Statements.

*	Filed herewith.

† Indicates management contract asor compensatory plan.

37The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

NEVADA PROPERTY 1 LLC Registrant /S/ ~~JOHN~~WILLIAM ~~UNWIN~~P. ~~John~~McBEATH ~~Unwin~~President, Chief Executive Officer and (Principal Executive Officer) Date: ~~November~~May 713, ~~2014~~2015

/S/ ~~RONALD~~MICHELLE GF. ~~EIDELL~~ADAMS ~~Ronald G. Eidell~~ Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date: ~~November~~May 713, ~~2014~~2015

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