Wednesday, Sept. 26, 2001 | 11:12 a.m.
It cost $276 million to build the Regent Las Vegas, the luxury Summerlin hotel-casino that opened in July 1999.
On Tuesday the now-bankrupt property was sold for $80 million to a Canadian real estate firm -- a bid that went unchallenged in a three-hour bankruptcy court hearing.
Larco Investments Ltd. of Vancouver, the buyer of the Regent, has real estate holdings throughout the United States and Canada, including hotels, shopping centers, office and industrial buildings, apartment complexes, mobile home parks and storage facilities. Larco officials declined to discuss their plans for the Regent following Tuesday's hearing.
The price paid by Larco will result in huge losses for the Regent's creditors and mechanics lien holders, who had claims exceeding $300 million. Not even the resort's mortgage holders will receive full payment, as they are owed $110 million.
That steamed some creditors, who had seen the sale process delayed by months and numerous potential bids for the Regent fall through. Ken Pasquale, an attorney for unsecured creditors, said previous appraisals had placed the value of the Regent at $160 million. At $80 million, unsecured creditors are likely to receive nothing from the sale.
"It is an understatement to say the creditors committee is disappointed with the value seen today," Pasquale said. "This (sale) process was not where it should have been."
Frank Merola, attorney for the Regent, agreed the price was disappointing. But he insisted this was the result of the chill cast over the Las Vegas gaming community from terrorist attacks on the East Coast Sept. 11, not the outcome of a flawed sale process.
"I think the (sale) process worked," Merola said. "It's just a difficult climate right now to be selling a troubled gaming company."
Merola pointed to the plunge in stock prices of some of Las Vegas' most powerful casino operators in recent days.
"To try and sell a property of this size, with its history of problems, is difficult," he said.
It appeared, going into Tuesday's hearing, that the sale process would be the brisk competition Regent attorneys had expected. Rumored buyers had included Coast Resorts, Station Casinos Inc., Stratosphere owner Carl Icahn, Silverton owner Ed Roski Jr., Starwood Hotels and Resorts and Desert Inn owner Steve Wynn. Several major casino operators had been interested in making bids prior to the events of Sept. 11, Merola said.
Four companies ended up filing bids challenging the Larco offer, including a partnership between Omni Hotels Corp. of Irving, Texas, and Las Vegas real estate development firm Peccole Nevada Corp.
But three of the four bids were thrown out by Regent attorneys before Tuesday's hearing even started. One bid that was dismissed was the Omni-Peccole offer of $91 million. The reason, Merola said, was that $60 million of this bid came in the form of debt, not cash -- and therefore the bid could not be considered superior to Larco's cash bid. Omni and Peccole did not make a new offer.
Also rejected by Regent officials were bids by Cherokee Enterprise Inc. of Las Vegas and Winecoff Hotel LLC, a California firm. Cherokee offered $200 million, but its offer was entirely in the form of preferred shares. In its bid sheet, Cherokee said it planned to go public by merging with a publicly traded shell company. The preferred shares could then be converted into 40 percent control of Cherokee, the filing said.
"We've having trouble understanding it," Merola said. "Given the information we received, we have no ability to value this stock."
Winecoff easily had the most unusual blueprint for the Regent. The company, an affiliate of the Disciples of Christ Outreach Ministry, offered $140 million for the Regent.
Had Winecoff acquired the property, it would have been converted into a Christian resort, said Michael Floyd, vice chairman of the ministry. The casino would have been converted into a filming area for a "televised ministry"; gambling and alcohol would have been deep-sixed.
Floyd said he was a former investment banker. Asked why he would establish such a ministry in a luxury hotel-casino, he had a simple answer -- he had been called by God to do so.
"I would have done this very differently, but I am seeking and following the Lord's guidance," Floyd said.
Winecoff's bid was turned down, as Regent attorneys said its South Carolina investment banker did not have experience in the size of the deal that had been proposed. But Floyd insisted after the hearing that he was not done pursuing the Regent.
"We shall acquire it," Floyd said. "It was pursuant to the direction of the Lord that we came here."
With these bids gone, the only bid left challenging Larco was an $85 million offer by American Property Management, a San Diego firm that owns about 40 hotels across the country.
But American Property officials stunned the audience when they announced they were withdrawing their offer. They then appealed to Bankruptcy Judge Robert Jones to delay the sale hearing for one week.
The company's attorneys explained to Jones that they had planned to fly to Hong Kong to secure funding for their deal, but had been delayed when flights were shut down after the terrorist attacks. Another week was required to secure the funds, they said.
"If the intent of everyone is to get the maximum price ... we are the maximum price," said American Property attorney Richard Alter.
The motion was supported by attorneys for the unsecured creditors, who hoped more time would help push up the sale price.
No one was surprised more by the request than Regent officials, who thought up until the hearing that American Property was ready to proceed.
"This is outrageous," Merola fumed. "We worked on this through the weekend ... and now they want us to wait for money from Chinese banks. This is exactly the type of transaction we wanted to avoid. We have to sell this property."
Larco then raised the stakes. If Jones delayed the hearing, Larco attorney Jeff Patterson said, Larco would yank its offer.
"We agree the events of Sept. 11 have made things difficult for everybody," Patterson said. "But we have precious little time to complete this procedure. We cannot agree to an extension. Given the uncertainty of economic times, the state of war and peace in this country, we need a decision today."
Jones decided not to risk the possibility the Regent would end up without any bidder at all in a week's time -- as American Property would not be compelled to bid on the Regent in a week.
"We've set the rules for this (sale) schedule," Jones said. "The most critical element, in my mind, is that we could lose the (Larco) bid."
The decision infuriated Alter.
"The process failed because there was no auction ... they gave it away," Alter said after the hearing. "We were planning to go to Asia and get the money, but we couldn't get a flight. It was the ultimate in de facto force majeure (a legal term for an uncontrollable event). We've had a (expletive) war."
The 461-room luxury resort, built by Swiss Casinos of America, has been operating under bankruptcy protection for the past 10 months. It filed for Chapter 11 bankruptcy on Nov. 21, 2000, 16 months after opening.
In May a team comprised of Peccole Nevada, Heller Financial Corp. of Chicago and PDS Gaming was designated the preferred bidder for the property with a $150 million bid. This was the first step in the sale process, much like an opening bid in an auction.
But in July a disagreement between Peccole and Heller caused the two sides to break up, delaying the sale process. Maritz Wolff, a Los Angeles real estate firm, emerged shortly afterwards as the new preferred bidder -- but the price had then fallen to $80 million.
Earlier this month Maritz Wolff began sparring with the Regent's secured creditors over the creditors' right to submit a "credit bid" -- an offer to acquire the Regent in exchange for their debt, estimated at $110 million. Maritz Wolff refused to proceed unless the creditors waived this right.
When they didn't, Maritz Wolff withdrew as the preferred bidder. The company was immediately replaced by Larco.
Larco has until Nov. 15 to close on its purchase of the Regent.