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August 27, 2014

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Lake Las Vegas proposes bankruptcy plan

Proposal calls for housing that’s more affordable; former owners want plan tossed

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Steve Marcus

A view of MonteLago Village at Lake Las Vegas in Henderson.

Map of Lake Las Vegas Resort

Lake Las Vegas Resort

1600 Lake Las Vegas Pkway, Henderson

The Lake Las Vegas development on Friday proposed a plan to emerge from its $728 million bankruptcy case -- a plan in which further development of the high-end community would include more affordable housing in response to the distressed economic times.

The plan also shows the development's lenders, led by Credit Suisse Group AG, would see a portion of their loans to Lake Las Vegas converted into a controlling equity interest in the development.

The plan is now subject to review by creditors and other parties and may face amendments and objections. Other parties, too, can file their own reorganization proposals.

And the plan could be moot if former Lake Las Vegas owners Transcontinental Corp. and Transcontinental Properties Inc. have their way.

They have asked the court to throw out the entire bankruptcy case, calling it a sham since Credit Suisse controls the Lake Las Vegas debtors and therefore is both its primary debtor and its primary lender and creditor. Lake Las Vegas has denied that allegation.

An Oct. 2 hearing is set on the motion by Transcontinental, which claims to be owed $1.4 million in the case.

A lengthy disclosure statement on the reorganization plan filed Friday with the U.S. Bankruptcy Court in Las Vegas did not project how much money creditors may eventually recover under the plan, which involves further land sales and continued litigation over several issues that may result in the recovery of funds for creditors.

In a statement issued Friday, the main debtor, Lake at Las Vegas Joint Venture LLC, said highlights of the restructuring also include:

-- The reorganized company having access to an additional $10 million in financing from one or more of the existing debtor in possession lenders.

-- Credit Suisse and the other pre-bankruptcy secured lenders receiving a share of ''certain litigation claims.''

-- General unsecured creditors receiving a share of a designated fund and a share of the litigation claims.

There is also expected to be provision for the completion of some work to enhance the development financed by local improvement district bonds, as well as payments to vendors that provided pre-bankruptcy infrastructure work.

"The company, the (lending) agents and the Creditors' Committee have worked hard to develop the foundation for a Plan of Reorganization that strikes a fair and reasonable compromise for all stakeholders while enabling reorganized Lake Las Vegas to succeed as the real estate market recovers," Frederick Chin, Lake Las Vegas president, said in a statement.

"Although there remain issues to work out, we anticipate this agreement will serve as a sound platform for the final round of negotiations on a consensual plan and a timely exit from Chapter 11," Chin said in the statement.

Lake at Las Vegas Joint Venture and its affiliates said in the statement they reached agreement on a reorganization plan term sheet with the Official Committee of Unsecured Creditors and the agent for its main lending facilities (Credit Suisse).

The disclosure statement said the plan includes a provision for settlement of a lawsuit filed by the unsecured creditors against Credit Suisse. That lawsuit accused Credit Suisse of predatory lending to Lake Las Vegas and said its conduct overwhelmed the project with debt while draining its equity, forcing it into bankruptcy as the economy slowed and the recession deepened. Credit Suisse has denied those allegations.

Lake Las Vegas said it hopes the reorganization plan can be considered by the court during an Oct. 15 hearing. The plan contemplates another hearing on Dec. 15.

"This accomplishment is particularly gratifying, given that we had no agreement among the various constituents when these cases commenced 13 months ago and in light of the unprecedented economic and operating challenges that have transpired since," Chin said in the statement.

John Cork, the chairman of the Creditors’ Committee, said in the statement: "Creditors, the city of Henderson and many other parties that will be directly affected have been very supportive of the parties’ collective efforts to move forward with a plan.''

Lake at Las Vegas Joint Venture last month reported it held assets of $191.2 million, mostly in undeveloped real estate, against liabilities of $728.4 million. Included in the liabilities is $675 million Credit Suisse says it is owed.

The 3,600-acre Lake Las Vegas, a development 20 miles southeast of the Las Vegas Strip, includes more than 1,600 residential units, three golf courses, two luxury hotels and a casino. Two of the golf courses are closed and the third is in foreclosure proceedings.

In its disclosure statement, Lake Las Vegas painted a grim picture of the real estate market throughout the Las Vegas area and at Lake Las Vegas in particular. The debtor said the project currently includes 405 unsold lots and 104 finished but unsold homes.

''The project is directly affected by the economic health and vitality of Las Vegas. As a consequence, performance of the actively-selling new residential subdivisions at the project has been dire,'' Lake Las Vegas said in its court filing. ''During 2009, 26 new homes have sold at prices that are up to 70 percent less than previous closing prices for the same type of home. Foreclosures are at a record high within the project; currently, there are almost 100 bank-owned properties.

''Asking prices for some of these bank-owned properties are up to 90 percent below their original purchase prices (some of which were purchased less than two years ago). Second home high-density and condominium prices have suffered the greatest drops,'' Lake Las Vegas said, adding it has sold no land to homebuilders and developers since filing for bankruptcy protection in July 2008.

''Market conditions are not expected to improve in the near term. Conditions are not expected to improve until excess supply is absorbed, the record level of foreclosures abates, real estate prices stabilize, gaming demand improves and unemployment levels decrease significantly,'' Lake Las Vegas said.

Lake Las Vegas said its new business plan over the next two years includes selling what land it can in Phases I and II of the project covering its central and southern areas. These holdings are expected to fetch an average price per acre of $215,000.

If the economy improves and credit markets loosen, Lake Las Vegas said it could be sold to a third party after about two years.

Also, after about two years, Lake Las Vegas said it hopes to develop Phase III, the northern portion of the project, as a more affordable component of Lake Las Vegas.

''That new business plan envisions a predominantly residential community that provides for a variety of housing types targeted to primary full-time homeowners. Previously, the debtors' business plan envisioned a second-home, high-end residential community surrounding a contemplated fourth golf course with homes at price points generally exceeding $1 million,'' the statement said. ''The revised plan does not contemplate an additional golf course, but instead provides for a network of trails, bike paths and open spaces for community residents. The revised plan is intended to accommodate families and other residents that seek a resort-like, active lifestyle with immediate access to an array of recreational amenities (lake, golf courses, parks and trail systems) as compared and contrasted to other master-planned communities in Las Vegas that lack the project's amenities.

''Based on the revised plan for Phase III, the anticipated price points for homes are also expected to be considerably less than the over-$600,000 historical average at the project,'' Lake Las Vegas said.

Phase III includes almost 600 developable acres and can accommodate up to 4,000 residential units, said Lake Las Vegas, adding it owns more than 80 percent of the remaining developable land in that phase.

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