Las Vegas Sun NewsTwo more Southern Nevada hotels default on debt
Facebook
Fark
Digg
Reddit
Stumble
Thursday
5 January 2012
12:44 p.m.
As the Southern Nevada gaming and tourism economy improves in 2012, financial restructurings of troubled companies and properties are expected to slow down.
But such troubles are continuing for some companies, as evidenced by debt defaults involving Loews Lake Las Vegas Hotel in Henderson and the JW Marriott Las Vegas casino resort in Summerlin.
Their recently disclosed defaults follow a difficult 2011 for the local resort industry.
Last year, control of the M Resort, the Palms, the Hard Rock and the Westin Casuarina was transferred to holders of the properties' debt, while foreclosure proceedings were initiated against the Las Vegas Hilton — now the LVH Las Vegas Hotel & Casino — and Hooters hotel-casino filed for bankruptcy.
Those changes followed the restructurings in 2009 and 2010 of Tropicana Entertainment LLC, Fontainebleau Las Vegas, Station Casinos Inc., Herbst Gaming, Riviera Holdings Corp. and Black Gaming.
"We believe that the major restructuring is behind us unless we face another economic hurdle or there is a double dip recession," said John Knott, a prominent casino and hotel broker in Las Vegas at CBRE (CB Richard Ellis). "Most of the gaming companies and the lenders worked very hard to get through these last few years. Improving revenue should have a beneficial impact on EBITDA (a profitability measure meaning earnings before interest, taxes, depreciation and amortization). We have already seen this with some properties. We hope this leads to employment growth."
While the Global Gaming Group at CBRE expects growth in gaming revenue on the Las Vegas Strip this year of up to 4.8 percent and hotel room rates to increase up to 6.2 percent, Knott said: "This does not mean that there is not a property out there that could face its own unique challenges depending on its own (debt) leverage dynamics."
"But we do not see the entire industry needing to restructure. as was the case a couple of years ago," he said.
It’s unknown how the recent defaults at Loews Lake Las Vegas and the JW Marriott will be resolved, and officials with companies that own those properties couldn’t immediately be reached for comment.
But based on recent appraisals, it’s likely investors in their debt face steep losses regardless of whether the loans are renegotiated, the properties are foreclosed on or they are sold.
Assured Lenders Services Inc., trustee of the $117 million Loews Lake Las Vegas loan, initiated foreclosure proceedings against that property Dec. 12. The initial paperwork didn’t specify an auction date. Its mortgage is held by investors after it was syndicated in 2007.
Trepp LLC, which tracks commercial loan data, reported the 493-room property was valued at just $29.4 million when last appraised in February — meaning it’s worth only 25 percent of the debt encumbering it.
The property’s loan first moved into special servicing in March 2009 because the recession was especially harsh on Lake Las Vegas, which went through its own bankruptcy and saw its hotels endure steep declines in business and leisure travel.
Later in 2009, the property was placed in control of a receiver after lenders sued to take it over.
"REVPAR (revenue per available room) levels show declines from 2010 as group business demand is down due to corporate cutbacks and concerns of Lake Las Vegas’s future," the loan’s special servicer commented last month. "Transient demand is also down with heavy competition from not only the Las Vegas Strip, but also resorts throughout the Southwest and California."
Loews Lake Las Vegas, while under the control of a receiver, is owned by a New York company called Loews LLV Hotel LLC.
As for the JW Marriott in Summerlin, foreclosure proceedings have not been initiated against it.
But the fact that it defaulted on its $160 million mortgage loan on Nov. 9 was disclosed Dec. 28 when a court fight broke out among investors in that loan.
Senior lenders complained in the New York Supreme Court lawsuit that a junior investor in the loan, a company called Galante Holdings Inc., was trying to buy the loan for $84.5 million.
The senior lenders said the move was "the brazen scheme of a junior lender who here attempts to steal more than $60 million in value from a group of senior lenders" who would be deprived of the right to foreclose on the property or otherwise control the loan.
That accusation was denied by Galante, which said its purchase was authorized by the loan pooling deal it invested in and that by acquiring the loan it would be a "potential equity participant" with current ownership of the JW Marriott.
An attorney for Galante said in a court declaration that the JW Marriott "has had a difficult financial history" and requires $40 million in capital for upgrades.
"Closing the purchase of the (loan) would permit Galante to commence immediate discussions with ownership about restructuring the debt and undertaking other capital and FF&E (furniture, fixtures and equipment) improvements," attorney John Reilly said in his affidavit.
Included in the New York lawsuit is a recent appraisal finding the Summerlin property is worth just $98.4 million, making it deeply underwater on its mortgage, like the Loews Lake Las Vegas property.
Trepp, in its latest report on the 548-room JW Marriott, noted the $98.4 million appraisal amount was down sharply from the boom year of 2007, when it was valued at $324 million.
PFK Consulting USA of Los Angeles, which conducted the latest appraisal, reported the JW Marriott’s gaming win fell during the recession from $79.8 million in 2007 to $61.7 million in 2010.
The appraiser noted the hotel’s performance had slipped as well, producing revenue per available room of $81.08 in 2010, down from $140.23 in 2007.
The JW Marriott was purchased out of bankruptcy in 2001 by Larco Investments Ltd. of Vancouver. At that time, the property was called the Regent Las Vegas.
The property is still owned by Larco and its affiliated company Hotspur Resorts.
Share
Join the Discussion:
Previous Discussion:
Discussion 2 comments
Only trusted comments are displayed on this page. Untrusted comments have expired from this story.
Most Popular
- Genting planning art exhibits, dragon dancers — even before Resorts World opens
- Metro officer is relieved of duty after pleading guilty in drug case
- For Tom Cunningham and most other stabbing victims, much pain, no justice
- Experience wins out over price in selection of jails’ food vendor
- County OKs replacing Strip eyesore with casino preview centers
.... but don't walk away from your mortgage because that's immoral. I love it!
How the hell does a "junior" lender buy the loan from "senior" lenders to the point that the senior lenders need to file a lawsuit to block it? Can't they just say no to the offer?
I think the days are over where companies can invest huge dollars to build these gambling palaces (marble, gold, artwork, $35,000 chairs, crystal chandeliers, etc.)....we're back to hardwood floors, sawdust, paint, flourescent lighting, plastic lamninate counter tops and paper cups. It will be the only way for owners to make money on a casino.
And isn't it interesting that J.W. Marriott is taking over the Rampart Casino and they have contracted Affinity Gaming (formerly known as the now bankrupt and defunct Herbst Gaming) to take over management of the casino on April 1, 2012. Maybe Marriott and Affinity are going to exchange trade secrets about all the blue smoke and mirrors used by the Herbst lawyers and accountants to enable Marriott to go belly up and come out a winner. I wonder where Gaming regulators are when these type of "arrangements" are made?
If managing the restaurants also goes to Affinity, look for the quality of food purchased by Affinity to decline to the same level as has happened at Terrible's properties in Vegas and Primm. Service will also decline to the same level as the Terrible's properties. Qaulity--and it's just not there--is a serious problem for food at all Terrible's properties. They opt for cheap instead. Poor selection of hot food that is barely warm and "cold" service to match. A one-two punch for failure. I've eaten at both Terrible's and Rampart in the past week so I believe my opinion is spot on.
Rampart casino is a nice local place to play for all the senior citizens in Summerlin/Sun City. But too many changes and the quality folks who now go there will find other haunts, like Red Rock or Santa Fe, to be better values.
How can Bellagio remodel for only $70M and MGM Grand for $90M but the JW Marriot needs $40M?
I think JW Marriot needs a new contractor.
At one time the J W Marriot was the class of the the west and northwest of Las Vegas, then The Cannery Casinos, a brain child of Bill Paulos took over and the decline bagan and has never stopped. Paulos took what was his only success in Las Vegas,the Rampart Casino and with the help of some real losers for management litterally gave the Fertittas and thier bankrupt Red Rock Casino the opening it needed to be the place to go west of the strip. Fertittas will not give The Cannery Casinos an opportunity for a comeback.
Like all casinos as time goes by they need remodeling and upgrades as well as fresh management and business models, all which along with a lack of good business sense by Paulos and his team of underachievers failed to do, hense a dirty,unfriendly,mismanaged hole in the wall on Rampart Blvd. in Summerlin, which may as well be in any other run down strip mall in Las Vegas. Coincidently his other two Cannery properties are just what the Rampart Casino in the end became.
If the locations that toursts are likely to frequent are struggling (Strip, Downtown) the locations off the beaten path are certainly going to fare even worse. When someone like me chooses to stay off of the strip at a Station, Sams Town, etc., It is to save money on the room cost vs. the strip. Something the above resorts do not offer.