$2 Billion Southern Nevada Mega-Project Files Bankruptcy
By Tony Illia
The $2 billion City Crossing project in Henderson has filed for Chapter 11 bankruptcy protection.
The 6 million-sq-ft mixed-use development being built by Las Vegas-based Plise Development & Construction broke ground last year on a 126-acre site at St. Rose Parkway and Executive Airport Drive. Roughly $30 million in site improvements, including grading, utilities and roads, are currently underway with Chaparral Contracting, a Plise subsidiary, as the general contractor.
Phase one plans call for 175,000 sq ft of retail space, an eight-story, 215,000-sq-ft office building, 184 apartments and a 160-room boutique hotel. Vertical construction on the 50-acre first phase was originally expected to start this summer with completion by early 2010. But that timeline will likely be extended by six months or more depending on the capital market's response to the bankruptcy.
On June 2, City Crossing 1 LLC, a Plise controlled entity, filed to reorganize $180 million in debt. The project, which consists of 15 parcels, is secured by raw land near the Henderson Executive Airport. Its current appraised value is $250 million, say company officials. But the housing market implosion has tightened credit markets and devalued real estate-backed loans.
“We've been working to refinance the existing debt at City Crossing over the last several months,” said Mitchell Stipp, Plise's chief operating officer. “All of our lenders, except for one local community bank, have been willing to work with us and negotiate mutually acceptable terms.”
The lender in question is Community Bank of Nevada, a subsidiary of Las Vegas-based Community Bancorp (Nasdaq: CBON). The firm’s stock price has dropped 77.5% since its 52-week high.
Community Bank of Nevada has lent about $30 million toward the development of City Crossing. Bruce Ford, the Bank's chief operating officer, didn't return calls seeking comment for this story.
City Crossing has seven lenders, with 1st National Bank of Nevada listed as its single largest debtor at $70 million.
“Community Bank of Nevada would not provide workable payment terms and notified us this week that it would initiate foreclosure proceedings,” says Stipp who notes that most of City Crossing's creditors are land lenders or Plise affiliated companies. ”Simply put, this action has forced City Crossing into bankruptcy.”
Plise will self-finance the project's remaining site upgrades from cash reserves. It still intends to build the 41-building City Crossing as originally envisioned. Plise has been negotiating with a national firm about becoming a possible development joint-venture partner.
“We are not stopping development. We have sufficient capital to fund this work,” Stipp says. “We expect to have the debt reorganized within the next three to five months.”
City Crossing's future phases call for several more office towers plus additional residential and retail space. Final build out was planned for 2015.
Stipp says he doesn't expect the bankruptcy filing to impact Plise’s other developments under construction, including the 25-acre, 547,000-sq-ft Rainbow Sunset Pavilion and 8.3-acre, 143,166-sq-ft Centennial Corporate Center. Portions of those projects are already open and generating rental revenue, making them far more attractive investments to lenders.
“Nothing surprises me in this market. There is more scrutiny on loans in general in today's economic environment,” says William Oakley, regional president for 1st National Bank of Nevada. “Financial institutions are more focused today on their existing portfolio rather than growing their portfolio.”
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