A company with strategic land holdings on the Las Vegas Strip filed for Chapter 11 bankruptcy reorganization Wednesday after its plans for an Elvis Presley-themed resort fell through. The filing was made in U.S. Bankruptcy Court in Las Vegas by FX Luxury Las Vegas I LLC, which is part of New York-based FX Real Estate and Entertainment Inc. The prepackaged bankruptcy calls for the land to be auctioned and says that if the auction doesn't yield an acceptable price, insider investors have agreed to buy it out of bankruptcy at a discount to the debt owed.
The investors include American Idol TV show owner Robert F.X. Sillerman, chairman and chief executive of FX Real Estate and Entertainment; Paul Kanavos, president of FX Real Estate and Entertainment; and Las Vegas real estate investor Brett Torino. FX Luxury listed assets of $139.6 million against liabilities of $492.6 million. Key creditors are the New York branch of Landesbank Baden-Wurttemberg, owed $268 million; and NexBank of New York, owed $220.8 million.
The company owns 17.72 acres of land at the southeast corner of Las Vegas Boulevard and Harmon Avenue that are occupied by numerous small businesses and a 125-room Travelodge motel. Tenants on the land include the Hawaiian Marketplace with multiple tenants, Smith & Wollensky, McDonald’s, Fatburger, Walgreens and Sunglass Hut.
The property is across the Strip from MGM Mirage's CityCenter development, where another Sillerman company receives royalties from the Viva Elvis production at the Aria hotel-casino thanks to Sillerman's control of Elvis Presley trademarks. In court papers, FX said a February appraisal found the property's liquidation value in a forced foreclosure scenario would be about $137.7 million.
FX said in its filing that it plans to auction the land as part of the bankruptcy process, but if there is a lack of qualified bidders, the investors have agreed to acquire the property for about $260 million including $15 million in cash and a new mortgage of about $245 million. The property produced revenue of $19.5 million in 2008, $17.3 million in 2009 and $3.6 million during the first quarter of this year, FX said in its filing.
In explaining the bankruptcy, FX Luxury President Mitchell Nelson said in an affidavit: "The current global financial crisis has had a particularly grave impact on the Las Vegas real estate market, including a substantial reduction in the number of visitors and per visitor spending, the abandonment of, and/or loan defaults related to, several major new hotel and casino development projects as well as publicly expressed concerns regarding the financial viability of several of the largest hotel and casino operators in the Las Vegas market."
"The current economic climate has also adversely affected the properties’ commercial leasing activities and, as a result, debtor has failed to maintain its previously high tenant occupancy rates amid these market conditions. In addition, market forecasts indicate Las Vegas may experience a prolonged decline in the development of new hotels and other entertainment venues, which could adversely affect any potential redevelopment of the properties for the foreseeable future," Nelson said in his statement.