Tuesday, Dec. 16, 2008 | 2 a.m.
Beyond the Sun
Former owners of Lake Las Vegas are striking back against the Henderson community’s new owners, accusing the group of shortsightedness for planning to close one of the resort’s three golf courses.
Transcontinental Corp. Senior Vice President John Plunkett and former Lake Las Vegas Marketing Director Cary Krukowski say plans by the owners to abandon Falls Golf Course, an 18-hole Tom Weiskopf-designed layout next to the resort’s entrance, will haunt the community.
Plunkett said the new owners, Lake Las Vegas Joint Venture, a subsidiary of the Atalon Group, should keep the resort intact on the expectation that the economy will recover and interest in the development will return.
A hearing on the abandonment is scheduled for Monday in U.S. Bankruptcy Court.
Plunkett told the Sun he is concerned by the direction of the new management. “When you start yanking apart the resort, it loses its cohesiveness and it loses its value. It can be another tract community, and that’s not what anybody out there intended ... Based on what I am seeing, the current creditors and management are looking to (hoard) land ... In my view, they are shooting themselves in the foot.”
The new owners say Falls Golf Course is projected to lose more than $1 million from last August to next July. Carmel Land & Cattle Co. is the principal lender with a lien on the property securing $15 million in debt, but the property is worth far less than that, according to Lake Las Vegas President Frederick Chin, founder of Atalon.
He said the decision to close the golf course was made after a thorough analysis, including examining the repercussions. With the economy having worsened since Lake Las Vegas entered Chapter 11 in July, the Falls is bleeding cash with no reasonable expectation of a change of circumstance, and there is no financing to continue funding operations and maintenance, Chin said.
No creditors have offered to advance any amount toward the Falls’ operating shortfall — a lack of commitment that “speaks volumes about the value and importance they truly ascribe to the Falls,” he said.
Plunkett worries that Lake Las Vegas also will abandon Reflection Bay Golf Course. Chin said no decision has been made.
“We want to see the golf course running, but we have an obligation to protect creditors,” Chin said. “We can’t continue to spend money and not have an upside for the estate.”
It’s been nearly a year since investment bank Credit Suisse foreclosed on the master-planned community developed by Transcontinental after it defaulted on a $540 million loan. Transcontinental executives are monitoring the development because it still has a 46 percent stake in the Ritz-Carlton and other land holdings and interests at Lake Las Vegas. Its executives also own homes there.
The Atalon Group served as the chief restructuring officer for the previous owners before striking a deal in January with Credit Suisse to acquire the 3,592-acre community. Lake Las Vegas Joint Venture filed for bankruptcy protection in July.
In trying to restructure its loans with the creditors, Transcontinental waived its right to bankruptcy protection because that would have generated negative publicity that could have harmed the resort, Plunkett said. Executives now regret doing so because that’s what happened when they departed, he said.
“We don’t understand the decision they made to go down the bankruptcy route anyway,” Plunkett said. “And I do feel had we known it was going to go down this route, we would have taken that route ourselves. In our view nothing has been done to stabilize the resort. It has been a series of sideshows — motions to disqualify attorneys and abandoning operating assets that are critical to the resort. I fail to understand that.”
Chin said his job is to recover for the creditors as much as possible by prudently spending money.
“My concern has always focused on the overall community and more specifically, the assets that are part of the community and of the bankrupt estate,” Chin said.
Plunkett maintains the resort can still have a bright future.
“Let’s face it. It is a one-of-a-kind asset,” Plunkett said. “Where can you get a 300-acre lake in the middle of the desert? ... We still view Lake Las Vegas as a pristine beautiful place to live, and we hope the direction is to maintain that.”
A version of this story appeared in this week’s In Business Las Vegas, a sister publication of the Sun.