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Developer Jim Rhodes to turn over operations to lenders

Updated Wednesday, Sept. 30, 2009 | 3:42 p.m.

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Jim and Glynda Rhodes

Las Vegas homebuilder Jim Rhodes has agreed to turn over most of his Southern Nevada residential development operations to lenders to close his companies' bankruptcy cases, court records show.

A plan filed last week also says Rhodes' companies will pay the lenders $3.5 million and Rhodes will maintain control of some operations in Arizona.

The plan was filed by lenders led by Credit Suisse Group AG that say they are owed $325 million. The Southern Nevada assets they are picking up include Rhodes' Rhodes Ranch and Tuscany developments.

Rhodes Ranch includes about 314 finished and unsold home lots and another 1,993 lots that have yet to be developed. Tuscany has about 350 finished lots and another 599 partially developed lots, records show.

Rhodes is the founder and president of Rhodes Homes and will not be part of the new Nevada homebuilding company emerging from the bankruptcy.

Rhodes said in a statement today: "This agreement was reached following extensive and positive negotiations between the main constituents."

"There is significant value to the holdings and to the continued operation of the homebuilding entities that make up Rhodes Homes. Our consistent focus was to create a solution that would provide the best results for current homeowners, that will keep people employed building new homes and that will ensure that trade claims will be paid. We accomplished that," added Rhodes, who has blamed the recession for his companies' inability to meet debt payments and their subsequent bankruptcy filings in March.

Rhodes Homes will be managed by a board of directors appointed by the lenders, and since Credit Suisse and the other lenders aren't in the home-building business, they're likely to be looking for buyers for the Rhodes Homes assets and other real estate assets they control in Southern Nevada.

The bankruptcy case has illustrated the rise and fall of the Las Vegas real estate market, in the late 1990s and through mid-2006 consistently one of the hottest in the nation.

Las Vegas home prices have fallen 54.8 percent since their peak in August 2006, debt-rating company Standard & Poor's reported Tuesday. Besides the subprime mortgage meltdown, the Southern Nevada market has been hit hard by the U.S. recession that has reduced travel to Las Vegas and curtailed big construction projects. Unemployment has soared in Southern Nevada, hitting 13.4 percent in August.

Rhodes, records show, had developed 40 communities in Nevada and Arizona since his companies were founded in 1988, generating more than $2.4 billion in revenue. Those developments included more than 6,000 homes in the Las Vegas Valley.

But in 2005, when money was easy to come by, the majority of the Rhodes Homes assets were used as collateral for a $500 million credit facility arranged by Credit Suisse -- also a big lender to the bankrupt Lake Las Vegas and Park Highlands planned communities. It was that loan that Rhodes defaulted on, pushing the company into bankruptcy.

Now, court records show, the value of the Rhodes collateral has declined so dramatically during the recession that the first-lien lenders project recovering only about 24 percent of the $325 million owed to them, up from $302 million when the bankruptcy was filed.

The lenders said their experts concluded that liquidating the Rhodes Homes land and assets would fetch only $42.5 million for creditors, but that operating the company and continuing its home-building operations would result in a recovery of $88.1 million as the real estate market is projected to improve by 2011.

The plan projects holders of $70.6 million in second-lien notes will recover just 2.8 percent of their claim.

Trade creditors, estimated to be owed $500,000 to $1.5 million, would receive a 100 percent recovery.

Holders of up to an estimated $15 million in asserted general unsecured claims would receive less than 1 percent.

Objections to the plan are due by Dec. 3 and a Dec. 17 confirmation hearing in U.S. Bankruptcy Court in Las Vegas has been scheduled.

The plan will be funded with home-building operations, Rhodes' cash on hand and expected recoveries from a pending lawsuit, the first-lien lenders said in their plan.

Besides the golf communities Rhodes Ranch in southwest Las Vegas and Tuscany in Henderson, court records show the Rhodes assets include Spanish Hills, a high-end development in southwest Las Vegas. As of March 31, Spanish Hills had two partially-developed single-family estate lots, two finished lots remaining to be sold and 10 acres of undeveloped land.

The northwest Arizona operations to be retained by Rhodes include Pravada, a development in the Kingman area of Mohave County that has 3,591 partially developed lots on about 1,312 acres.

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