With Elvis-themed casino out, lenders want Strip property

By Steve Green

Friday, June 5, 2009 | 5:20 p.m.

Lenders are moving to seize control of a key piece of real estate on the Las Vegas Strip after plans fell through for an Elvis Presley-themed casino resort there.

Three first-lien lenders filed a lawsuit Friday in Clark County District Court against entities controlled by FX Real Estate and Entertainment Inc. of New York, which is in default on two loans for $475 million for the property southeast of the corner of Harmon Avenue and Las Vegas Boulevard, across the Strip from the CityCenter complex.

The lenders say that even though foreclosure proceedings are under way and the banks have been collecting rent from small businesses on the site, FX continues to maintain possession or control of the land.

The lenders' agent "believes that the fees and expenses which borrower and/or its related entities are currently charging the first lien lenders for managing the real property are excessive and disproportionate to those customarily paid in Clark County," charged the lawsuit.

The lenders are asking the court to appoint a receiver to take control of the land.

It appears the lenders and investors will take huge losses on the property. The first lien lenders say they are owed $259 million on their $280 million loan, but FX has recently estimated the property is worth only about $219 million.

In the foreclosure, the second-lien holders -- believed to be a syndicate of 70 or more lenders -- may recover nothing on their $195 million loan against the property.

And the rents being collected by the lenders are insufficient to satisfy interest due on the loan or to reduce the principal amount due, the lawsuit said.

The value of the land has fallen as the recession has reduced valuations in the hotel and gaming industries and commercial real estate financing has dried up.

The banks suing the FX entities Friday were Landesbank Baden-Wurttemberg, Deutsche Hypothekenbank and Munchener Hypothekenbank eG. FX officials couldn't immediately be reached for comment.

In April, FX said it may file for bankruptcy protection following the collapse of its plans to build celebrity-themed properties in Las Vegas and other cities.

The company in May reiterated it has no way of making payments to become current on the Las Vegas loans. As for legal action, including bankruptcy, it said it "cannot guarantee to what extent, if any, such actions may be viable or effective."

FX is controlled by Robert F.X. Sillerman, who also owns the wildly popular "American Idol" TV show.

FX had been promoting plans to build properties with Elvis Presley and Muhammad Ali themes and has been paying royalties to Elvis Presley Enterprises and Muhammad Ali Enterprises. Those licensing deals were canceled this year amid FX's financial troubles.

The Las Vegas property, once planned for an Elvis Presley resort, consists of six parcels totaling 17.72 acres that have in recent years been occupied by small retailers and restaurants, such as the Harley-Davidson Cafe and Smith & Wollensky, as well as a Travelodge hotel.

Because of a write-down on the value of its Las Vegas holding, and the licensing fees paid to the Presley and Ali companies, FX said it lost $462 million on revenue of $6 million in 2008.