Monday, Feb. 2, 2004 | 10:57 a.m.
Las Vegas mortgage lender Vestin Mortgage snapped up the Castaways hotel-casino for $20.7 million at a foreclosure auction for the property this morning.
About a dozen people showed up to witness the auction, but there were no other bidders for the closed Las Vegas property.
Vestin, the Castaways' primary lender, arranged a $20 million loan for the Castaways in 2002 and agreed to loan the property another $2 million after Castaways owner VSS Enterprises LLC filed for Chapter 11 bankruptcy in June.
Vestin will now secure the property and market it for sale, Vestin spokesman Steve Stern said.
Castaways officials could not be reached for comment this morning.
The lack of bidders could be because of the difficulty in coming up with a bid of more than $20 million in cash on relatively short notice, Stern said.
"This gives (investors) some time to come in and raise the capital to buy it," he said.
Stern couldn't say how long the sale would take but said Vestin -- which could pay up to $60,000 per month just to secure the Castaways -- is expected to sell the property as soon as possible.
Vestin foreclosed on the property about two months ago. Castaways management shut down the property Thursday after Vestin seized cash collateral from the casino.
Vestin had received prior approval in U.S. Bankruptcy Court to seize the collateral, which was done because VSS Enterprises violated stipulations related to the use of that cash collateral, Stern said. Specifically, VSS Enterprises failed to maintain cash at required levels, continued to accrue debt after filing for bankruptcy and wrote checks "in excess of what it had in the bank," he said.
Stern couldn't immediately confirm today how much money Vestin had seized from the Castaways last week.
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