03/30/2012

$200 Million Loan Sought on Vegas Complex

A Five Mile Capital partnership that seized a Las Vegas retail/office complex from a defaulted borrower last year is now seeking a low-leverage loan of about $200 million.

The property, called Town Square, was among a raft of ambitious projects launched in the city in the early part of the last decade. The developer, Turnberry Associates of Aventura, Fla., raised about $500 million of construction financing from a Deutsche Bank syndicate for the planned 1.5 million-square-foot development. But it had to stop at 1.15 million sf as the recession took hold and the property became ensnared in a legal dispute.

The sharp drop in property valuations left Turnberry unable to refinance the debt. Then Five Mile and its partners, which had separately acquired some of the debt in the secondary market, foreclosed. It’s unclear how much of the existing debt remained in place.

Town Square, which is on the edge of McCarran International Airport, encompasses about 900,000 sf of retail space and 250,000 sf of offices. The retail portion is 80% occupied, and annual sales are described as strong, in the neighborhood of $550/sf. The office component is only about 30% occupied. There is also some partially built space that could be used for a hotel.

Five Mile, of Stamford, Conn., and its partners — Centerbridge Partners of New York and Oaktree Capital of Los Angeles — prefer a five-year loan and would consider fixed and floating rates. The proposed size would put the loan-to-value ratio at about 55%. Eastdil Secured is their advisor.

In 2009, Turnberry sued Lehman Brothers, asserting it had failed to follow through on a commitment to refinance the Deutsche syndicate’s construction loan, which consisted of a $450 million senior mortgage and around $50 million of mezzanine debt. Lehman, which was in bankruptcy at the time, then countersued. The countersuit stalled the effort of the lenders to foreclose. In the meantime, the Five Mile group began quietly buying pieces of the debt. Ultimately, Lehman agreed to let the foreclosure proceed, and the Five Mile team gained control of the property in March 2011.

The center is on a 93-acre site at the southern end of Las Vegas Boulevard, about five miles south of downtown. The tenants include H&M, Guitar Center, Old Navy, Whole Foods and more than a dozen restaurants.

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