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The economy:

Las Vegas commercial mortgage delinquencies lead nation, hit $2.9 billion

Sun, May 22, 2011 (1:25 p.m.)

Despite recent improvements in the Southern Nevada economy, Las Vegas continues to lead the nation in delinquencies for commercial mortgages financed by Wall Street.

That’s according to Moody’s Investor’s Service, a debt rating agency. Last week, it reported the delinquency rate locally for commercial mortgage-backed securities in April was 29.4 percent, well above the national rate of 9.22 percent.

The debt rating agency said the commercial markets in some of the metro areas hit hardest by the recession continue to struggle, with high delinquency rates also reported in Riverside, Calif. (19.8 percent), Tampa, Fla., (17.9 percent), Phoenix (17.4 percent) and Orlando, Fla. (15.5 percent).

The best performers included Boston (2.9 percent), Seattle (3.4 percent), Washington, D.C. (3.7 percent), San Francisco (3.8 percent) and San Jose, Calif. (3.9 percent).

Nationwide, the delinquency rate is expected to remain elevated because as nonperforming loans are worked out, new delinquencies appear.

"We expect the delinquency rate to run high single digits to low double digits over the near term," Tad Philipp, Moody’s commercial real estate director of research, said in a statement. "The resolution process is in full swing, and liquidations should roughly balance new defaults."

Similar commercial mortgage-backed securities delinquency numbers were issued for Las Vegas for April by Trepp LLC, a provider of commercial real estate finance data. It found the local delinquency rate was 28.2 percent – up from 22.18 percent in April 2010. Trepp reported that of loans totaling $10.33 billion it tracks in the Las Vegas area, $2.9 billion of that was in delinquent status.

In the Las Vegas area, troubled commercial real estate loans in the news this year have included the involuntary bankruptcy of Henderson’s Inspirada planned community; the Town Square and District at Green Valley Ranch shopping centers, both foreclosed on; the World Market Center in downtown Las Vegas, which defaulted on loans but recently announced a restructuring aimed at ensuring its long-term viability; the bankruptcies of Station Casinos Inc. properties Green Valley Ranch and Aliante Station hotel-casinos; debt-holders assuming ownership of the Las Vegas Hard Rock and the M Resort hotel-casinos; and construction supplier Ahern Rentals Inc. defaulting on debt obligations.

Affiliates of the Greenspun family, owner of the Las Vegas Sun and VEGAS INC, developed the District at Green Valley Ranch and partnered with Station on the Green Valley Ranch and Aliante Station hotel-casinos.

The restructurings this year are just a small part of the carnage inflicted on Southern Nevada during the recession since 2008.

Earlier bankruptcies and debt defaults involved General Growth Properties, developer of Summerlin and owner of five big local shopping malls; Lake Las Vegas in Henderson, City Crossing in Henderson, Park Highlands in North Las Vegas, the Las Vegas Monorail, timeshare company Consolidated Resorts, Las Vegas Strip landowner FX Luxury Las Vegas and homebuilder Rhodes Companies.

Also in default or bankruptcy were gaming companies Tropicana Entertainment Holdings, Fontainebleau Las Vegas, Herbst Gaming, Black Gaming, Station Casinos, Riviera Holdings, Planet Hollywood, Hooters Las Vegas, the Greek Isles, the Westin Casuarina, Loews Lake Las Vegas and the Ritz-Carlton Lake Las Vegas.

Two Las Vegas entities -- Cannery Casino Resorts LLC ($750 million in debt) and CityCenter Holdings LLC ($5 billion in debt) -- remain on Standard & Poor’s latest list (May 9) of debt issuers that could potentially be downgraded. They’re both rated "B-" with a negative outlook.

Bankruptcy and foreclosure filings confirm that in this new economic environment, lenders are facing the difficult reality of dramatically reduced asset values in Las Vegas.

Holders of debt totaling more than $378 million, for instance, are poised to take over Aliante Station in North Las Vegas. Developed at a cost of $662 million, it now has a liquidation value of just $47 million to $53 million, attorneys for Station Casinos reported in a court filing last week.

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