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twitterDAILY MEMO: GAMING:
Smaller casinos in big debt, too
Three have one unlucky lender in common
Monday, April 20, 2009 | 2 a.m.
Sun Archives
It’s not just the big boys running into trouble for accumulating too much debt. Smaller casinos, including the Greek Isles and Hooters, have also become the pawns of lenders.
Their operators owe millions of dollars, rather than billions, but their predicament is parallel to that of the debt-laden gaming giants grabbing the headlines.
Like buyers who fixed up an overmortgaged home before taking a big pay cut, the owners of Hooters, who include the creators of the restaurant chain and the Japanese owners of the former San Remo, accumulated $145 million in debt on a company that generated $7.4 million in cash from operations last year. The property is expected to make even less this year, when $13.5 million in debt maturities and interest payments are due.
Hooters’ owner, 155 East Tropicana LLC, has fully extended its credit facility and failed to make a $5.7 million interest payment due April 1, which could trigger a Chapter 11 bankruptcy protection filing.
A lender’s dilemma
Their lenders may end up with a fraction of what they are owed from the sale of the property in a foreclosure auction or bankruptcy transaction.
One potential loser is Canyon Capital Realty Advisors.
Canyon — a Beverly Hills firm with more than $10 billion in capital that specializes in short-term, high-interest-rate loans paid back once a project is completed, refinanced or sold — gambled on a number of the small Las Vegas casinos encountering trouble in this economy.
One of these gambles paid off. The company dodged a potential bullet by receiving payment for a $48.5 million bridge loan used to finance the transformation of the former Hotel San Remo into a Hooters-branded casino.
Hooters owners replaced the bridge loan with public bond debt more than three years ago, before the economy soured.
But its investment in the Greek Isles casino, which is further along the road to insolvency, isn't doing so well. The subject of various redevelopment plans over the years, the Greek Isles had a big selling point with its Convention Center Drive location and proximity to the Las Vegas Convention Center. That means less in today’s economy.
The casino received a $56 million loan from Canyon in July 2007, when owners GIH-SPE II purchased the property for $48.9 million. The owners failed to pay the balance and interest owed when the loan matured in July 2008.
A Canyon subsidiary, Canpartners Realty Holding Co., filed suit in January to enforce its right to receive future rents and profits and appoint a receiver to oversee management. (Lenders say the owners didn’t maintain the property as required and didn’t pay expenses, exposing the lender to liens from creditors. Former Caesars Palace President John Groom was appointed receiver in February.)
A battle for position
A small group of unsecured creditors filed a Chapter 11 bankruptcy petition against the owners this month, which would temporarily halt any foreclosure proceeding by the lender and is a possible preemptive strike by the creditors, who may want to take their chances recovering any cash in bankruptcy.
Meanwhile, the Lady Luck casino downtown, where Canyon funded a $66 million bridge loan for a planned renovation, isn’t generating any revenue. Owner Andrew Donner closed the property in 2006, hoping to redevelop it as a boutique hotel.
Canyon’s recent misadventures with small Las Vegas casinos are a stark contrast to recent years, when Las Vegas developers didn’t have to build anything to make money.
In late 2005, Canyon financed an investment by developer Concord Wilshire in 7.6 acres north of Circus Circus — the site of a proposed Maxim magazine-themed resort. The plan was short-lived and Concord, which paid $90 million for the land, sold it two years later to Circus Circus owner MGM Mirage for $131 million.
Editor's note: This story has been corrected to note that Canyon no longer holds the Hooters' debt.
Discussion: 10 comments so far…
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The results will be layoff's in all these locations. City and County Government should do all they can to cut costs now so the problem with government revenues doesn't multiply. Where is harry Reid? Wasn't he suppose to protect Nevada in all this? What good has he done except pressure banks to make more shaky loans to companies he favors?
John Ensign is ruining Nevada
I wish whoever reports on these stories would get facts straight and not just take someone's word. There were no liens on the Greek Isles Property prior to foreclosure. And the only 'creditor' who filed for bankruptcy was an owner-DI Developement.
The only expense not paid was the mortgage interest.
CanPartners removed the prior managing company and replaced it with Epic Gaming-who the Receiver John Groom currently works for. They are the ones paying bills late and allowing the profits to drop.
Comment removed by staff.
too bad the big boys cater to all the money.Maybe if they would have left Vegas to be what we all enjoyed,The old vegas.Instead of trying to outdo each other with the fanciest and largest buildings,why can't they put up some reasonable housing apartments that the average american can afford to rent.We are retired and have come to Vegas for 30 years,staying a month or so in winter.It is getting very hard to find anywhere we can stay,reasonable. I am sure they could still make money on a nice apt house,instead of condos we can't begin to afford.
Wake up Las Vegas,before its to late.Ourdollars help put you there
I remember seeing "Showgirls of Magic" at the San Remo Hotel. That was a great show. Hooters in Pasadena, CA closed. I don't know why, but then a LOT of businesses in Pasadena have disappeared, even on fancy South Lake Avenue.
The Depression of 2009 is going to go on--and on--and on--and on. Nobody has money to spend, especially college grads with their average $22,000 in student loans to pay back to loan shark companies like Sallie Mae.
Oprah is a BIG cause of the current depression. She told everybody to go college. Now those college grads have to deal with their student loans and they don't have ANY money to spend--and those are the people who usually spend a lot of money on stuff like Blu-ray DVD's and trips to Vegas.
i always thought the day hooter's opened it kinda signaled the beginning of the end.
hooters is totally cheesy, totally corny, and stupid, and there's one in every town in america. people come to vegas to see what they CAN'T see in nebraska or ohio.
san remo was a forgotten hotel, but i stayed there for a few day in 2001 and it was nice.
things are getting worse. i work in the trade show industry selling displays and booths and almost every time we made a graphic or booth for someone, we'd send it over to the convention center. now...i send them to denver, pensacola, orlando.
we're losing convention business. it's just a drip, but it's a steady drip.
you can only stick it to people for so long. times get tight and they start looking at those balance sheets and say "we can save $20,000 by having the trade show in denver instead of vegas".
I'm sorry, but did manfromuncle1 actually write that Oprah is BIG cause of the current depression because she told people to go to college? Dude, seriously....really?!?! My parents told me that when I was in high school, I went to college, I got a good job, and paid off my student loans. I'm now 44, own a home and have an excellent paying job. So now Oprah is a BIG cause of the current depression because she's telling others what my parents told me years ago?!?!? Dude, seriously....really?!?!
Yes, really. It's irresponsible for Oprah to tell people to go to college and not warn them about student loan debt, and not tell them that college is not a good idea for everybody. I work at a big box store and everybody has lost a lot of hours because of slow sales. What's SCARY is that sales have not improved AT ALL in the last 3 months. I don't think any help can come from 20-something college grads (who usually are the ones who buy the newest stuff) because they owe an average of $22,000 on their student loans. Did the article say that Hooters Casino owes $145 million but it generated only $7 million in cash last year? That is shocking. When the recovery comes, it's going to be at a glacial pace, and not fast enough to save City Center, or Hooters, or MGM Mirage.
And you wonder why you work in a box store....