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Gaming Guru

Arnold M. Knightly
 

Elvis investors default on mortgage

16 April 2009

LAS VEGAS, Nevada -- A group of investors who had planned to build an Elvis-themed resort on the Strip could be forced to sell their property because of a default on a $475 million mortgage loan.

New York-based FX Real Estate and Entertainment, which owns 18 acres across from CityCenter, said its lenders informed the company on April 9 of the bank's intention to sell the land "to satisfy the principal amount ... owed to them under the mortgage loan and secured by the property," a filing Tuesday with the Securities and Exchange Commission shows.

FX said it would not be able to resolve the default issue by the May 18 deadline and "is considering all legal options, including bankruptcy proceedings" to prevent a sale of the property.

The company announced in late December it had defaulted on the loan from Credit Suisse.

The value of the land had dropped to $218.8 million -- compared with the $221.3 million it cost to acquire the land between March 1998 and May 2005 -- the company's year-end filing shows.

The land stretches from the Harley-Davidson Cafe on the corner of Harmon Avenue and the Strip to the Smith & Wollensky building just north of the MGM Grand. The Hawaiian Marketplace, Travelodge and several novelty shops also occupy the land.

FX generated $19.5 million in revenue in 2008, most in rent from businesses operating on the property. The company announced in September it was abandoning plans for a Elvis-themed resort due to the "dislocation and turbulence in the capital markets."

A licensing agreement between FX and Elvis Presley Enterprises was terminated in early March when FX failed to make a $9 million annual payment.

The company also announced it was voluntarily delisting from the Nasdaq National Market after falling below the required $10 million in stockholders' equity level.

FX has had its stock price fall from its initial offering date high of $10.02 per share on Jan. 10, 2007, to a low of 5 cents per share on March 5.

Shares closed Tuesday at 16 cents per share, giving the company a market capitalization of $8.4 million.

FX had until April 23 to submit a plan to Nasdaq to regain compliance by a late July deadline. However, "based on the company's deteriorating financial position," the company believed it could not regain compliance during that time frame.

FX is a partnership between Robert F.X. Sillerman, whose publicly traded company CKX Inc. owns the name and image of Elvis Presley and the operation of Graceland; hotel developer Paul Kanavos; and residential and commercial developer Brett Torino. The three men control 65 percent of the publicly traded company's stock.