Las Vegas Sun

March 28, 2024

Walters sale plan gets boost from report

A plan to sell two of the three golf courses at Stallion Mountain got a boost on Friday from an appraisal requested by the development's homeowners' association.

In late April developer Bill Walters proposed the plan to sell the two golf courses in an effort to save the third. The courses are facing bankruptcy after Wells Fargo Bank notified Walters that a $32 million loan would be due in February.

The termination of the Wells Fargo loan will also cause a second, $4.5 million loan to come due, leaving the developer with a looming $36.5 million payment.

In response, he has asked owners of the development's 730 homes to approve the sale of two of Stallion Mountain's three golf courses to a home builder. Walters' plan would allow the construction of about 1,200 homes on the golf course land.

The appraisal, conducted by Lubawy & Associates, said the additional homes, traffic and reduced open space would not adversely affect the existing values.

"It is my opinion that the values of the single-family residences in the Stallion Mountain subdivision will not be adversely impacted as a result of the proposed redevelopment of the golf course to residential use," appraiser Matthew Lubawy said in the report.

The three golf courses were built between 1990 and 1995. The property was in default when Walters bought it in 1996. He sold the surrounding land for residential development in 1998. The last of the 730 homes were completed last year.

The neighborhood association's bylaws stipulate that the three courses would stay intact for 10 years, unless 51 percent of homeowners approve a change. There are nearly six years left on that stipulation.

Walters said his proposal would prohibit the construction of condominiums, apartments or two-story homes in an effort to preserve views and home values of existing residents. Terms of the sale also would include a deed restriction preventing any future development on the remaining course, Walters said. Also included would be a series of payments to maintain the remaining golf course, subsidize the guard gate and pay impact fees to homeowners.

The appraisal's findings presume that those promises would be fulfilled. The appraisal also includes Walters' estimate of a $200,000-per-acre sale price for the two courses. The price of the land would indicate fairly expensive homes would be built on the courses to complement the existing homes.

Homeowners' attorney Edward Song said the attention will now turn to getting Walters to commit to the promises in writing and determining the negative impact of one or more of the promises falling through.

"If one can provide a guarantee, it would go a long way," said Song, an attorney with Angius & Terry LLP.

Official proxy ballots on the sale have been prepared, Walters said. Those ballots include formal commitments to all of the stipulations, except a $200,000-per-acre sale price.

"Nobody can guarantee that it can sell for $200,000," Walters said. "That's not something that I, or anyone, can legally guarantee them ... I have to sell it for that in order to accomplish this, but I can't guarantee that."

The proceeds of the sale would pay off the debt, giving Golf Club of Nevada LLC, which Walters controls, debt-free ownership of the remaining golf course, a driving range and clubhouse.

If the sale of the courses is not approved, Walters said he will declare bankruptcy on all three Stallion Mountain golf courses and close them June 15.

"I've done everything in my power to save this thing," he said. "I cannot get a loan and I can't sell the land for golf courses. I have run out of options."

Residents have been worried, Song said prior to receiving the appraisal Friday.

"Are the residents for or against it?" Song said. "I would say the reception so far has been very mixed."

Getting the approval of most homeowners will be critical. While obtaining the approval of 51 percent of the homeowners would meet legal requirements, Walters said his target is 90 percent. That would make the sale more attractive to the three builders interested in the purchase.

"They made it clear that the only way they would be interested is if we have a consensus of homeowners," Walters said.

Song said making a decision in such a short time frame has been a problem.

"My only regret is that this was kind of brought to a head in a very expedited and urgent manner," he said Thursday. "All this could have been done weeks ago and months ago ... At this point, it is a bit chaotic."

Walters said he was informed by Wells Fargo nearly two years ago that the loan would not be renewed. At that point, however, there was little concern that a new loan could be negotiated.

"When they called our loan, I wasn't the least bit concerned," Walters said. "At that time, the golf business in Las Vegas was booming. There was more demand for golf than there were golf courses.

"About the same time, the golf industry started to come under a lot of pressure. Throughout the United States and Las Vegas, golf courses were becoming overbuilt."

With that, a national search for a bank willing to fund a new loan failed. When a new loan could not be negotiated, he sought deals to sell the courses to new operators, Walters said. On two occasions, he said, tentative agreements on a sale were reached, but both collapsed.

Now, he said, the weak economy and travel concerns since Sept. 11, 2001, have sapped the profitability of Stallion Mountain's golf operations.

"Cash flow is way, way short of paying the current debt," Walters said.

Still, resident Roger Hamrah questioned the timing.

"There is far too little time for the proper facts to be presented," he said prior to release of the appraisal. "Whether this guy is for real or not, there's not enough time to tell."

Resident Robert Fitzgerald said keeping all of the courses would be the preferred option, but that may not be realistic.

"What (Walters) is proposing may be the best option," he said, adding that a bankruptcy proceeding would leave homeowners with no control.

"When a lender liquidates property ... their primary focus is on recovering debt. What happens to the property usually has very little to do with the residents."

Jerome Johnson, another Stallion Mountain resident, said he will take his cue from the homeowners' association.

"It brings up a lot of questions from a lot of people," he said. "I want to see what the homeowners' association is going to do. I am hoping we can find out what is really happening so we can make a good decision."

In addition to home values, a chief concern is whether the possibility of bankruptcy for the courses is valid, Song said.

"What has been proposed in the alternate of this plan is that he would be forced to file bankruptcy ... That's a concern," Song said. "As for the veracity of the claims and doomsday predictions, it's too early to determine."

Now that an appraisal has been completed, Song said he plans to meet with the homeowners' association's board of directors early this week, and he said a meeting with Walters would follow soon after.

While there is still plenty of uncertainty, the appraisal adds credibility to Walters' proposal, Song said.

"It confirms Billy Walters on his face and first outward appearance to the homeowners is not acting disingenuously," he said.

In addition, the proposal would commit Walters to $805,000 in impact fees paid to residents if the sale is finalized. The deal also calls for a $500,000 payment from Walters that would reduce the $225 annual fee residents pay for the operation and maintenance of the Stallion Mountain's guard gate by 60 percent, and $500,000 for capital improvements on the remaining course. Walters would also have to pay $500,000 in legal fees and title costs.

Walters said even if the sale goes through, he will still have a sizable amount invested in Stallion Mountain.

Including debt and the cost of settling promises with homeowners, Walters' investment in Stallion Mountain is about $61.3 million. At an asking price of $200,000 per acre for the two courses, Walters would receive about $50 million. That would leave the developer with unrecovered costs of about $11.3 million.

"That's a best-case scenario," he said, adding that his opportunity to recoup the balance of his investment would come from the operation of the remaining golf facilities.

Ultimately, the golf courses will be sold, Walters said, whether it's through the current proposal or bankruptcy proceedings.

"At the end of the day, this thing is going to happen one way or another," Walters said. "No doubt about it there is going to be change .. They've got a choice here, but they've got a good choice."

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