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Las Vegas Hilton owners get more time in battle for property

The majority owners of the Las Vegas Hilton gained at least another month in their struggle to retain control of the off-Strip resort.

Clark County District Court Judge Elizabeth Gonzalez on Thursday put off until mid-November a hearing brought by lender Goldman Sachs Mortgage Co. to put a receiver in charge of operations.

This will allow the 2,950-room Hilton’s controlling owner, an affiliate of the Santa Monica-based real estate investment fund Colony Capital LLC, to interview up to four people involved with the case and view Goldman Sachs documents.

Lenders, including Goldman Sachs, generally push receiverships as routine matters after a borrower defaults, which Colony did in June. However, Gonzalez said she allows discovery, the process of accumulating evidence for a hearing or trial, “more often than I want to (with receiverships) … and it appears this will be one of those cases.”

Goldman filed the lawsuit asking for the receiver one day after it started foreclosure proceedings, which could result in it taking over in late December. Before then, the receiver would control the hotel’s operations until its fate is decided.

To Goldman Sachs, the case is straightforward. Colony had halted payments on the $252 million mortgage and agreed to the installation of a receiver if that happened when it signed the loan five years ago.

Goldman Sachs attorney James Hough said allowing Colony to spend several weeks taking depositions and poring over documents was a way to “delay the inevitable appointment of a receiver.”

However, Colony attacked Goldman Sachs on several fronts that amount to a conflict of interest, including its ownership of the nearby Stratosphere, depicted as a direct competitor, a 40 percent stake in the Hilton, and having a seat on the board of Colony Resorts LVH Acquisitions, which owns the hotel.

Colony also raised concerns that the proposed receiver, Ronald P. Johnson of Premier Gaming Consultants, was closely tied with Goldman.

Johnson returned to Las Vegas this year to start his consulting firm after five years in the lodging industry in New Jersey. Before that, he had spent his career with several local resorts, including 15 years with the Riviera.

A different Colony entity also guaranteed payment of the entire loan in the event of foreclosure, giving it further incentive to fight Goldman Sachs.

Colony worries that the receiver would have the authority to sell the Hilton, triggering the guarantee.

As the Hilton’s losses mounted, the cash flow crunch came to a head and prompted Colony to halt the loan payments. In the three years through 2010, the Hilton’s revenues dropped by a third to $187.7 million, while the net loss widened to $34.1 million from $437,000 in 2008.

During the first half of this year, revenues fell another 4.3 percent compared with the same period last year to $45.5 million, although the loss shrank to $8.9 million from $9.9 million.

Contact reporter Tim O’Reiley at
toreiley@reviewjournal.com or 702-387-5290.

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