Las Vegas Sun

March 29, 2024

REAL ESTATE:

Auction for key Strip land holdings might be revised

FX Luxury-owned land

A bankruptcy judge in Las Vegas has rejected a plan by American Idol TV show owner Robert F.X. Sillerman and co-investors to reorganize their strategic land holdings on the Las Vegas Strip in which they would have been the "stalking horse" bidder for the property.

In response to the rejection, attorneys for Sillerman, the investors and their company FX Luxury Las Vegas I LLC proposed a new plan Wednesday in which the land would be auctioned off without a stalking horse bidder component.

After Sillerman's plans for an Elvis Presley-themed resort across from CityCenter on the Strip fell through, FX Luxury defaulted on loans against the land totaling nearly $493 million.

The company owns 17.72 acres of land at the southeast corner of Las Vegas Boulevard and Harmon Avenue that are occupied by numerous small businesses and a 125-room Travelodge motel. Tenants on the land include the Hawaiian Marketplace with multiple tenants, Smith & Wollensky, McDonald’s, Fatburger, Walgreens and Sunglass Hut.

Sillerman is also chairman and chief executive of FX Real Estate and Entertainment of New York. Sillerman's co-investors under the aborted stalking horse bid would have been Paul Kanavos, president of FX Real Estate and Entertainment; and Las Vegas real estate investor Brett Torino.

Torino is also part of BPS Partners. That company plans to develop a three-story, 100,000-square-foot retail center anchored by Walgreens across Harmon Avenue and just north of the FX land. It wasn't immediately clear if Walgreens would keep its existing store on the FX land once the BPS project is developed.

In the FX bankruptcy case, filed April 21, attorneys for NexBank, SSB, representing second-lien holders owed $221 million, complained the stalking horse bid by Sillerman and his partners was a "sweetheart deal" rigged to favor the insiders and that they had proposed "illusory bidding and auction procedures intended to deter any actual bidding for the purchase of the debtor's assets."

NexBank and other minority lenders complained Sillerman and his partners as the stalking horse would only have to put up $19 million to maintain control of the land, since they had also arranged to assume $244 million in existing debt owed to first-lien lenders.

Other bidders, however, would have had to put up $256 million in cash if they wanted to bid, putting them at a disadvantage, NexBank complained.

"The minimum threshold bid of $256 million in cash is an absolute deterrent to any bidding at the auction," attorneys for NexBank argued. "Any party seriously considering bidding on multi-million dollar real estate located on the Las Vegas Strip will be sufficiently sophisticated to be aware that the debtor's public filings recently set the value of the property at $137.7 million."

Judge Bruce Markell on May 10 found that the $244 million in planned financing needed to be exposed to other potential bidders, that the $256 million cash bid requirement for other bidders was too high and that more time needed to be invested in marketing the property.

"Debtor heard loud and clear the court’s desire to see a bidding process that provides the broadest opportunity possible for the most potential bidders to come forward and competitively bid for the assets," attorneys for FX said in a filing Wednesday.

"Now that (the Sillerman investors) will not be the 'stalking horse bidder,' it will no longer have any advantages vis-a-vis any other bidder and the second-lien lenders, if interested, can bid on an even footing as other bidders," FX said in the filing.

Markell has not yet approved the new auction plan nor has a date for the auction been set.

Regardless of which entity wins the proposed auction, lenders are facing huge losses in the case.

In court papers, FX said an appraisal found the property's liquidation value in a forced foreclosure scenario would be about $137.7 million while it may be worth as much as $236.1 million considering future rental income.

The property produced revenue of $19.5 million in 2008, $17.3 million in 2009 and $3.6 million during the first quarter of this year, FX said in its April 21 bankruptcy filing.

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