Report calls Barcelone retail center in Las Vegas ‘troubled’

Beauty salon owner Debbie Ritchey had to ease the worried minds of hairdressers and manicurists afraid they might lose their work stations at Body Spa West after reading a report that Barcelone center was headed for foreclosure.

The 10,000-square-foot salon and spa opened in September and is undergoing an expansion that would take it to 27,000 square feet, making it the largest salon in Nevada, Ritchey said.

Real Capital Analytics listed Barcelone as a "troubled" property in October and reported that the retail center at 8751 W. Charleston Blvd. had gone into receivership, a form of bankruptcy in which a company can reorganize under a court-appointed trustee.

The center, consisting of 51,000 square feet in four buildings, is owned by SRT Barcelone LLC, and the lender is J.E. Robert Cos. The property last sold for $12 million in May 2007 and has a $5.4 million first mortgage, Real Capital Analytics reported.

"Troubled is a pretty broad category these days, especially in this market," Barcelone manager Dave Lazzarini of Los Gatos, Calif.-based Preferred Community Management said. "Vegas and the entire country are troubled, and troubled is a lot different than foreclosed or in receivership."

Lazzarini said the loan was transferred to a special servicer on a proactive basis to try to restructure the terms, but was never delinquent nor in foreclosure or receivership. The loan was subsequently transferred back to master servicer PNC Midland and is current, he said.

Real Capital Analytics, a commercial real estate research firm, may assume receivership or foreclosure upon a transfer to special service, but that's not necessarily the case, Lazzarini said.

"The mortgage payment was always made to PNC Midland on time, but there was some mix-up between servicers on how it was posted, which ended up in late charges all being reversed by J.E. Robert and Midland," Lazzarini said. "That's probably what they picked up. Obviously, a liability on how this information is reported and interpreted. It's as if we defaulted, even though we never did. And on a positive note, we've leased 25,000 square feet during the past six months. We don't need to worry about restructuring."

Ritchey, who also owns Body Spa East on Eastern Avenue, said it was a "gamble" going into space formerly occupied by a furniture store at Barcelone, but it was important to bring a full range of services to Body Spa West, which serves a high-end clientele.

"I just think you have to change with the times," said Ritchey, who's been in the salon business for 33 years. "You can't continue to do what you were doing 10 or 20 years ago. I'm putting all the (salon) professionals under one roof. You have to have that in these economic times. That's why you see all the smaller salons closing."

While Barcelone is not in receivership, the borrower was 30 days delinquent on its debt service, said Andrew Florio, market analyst for Real Capital Analytics. Last year, the firm started tracking loans transferred to special servicing.

The "troubled" event can mean the property is in receivership; the asset is in administration; or the loan secured by the property has transferred to special servicing, Florio said.

With retail vacancy running around 11 percent in Las Vegas, shopping center owners have seen net operating income greatly reduced and are having difficulty staying afloat.

Turnberry Associates defaulted with Deutsche Bank in June on the $500 million Town Square shopping and entertainment center on Las Vegas Boulevard South, and Triple 5 lost Village Square on Sahara Avenue and Fort Apache Road to foreclosure with Bank of America last year.

The default rate for commercial mortgages stood at 4.17 percent at the end of the first quarter, or $45.5 billion, second only to the 4.55 percent in 1992, according to an analysis of bank and FDIC data by Real Capital Analytics. It's expected to surpass that mark by year's end and peak at 5.4 percent in 2011.

Whitney Tilson of New York-based investment firm T2 Partners told the Review-Journal in 2008 that commercial real estate loan defaults would total $3.5 trillion and cause the collapse of major financial institutions. Nearly half of all commercial mortgages are held by institutions with $10 billion or more in assets.

Las Vegas, Phoenix, Los Angeles and parts of Florida are most often mentioned as the most distressed commercial markets in the nation.

A local attorney who represents banks taking back real estate said pundits are "dead wrong" in thinking Las Vegas will start to recover in 2011. He sees commercial defaults accelerating and expects to see more properties go to auction, more loan modifications, more short sales and more deeds in lieu of foreclosure.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.