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Town Square
Published Thursday, Jan. 13, 2011 | 9:34 a.m.
Updated Thursday, Jan. 13, 2011 | 4:10 p.m.
Map of Town Square
Town Square
6605 S. Las Vegas Boulevard , Las Vegas
Lenders owed $449 million have asked a New York bankruptcy court to allow them to foreclose on and resell the big Town Square mall and office complex in Las Vegas.
Talks for a voluntary foreclosure have broken down, attorneys said in a motion filed this week in the massive bankruptcy case of Lehman Brothers Holdings Inc.
The lenders seeking to foreclose on the Las Vegas mall are led by their administrative agent, the Bank of Nova Scotia, New York Agency.
Bank of Nova Scotia claims Lehman Brothers is not a party to the first-priority mortgage encumbering Town Square and that Lehman "has no property interest in the Town Square Mall."
Nevertheless, a title insurance company handling the foreclosure has told Bank of Nova Scotia that any title issued after the foreclosure will exclude a $72 million claim Lehman has asserted against Town Square's developers, brother and sister Jeff and Jacquelyn Soffer.
The Soffers' Florida-based Turnberry development company is known in Las Vegas for developing not just Town Square, but high-rise condominiums and the bankrupt and stalled Fontainebleau casino resort.
In 2009, the Soffers sued Lehman Brothers, the collapse of which in part triggered the nation's financial near-meltdown in 2008.
The Soffers and three of their companies charged Lehman had reneged on part of a commitment to provide $1.5 billion in financing for three projects developed by the Soffers' Aventura, Fla.-based Turnberry Associates development company, where the siblings are executives.
The projects were the Fontainebleau Las Vegas retail project, the 93-acre Town Square shopping center in Las Vegas and the Aventura Mall in Florida.
While the Fontainebleau and Aventura financings closed, Lehman Brothers failed to provide promised long-term financing for Town Square in Las Vegas, the lawsuit charged.
The Turnberry companies said the initial $520 million in Town Square construction financing was provided principally by Deutsche Bank.
Development of Town Square started in 2004 and Turnberry later sought customary long-term take-out financing as well as an additional $100 million for the project, the lawsuit said.
The Soffers asserted in their suit that at the insistence of Lehman, they personally were the borrowers in July 2007 under a $95 million "interim advance" credit facility for Town Square, with the expectation that Lehman would later include the interim advance in permanent financing.
"Lehman has now made clear that it is refusing to honor its commitment to provide the permanent financing," charged the lawsuit, filed several months after Lehman filed for bankruptcy on Sept. 15, 2008.
But Lehman Brothers, in responding to the lawsuit, denied it made representations it would provide long-term financing for Town Square and filed a counterclaim accusing the Soffers of breach of contract for failing to pay $72 million due under the $95 million loan.
Later, Lehman Brothers sued Jeff Soffer, seeking to recover hundreds of millions of dollars loaned for the Fontainebleau project.
In August, Town Square acknowledged lenders had initiated foreclosure proceedings against it and said the foreclosure would have no effect on operations at the center with 900,000 square feet of retail, restaurant and entertainment space and another 300,000 square feet of office space.
In a statement Thursday, Turnberry said talks about a voluntary foreclosure are ongoing and that it hopes to maintain an ownership stake in the property at Las Vegas Boulevard and Interstate 215.
“This filing is not a surprise, nor is it new,’’ said Mike Wethington, general manager of Town Square Las Vegas. “Our lenders filed their initial foreclosure action last summer, and we have continued to discuss a resolution with them. Those talks are ongoing. The Bank of Nova Scotia filed this action in the Lehman Brothers bankruptcy case simply to protect its interest in the mall.
"The financial negotiations taking place have no effect on the daily operations of Town Square and do not reflect the shopping center’s performance. We’ve opened approximately 16 tenants in 2010, and several additional ones are on tap for 2011. Our retailers, restaurants, vendors, employees and customers will notice no changes as a result of this action.
"Turnberry continues to manage the property, and we are optimistic that we will emerge from these negotiations with those management rights and an equity interest in the mall,” Wethington said.
The $72 million allegedly owed by the Soffers to Lehman Brothers for the Town Square loan remains a hurdle for Bank of Nova Scotia as it tries to foreclose on Town Square.
Bank of Nova Scotia insists the Lehman Brothers bankruptcy estate has no enforceable interest in Town Square -- in part because an appraisal found the value of the property in May was $415 million and has likely fallen further since then, less than the $449 million owed under the first-priority mortgage.
Attorneys for Lehman Brothers have not yet responded to those assertions.
Zzzzzzz ... and the unwinding continues.
as long as it doesn't affect the operations it's not really a big deal for us not involved with the project. Town Square is definitely one of the best places in town to eat, shop, and play.
Town Square is beautiful..but it has to make money. Otherwise it's a slow descension to disrepair.
I totally agree Jerry. We go there all the time.
Town Square is an awesome place! Convenient, safe, great stores, restaurants, entertainment - it's the whole package wrapped in a beautiful environment!
I also agree with Jerry, glad we won't be affected by it.
@Martin9, if you don't see a need for it, at least it provides great sales tax opportunities for our state's coffers without taking anything! Geez....
I too love Town Square. Reminds me of California.
It is nice to hear that it will remain open.
@Jenlv etal - everytime a place closes down that means people lose a job - so yes, we ARE all affected.
It's a fine mall, opened at the wrong time. But it's still a mall, a movie-set recreation of an imaginary Main Street, a facsimile of community and culture. Let's keep it in perspective: if it closes, the Fashion Show does the job just as well (actually better, when it's freezing outside).
ROFL
Leave it to some of the posters on here to make positive of this
This is so SUBLIMINAL that it went right over most peoples heads
If you cant see the Underlying issue here,except to make comments on "oh well it wont affect us" it is a wonder how any of you survive on a daily basis
This is very telling of what is going to continue to happen in this S******* atleast for another 3-5 years
aria,harmon,PH towers,town square,lake las vegas,the district,restaurants,hell even evas place,city center retail shops,the M,etc,etc,etc
WAKE the HELL UP PEOPLE
Not to mention our WATER is gone in 4-8 years for good
Happy New Year
ROFL this is all i do when reading how you are so oblivious to what is happening around you
Just remember everyone,YOU can only live off your credit cards for so long!
ROFL!
What I don't get is why don't developers finish one project, get it up and running, then start paying it down before taking on more debt? Is it greed or stupidity? This recklessness seems to be a big factor in why we had the meltdown. The Fontainebleau was such a great project and, now, just look at it - an empty shell rusting in the sun.
I also love the new Companies that will put a bid into the property thinking they will be the ones to make it profitable
90% isnt the current owners fault,it is the window shoppers,and people watching,but only buying a coke and drinking it just to get out of the house doesnt pay the lease
Same thing on the strip,there are tons of people on the strip,BUT they dont have the expendible income anymore to make the businesses profitable,so they get into the herd mentality,and walk up and down,and maybe frequent a vendor or two
The 1/2 of 1% of people that have all the money are not spending it here anymore,and this trickle down will continue
The media has taken a small break with the deluge of negative issues facing this state,due to the holidays,but it will be returning shortly,GUARANTEED!
peace out
"bldblu" I'd say your sky has fallen already. Time to hightail it out of Las Vegas and let those of us who care figure it out.
"This recklessness seems to be a big factor in why we had the meltdown."
Jerry, you may be right in some regard, but that "recklessness" is also what fuels Las Vegas. Sometimes it works, sometimes it falls flat, but I prefer a place where people at least try and sometimes fail to one where they acquiesce to the pundits and naysayers and do nothing.
My Sky has maintained its same Altitude.
But thanks for your Concern,*****
If a Comment is made,and not specifically pointed in your direction,why do you feel the need to respond.
Going back and forth would constitute a conversation,and you have nothing to say to me,AND I certainly dont need to converse with you to get through my day
ROFL
peace out
Seems very popular, but put a fork in it, it is done.
Not to get political, but Brian Sandoval can not do the Jim Gibbons tap dance. The State is in big trouble, despite the rah rah types like Alan Stock and the development board, low taxes and small government can't compete with Big China etc.
We can't compete with New Mexico on some levels, for God's sake, get real people.
Why do people have to be so negative. Town square will be fine. It wont be with the current owner but many of us enjoy the place and it will be here to stay. Also as for the rest of this town, I promise we will figure out the water issues, and you may see more companies in bankruptcy but come out fine on the other side on good financial footing. People love Vegas and we will be fine. I'm not gonna let a bunch of pessimists stop me from conducting business here and raising my family here and being happy here.
I agree with Mr. Reza. Let those with an optimistic view of Vegas remain here and figure it out. Those with a negative view should move along. I actually like the quiet. We're not dead, just restructuring.
Exactly VC - I doubt some of these negative commenters even read the article.
Azsk8fan - they're NOT closing, so we are NOT affected. No one is losing their jobs... geez..
They can't rent that space above retail out for offices, it's right under the flight path! Imagine that while you're in a conference call!!! So yes, I wonder what they were thinking with that idea...
Foreclosure on any property is never a good thing.
Whether or not the shops stay or folds doesn't mean that someone isn't getting hurt. If the big banks take the hit, they just pass it on down to you and me by way of fees, tigher lending standards etc.
If some developer goes out of business not only do people hit the unemployment line but a cog gets removed from the economic engine that employs an untold number of people.
The trickle down to little people is there and we all will feel it eventually.
Lehman's problems really started the who meltdown. They financed anything and everything, just to make the fee's. No the Banks are the biggest holders of real estate in the world..they are and were hoping this would happen. Look at LLV - The German banks were slick operators and bled the thing dry. I know cause I lived there..Did EVERYTHING RIGHT with good credit, 60% down payment so the mortgage woould be right and BAM..so for all these developers - OH WELL !!! Town Government is stupid to let these guys put one more shovel in the ground until this all clears up. And same goes for allowing banks to do it. Force the banks to be "real" and look at the market here...Kick 'em out of town for all I care and don't come back offering cheap money...for the history, just look at old Wild West films from Hollywood - the banks were crooks then and they are now..
mred, you're post is irrelevant to the topic at hand.
Parsing through the information at hand, it sounds like some Lehman entity which is in bankruptcy has a second lien mortgage on Town Center. Under the "automatic stay" provision of the Bankruptcy Code, a first mortgage lender like Bank of Nova Scotia cannot foreclose when a second or otherwise junior mortgage lender is in bankruptcy, unless the junior lender's bankruptcy judge approves.
I've been reading the Lehman bankruptcy files, sporadically, for the last two years, as well as business news stories about specific disputes under the umbrella of the Lehman bankruptcy case. As a result, my overall impression is that Lehman's bankruptcy judge in New York never allows anyone to do something to "hurt" Lehman as a Chapter 11 debtor. Comparatively, the bankruptcy judges in Las Vegas are far tougher on Chapter 11 debtors.
As a result, I expect Lehman's ever protective bankruptcy judge to "Say No" unless Bank of Nova Scotia and the other lenders it represents give Lehman a cash payment in the form of green mail.
In the not-too-distant past, wise commercial mortgage lenders would not allow second mortgages on office, commercial or industrial properties which served as their collateral for just this sort of reason. A screwed up or cantankerous junior mortgage holder usually makes a first mortgage lender's foreclosure far more difficult and expensive. The fact that regional banks, mega banks, and investment banks (including foreign banks doing business in the USA) threw caution to the wind, and allowed themselves to get into this sort of situation with title to their collateral junked up with junior liens, just shows one of the reasons why America's banking system is so messed up today.
One thing I have learned in the last two years--if you can't remain positive about the future of Las Vegas, you should get out of the way for those who still have hope. Just move aside. And if you are "stuck" here because of housing issues, you'd better become a cheerleader for southern Nevada. Otherwise, you are destined to go down with the ship. It's like "Back to the Future" set onboard the Titanic....as a hired musician, you know what's going to happen but you have to keep playing "Nearer My God to Thee" for those "passengers" who think they will survive. And there were plenty of survivors. So get out your pom-poms...or move to the back of the lifeboat line. Because 2011 is going to be one bumpy ride. We have to survive this...because there is no alternative. None. Rah! Rah!!
One of my favorite places in the city. Great variety of shops, restaurants, bars, and the RAVE theaters are great. Hopefully all will go smooth and someone will be able to take it over without any turbulence.
Well, I don't wish ill on any venture or development. But I actually agree with P_Reza's *initial* comment, as it is true that Town Square just replicates many of the chain store mall experiences that were already here in the Valley.
For those of you who enjoy going to Town Square, for now it looks like the place will survive for another day. But going forward, I maintain that the takeaway is to never again let bubble development run amok and leave the Valley with so much over-capacity, be it commercial retail development, residential, or hotel.
And in the words of BldBlu, "Peace Out."
Crap...
"mred, you're post is irrelevant to the topic at hand."
99% of mred's posts are irrelevant! As a matter of fact so is he.
I read Bank of Nova Scotia's motion for relief from stay in Lehman's NY bankruptcy case. It says, in essence, that Lehman has a lien on nearly half of the ownership interests in the mall owner's parent company, and that Lehman has a lien on nearly half of the ownership interests in the mall owner's grandparent companies. According to Bank of Nova Scotia, those liens secure a huge loan by Lehman to the Soffers, which was used by the Soffers to finance improvements to the Town Center property. In litigating against the Soffers in a lawsuit which is under the umbrella of the Lehman bankruptcy case, Lehman is making equitable claims against the Soffers, and vice versa.
What is interesting, from the motion for relief from stay, is the clear implication that Bank of Nova Scotia, and the investors in its construction loan for Town Center, willingly facilitated the making of Lehman's loan. This is just the sort of loan, complicating a bank lender's foreclosure, which would not have been allowed in the old days.
As a result it will be interesting to see if Lehman objects to the foreclosure. The hearing on whether Lehman's bankruptcy judge will allow foreclosure on Town Center is on February 16th in New York.