2016 was another year of no return on a $19 million investment for over 300 people who sank money into the Moulin Rouge property in 2006.
“I’m probably a better litigator than I am an investor,” said Bernard Lanz, a commercial real estate attorney in Seattle, Washington.
Some, like Lanz, put down $50,000, while others shelled out $500,000 into the Moulin Rouge project. Some investors have already died without recouping their loss.
The 15.5-acre property was slated to become a hotel and casino in a historically African-American and underserved part of Las Vegas. Instead, the project fell apart amid 2008’s economic storm. The developer of the property went bankrupt in 2008. Then, the company that used investors’ money to loan the $19 million to the developer, Olympic Coast Investment, went bankrupt in 2012. The property ultimately went into receivership in 2013.
Kevin Hanchett, who as the receiver is charged with selling the property and helping those who invested recoup their losses, said he feels time is of the essence.
“A lot of these people are older. Age range is probably 55 on the low end up to 90 on the high end,” Hanchett said. “A few investors have died already.”
At the same time, Hanchett said he isn’t willing to make anything less than the best deal possible.
“I have a responsibility to the court (that appointed me as receiver) to try to get the buyers the value of the asset,” Hanchett said.
John Hoss, president of Olympic Coast Investment, said the 15.44 acres was appraised for $39 million in 2006. In 2015, the property was appraised for $6.67 million.
Lanz said he doesn’t know what 2017 has in store, but he said he has placed his full trust in Hanchett.
“If there’s any way to make a deal work, he’ll find it. That’s what I’m banking on: Kevin putting something together,” Lanz said. “The deal will happen. The only issue is how much money is it going to take to do the deal? I mean, you could probably do this deal for $4 million in a heartbeat, but nobody’s going to get much money out it for that price.”
Lanz said he knew in 2006 he was putting money into a risky investment.
“I was Olympic Coast’s lawyer for I don’t know, 15 years or something like that … all of the loans Olympic Coast made weren’t class-A loans, they were all class-C or whatever. They were high-risk (and high-return) loans.”
He said he believes everybody who invested knew that going in. But, as a commercial real-estate attorney who commonly litigated class-C and class-D deals, Lanz said he may have been more prepared than others for the way this investment turned out.
“I didn’t think they (a new buyer) were going to march in with a check and pay it up right away; I knew there’d be some litigation or something. Nothing ever totally works out like everybody likes it to in real estate deals,” Lanz said. “These (class-C and class-D) deals are long shots. And when the long shot comes through, you get a big return. It’s just like horse racing.”
Reflecting on the handful of developers who unsuccessfully tried to purchase the Moulin Rouge property in 2016, Lanz said “that’s typical of these class-D deals. There are always a bunch of flakes in on them. They don’t have any money; they’re using other people’s money and they try to get the deal first and then they go find the money. I’ve been litigating that type of investment for 25 years, and they’re pretty much charlatans, most of them.”
Lanz said he doesn’t know if he can expect anything different in 2017, but he thinks Hanchett is on the right track.
Since selling the 15.5 acres as a package deal doesn’t seem to be working, Hanchett said he will consider developers in 2017 who are interested in purchasing individual parcels of the property.
Lanz is hopeful that approach might even result in more money.
“When you sell smaller partial parcels you get more money for each parcel depending on the deal,” he said. “That’s happened before.”
Contact Nicole Raz at email@example.com or 702-380-4512. Follow @JournalistNikki on Twitter.