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Best of Chris Sieroty

Gaming Guru

Chris Sieroty
 

Vegas Hard Rock files lawsuit to halt foreclosure

4 February 2011

LAS VEGAS, Nevada -- The Hard Rock Hotel in Las Vegas claims a company trying to foreclose on the struggling hotel has no right to do so and is trying to gain an advantage over other investors, according to a lawsuit filed in New York Supreme Court.

In the 825-page lawsuit filed on Tuesday against an entity created by NorthStar Realty Finance Corp. of New York, the Hard Rock said it was bringing "this action ... to prevent NorthStar from foreclosing on a major Las Vegas hotel casino and destroying plaintiffs' equity value as a consequence."

NorthStar's entity, NRFC HRH Holdings LLC, disclosed on Friday it had filed a notice of foreclosure against the hotel. A foreclosure auction has been scheduled for 1 p.m. PST on Monday.

The entity has the option to acquire the hotel-casino or sell its interest in the property to the highest bidder. NRFC HFH Holdings controls a piece of the $1.36 billion loan used to acquire and renovate the property, which was restructured in 2009.

On Feb. 9, $1.25 billion in debt will mature, the Hard Rock said. In its lawsuit, the company said NorthStar's claims of default were based on "non-meritorious" allegations and claimed the company wanted to sell the hotel on the courthouse steps within 5 days notice.

"This last-minute attempted foreclosure is to take place two days before the maturity of substantial debt senior to the NorthStar loan, making it perfectly clear that (its) efforts are tactical and self-centered, rather than some legitimate attempt to vindicate its legal rights," the lawsuit says.

The Hard Rock also claims the alleged default is "not based on any failure" to pay NorthStar for amounts owed under a mezzanine loan agreement.

The Hard Rock Hotel was built in 1995 and recently completed a $750 million renovation and expansion. The hotel-casino features 1,500 rooms and has approximately 2,800 employees.

The Hard Rock also claims that Nevada law requires pre-approval by the Nevada Gaming Commission of any sale of an interest in a property, "which has not been obtained."

The Hard Rock Hotel in Las Vegas is majority owned by a subsidiary of Credit Suisse AG, while Morgans Hotel Group in New York has a minority position and manages the property.

Morgans Hotel Group is the luxury hotel company founded by Ian Schrager, the co-creator of Studio 54 in New York. The company, which posted a third- quarter loss of $31 million, purchased the property in 2006 for $770 million.
Vegas Hard Rock files lawsuit to halt foreclosure is republished from Online.CasinoCity.com.