The owner of the Holsum Lofts, an early downtown redevelopment project, said he has lined up the financing to pull the project out of Chapter 11 bankruptcy.
According to owner Jeff LaPour, the private finance firm Quarry Capital put up $6 million at 7 percent interest. In addition, the company will contribute $200,000 cash, enough to pay off all the debt and costs of the bankruptcy case.
But the Quarry loan will come due after two years of interest-only payments, possibly setting the stage for a rerun of the problem that led to the bankruptcy.
When LaPour finished renovations and began leasing the office, design studio and restaurant spaces in 2005, two years after purchasing the former Holsum commercial bakery, he obtained a $6.8 million loan from Goldman Sachs Commercial Mortgage Capital. However, he was unable to repay when the loan came due in January 2011.
As recently as July, LaPour had a proposed $7 million sale of the project in case the previous, more expensive loan deal fell through. LGC231, the ownership entity in which LaPour is the managing member, still must submit, and gain a judge’s approval, to a Chapter 11 reorganization plan before the project is completely on its own again.
“We’re not worried about the loan,” LaPour said. “The financial markets are much better than they were in 2011 or even 2012. We have refinanced three other properties just this year.
Attorneys for Holsum Note 231241, an entity created by unidentified local investors that bought the first loan early last year, did not return calls seeking comment.
“Holsum Lofts was conceived and introduced to downtown in 2005,” LaPour said in a statement. “Things were very different at that time,” with the general real estate market booming but many of the projects that now define downtown still not in place. Further, the idea of recycling older buildings for new uses, common in many cities, was still new to Las Vegas.
When the loan came due in January 2011, lenders avoided commercial real estate with so many distressed properties dotting Las Vegas. In addition, space in the building, which was built in 1954 but sat derelict after its closure in 2002, proved to be a tough sell; as recently as June 2012, about one-fourth of the 46,800 square feet were empty before a new tenant was signed to fill it.
After the loan came due, a workout firm was brought in to negotiate new terms.
That effort failed, and the loan was sold to Holsum Note for $4.5 million early last year, according to court papers.
Holsum Note then moved forward with foreclosure and a state court-appointed receiver taking over management, leading to the Chapter 11 filing in July 2012 to keep LaPour in control.
“It was the lack of available financing and an overambitious lender that caused this,” LaPour said in regard to the bankruptcy.
But Holsum Note attorneys cited maintenance deficiencies and contended that LaPour was withholding tenant rent payments, a key component of the collateral.
A settlement conference in May, which led Holsum Note to reduce its claim from $7 million to $6 million but obtain an August deadline for refinancing, opened the avenue to settle the case.
Holsum Note had already drafted its own Chapter 11 plan to take over and liquidate the property.
Contact reporter Tim O’Reiley at 702-387-5290 or at email@example.com.