Court opens door to resort's change of ownership

27 June 2012

By Tim O'Reiley

A New York appellate court has opened the way to a possible change of ownership of the JW Marriott Las Vegas Resort & Spa and the attached Rampart Casino Resort at Summerlin.

On June 19 a five-judge panel of the Appellate Division of the Supreme Court of New York ruled the investment funds that hold the $160 million mortgage on the Summerlin resort could not stop an outsider from buying them out at a discount to face value. Because owner Hotspur Resorts Nevada Ltd. defaulted last year, the lender could wind up owning the 548-room hotel and the Rampart's 1,212 slots and 20 tables.

In their ruling, the judges wrote that the investment funds "failed to demonstrate that they were otherwise likely to succeed on the merits" in proving that the would-be buyers were getting an unreasonably good deal.

The investors have asked permission to appeal their case to the state's highest court. The matter is being heard there because several of the parties are based in New York.

The judge's allowed Galante Holdings, the investment fund that seeks to take over the mortgage, to close the deal as early as Aug. 6.

"That is certainly the intention here," said John Reilly, an attorney representing Galante. "We see no reason why the court would change its mind."

The people behind Galante have not been identified. Galante maneuvered itself into the position of potential owner by purchasing a $10 million piece of the debt last year.

Attorneys for the current lenders could not be reached for comment. But in court papers, the investors accused Galante of trying to "steal" about $60 million in value by buying the mortgage at a discount.

An appraisal conducted in November by PKF Consulting USA set the Marriott's value at $98.6 million. The property's financial performance has deteriorated significantly since 2007, although it has shown signs of trending upward in recent months.

Michael Gaughan III took over the management of the hotel in August and the casino on April 1. Cannery Casino Resorts had run the Rampart for the previous decade.

Since then, the Marriott has run promotions aimed at bringing in more locals and has laid out a renovation program.

"It's a challenge to do anything until that gets resolved," said Gaughan in an April interview, referring to the New York litigation.