Greek Isles lender wants to sell, says owner has no equity left

LAS VEGAS, Nevada -- The main lender to the Greek Isles hotel in Las Vegas has asked a bankruptcy court for permission to sell the property at auction, saying it continues to lose money and has dramatically declined in value.

The lender, Canpartners Realty Holding Co. IV LLC, plans to press its case to immediately auction the Greek Isles during a hearing July 16.

Greek Isles, with 202 hotel rooms and a small gaming operation, was forced into bankruptcy by other creditors April 6. A receiver appointed at the request of Canpartners has been running the property on Convention Center Drive between Las Vegas Boulevard and Paradise Road.

In a court filing in U.S. Bankruptcy Court in Delaware, Canpartners said Greek Isles owner GIH-SPE II LLC no longer has any equity in the property -- so there's no reason to encumber it in bankruptcy court.

Canpartners says appraisals show the value of the property has declined from $120 million in late 2007 to $44 million this month. But GIH-SPE II hasn't made interest payments since Dec. 17 to Canpartners on a $56 million loan issued in 2007 and it now owes $67.3 million, Canpartners said.

Canpartners said that besides GIH's negative equity of more than $20 million, the property has been losing more than $86,000 per month -- indicating there's little likelihood GIH can become current on its mortgage payments.

"Given the current economic conditions and the conditions of the gaming and hotel industries in Las Vegas in particular, revenue will likely continue to decline for the foreseeable future and net operating losses are projected to continue for at least the remainder of 2009," Canpartners said.

The lender added that the rapid decline in the value of the property "illustrates the extent of the losses experienced by the Las Vegas real estate industry and reinforces the unlikelihood of the debtor's successful reorganization."

Canpartners said a quick foreclosure sale will benefit it by eliminating expenses it faces in the bankruptcy case.

Canpartners also criticized the creditors that forced Greek Isles into bankruptcy. That happened the day before Canpartners planned to auction the property as part of the foreclosure process, thus delaying the auction.

Canpartners suggests the bankruptcy filing was made in bad faith.

And since the bankruptcy filing, those creditors have failed to justify their financial claims against GIH, Canpartners said this week in a motion against them to force them to adequately spell out their claims.

"Given the timing of the filing and the questionable standing of the petitioning creditors, (Canpartners) submits that the involuntary petition was filed in bad faith and the petitioning creditors have abused the judicial process solely to stall the foreclosure sale," Canpartners charged.

GIH and the other creditors in the case have not yet responded to Canpartners' motion that it be allowed to auction the property.

With its strategic location near the Las Vegas Strip and the Las Vegas Convention Center, the Greek Isles and its associated real estate are seen as having long-term value after the recession ends.