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StumbleStalled NLV development files for bankruptcy protection
The Park Highlands housing development in North Las Vegas has filed for Chapter 11 bankruptcy protection. The developers may be able to restructure their debt and resume building when the economy improves.
Tuesday, May 12, 2009 | 9:02 a.m.
Planned development
Sun Topics
The stalled Park Highlands master planned housing development in North Las Vegas has voluntarily filed for Chapter 11 bankruptcy protection.
Ground was broken in 2007, but work has since been halted on the project, which planned for 16,000 homes on 2,675 acres northeast of Elkhorn Road and Decatur Boulevard. With a Chapter 11 filing, the developers may be able to restructure their debt and resume building when the economy improves.
Led by Southern Highlands developer Olympia Group, the project initially attracted participation from homebuilders D.R. Horton, American West, Standard Pacific and Astoria. D.R. Horton had bought about 20 percent of the acreage for $127.8 million, but later sold its interest in the project, Moody's Investors Service said.
Olympia bid $639 million for the land at a Bureau of Land Management auction in 2005.
As the economy weakened, work was halted with no homes being built. Proposed casinos to serve the development also have not advanced past the proposal stage, while the Clark County School District and the city of North Las Vegas have followed the lead of the developers in delaying their own projects in Park Highlands.
Friday's filing in U.S. Bankruptcy Court for Nevada by the development partnership, November 2005 Land Investors LLC, said the company has an estimated 50 to 99 creditors owed a total of from $100 million to $500 million and that assets also total $100 million to $500 million.
Major creditors include Western States Contracting of North Las Vegas, owed $1.16 million for development services; the city of North Las Vegas, owed $221,074 for development services and G.C. Wallace of Las Vegas, owed $61,309 for development services.
Moody's today lowered the probability of default rating of November 2005 Land Investors LLC to "D," meaning the company is in default on some $224 million in bank debt.
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The Sun
Locally owned and independent for more than 50 years.
$239,000 per acre of desert.
Freaking unreal. They will never turn a profit.
Considering D R Horton's other legal problems like defending against nationwide predatory lending and mortgage fraud from their in house affiliated lender, DHI Mortgage, its a good thing that they cashed out on this project. Defense attorneys are expensive.
This land development partnership's bankruptcy, like many others around the country, will end up in a predictable way.
Because the mortgage debt is rated by Moody's Investors Service, we can tell that the original mortgage lender sold off pieces of it, often called participations, to other banks and investment groups. The continual lowering of Moody's rating of the debt will mean that the original buyers of participations in the mortgage loan will sell their participations, at a loss, to third party speculators.
The only way this land investment partnership will "get out of Chapter 11" will be if they find refinancing of that mortgage. dIn this economy, that simply isn't happening.
Instead, the third party speculators will go to the original, lead lender and, in effect, vote to take ownership of the property, and hold the land until "better times". About 10 years ago, Congress created an "express lane" for mortgage lenders on "single asset entities" to quickly get authorization (relief from stay) to foreclose through the bankruptcy court.
The speculators who bought the debt will decide whether to hold the property without a local land developer leading the group, or whether to pay a new developer to lead the group, or whether to "keep" the original developer Olympia Group as a manager of the property.
This bankruptcy should have no effect on the average Las Vegan.
However IF the people who own and control the remaining undeveloped land at Southern Highlands guaranteed the big loan on Park Highlands, through the course of litigation or settlement on the guarantees, ownership of the Southern Highlands land development entity could pass to the current holders of the guarantee, i.e. the speculators who buy up the loan participation pieces on Park Highlands. That would be very, very unnerving for Southern Highlands residents.
Usually this sort of guarantee litigation goes on in the Federal District Court in New York City, so local people do not find out what is happening to the developer of their community until some clever reporter finds the lawsuit and follows it to its end.
The developer of Summerlin, Howard Hughes Corporation, is in Chapter 11 bankruptcy in New York. Channel 8 reported that even the management company for the Southern Highlands Master Association is part of that bankruptcy. However neither the Sun or Review Journal have reported on that bankruptcy or followed that story for the benefit of the average reader who lives in Summerlin. As a result, I have no expectation that the average reader in Southern Highlands will get much advance warning if the loan default and bankruptcy at Park Highlands will ultimately affect their community.
At most, we will see a press release from the development company saying "Everything is fine", which of course will not be true if guarantees by the master developer on Park Highlands drag its other real estate holdings into the mud.
Correction:
"Channel 8 reported that even the management company for the Summerlin Master Association is part of that bankruptcy."
Again, why isn't the press in Las Vegas keeping tabs on the Summerlin bankruptcy story?
Nobody cares about Summerlin, that's why.