Published Thursday, June 4, 2009 | 2:05 a.m.
Updated Thursday, June 4, 2009 | 11:46 a.m.
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- Bridge over troubled water (5-24-2008)
Beyond the Sun
Another Southern Nevada hotel is in financial trouble because of the recession.
Lenders this week moved to take control of and foreclose on Loews Lake Las Vegas after the hotel's owner defaulted on a $117 million loan.
Loews Hotels, part of New York-based Loews Corp., intends to continue managing the property and maintain the Loews brand there, said Loews Hotels Senior Vice President of Marketing Nancy Mendelson.
The hotel is owned by Loews as a minority investor and an institutional investor partner, Mendelson said.
On Thursday, she called the foreclosure "sort of a sign of the times," referring to the recession that has put numerous hotel properties and loans into default around the nation.
But Loews remains committed to the Southern Nevada property and is keeping it open, she said.
"It's business as usual," she said. "We love that property."
Wells Fargo Bank, trustee for the lenders, sued Loews LLV Hotel LLC in Clark County District Court Tuesday.
Court papers show the hotel company, which is managed by an entity called L.H. Investments I LLC of New York, last month told the lenders that it needed an emergency loan because it was running out of cash and that without the loan it would cease operations.
The lenders, through loan servicing company CWCapital Asset Management LLC, responded Tuesday with an advance of $581,000 to pay operating expenses at the property, the lenders said in the lawsuit.
The borrower, in seeking the emergency loan, defaulted on the underlying loan, the Wells Fargo lawsuit says.
That apparently is a moot point since the borrower is willing to transfer its interest in the property to the lenders in order to get out of the loan and is unwilling to provide any more funds to cover operating losses at the property, a letter from L.H. Investments to the special loan servicer said.
Loews acquired the hotel with the other investor in a deal announced in 2006 when it was called the Hyatt Regency Lake Las Vegas Resort.
Financial trouble at the property was disclosed last year and in early 2009 by credit rating agencies, which downgraded securities that include the loan against the hotel. The loan had been collateralized with other loans into a commercial mortgage-backed security called CD 2007-CD4.
"Wachovia (since taken over by Wells Fargo) determined the loan, which had previously appeared on its watchlist, was at risk for default after communications with the borrower indicated the property was not generating sufficient cash flow from operations to pay the debt service," Standard & Poors said in a March report. "The borrower also indicated it is no longer willing to fund the shortfalls. The performance at the property has been negatively affected by increased cancellations and fewer group bookings."
Standard & Poor's said that as of March, the loan had a balance of $117 million and is secured by the property's 493-room golf course resort. The property includes 110,000 square feet of meeting space, waterfront views of Lake Las Vegas, a spa, gym, four food and beverage outlets and two pools.
At loan issuance in 2006, the property had generated average daily room occupancy of 68.8 percent and average daily revenue per available room of $133.14 during the previous 12 months, S&P said.
But between October 2007 and October 2008, occupancy had slipped to 55.5 percent and revenue per available room fell to $103.77, the credit rating agency said.
In their lawsuit, Wells Fargo and the lenders said they have commenced foreclosure proceedings against the hotel and are asking the court to appoint a receiver to manage and maintain the property.