With the help of legal maneuvering courtesy of Lt. Governor Mark Hutchison, who worked against the interests of many of the same lenders he once represented, Las Vegas businessman Howard Bulloch is reaping the rewards this Good Friday of defaulting for ten years on what’s now more than $50 million in principal and interest secured by Strip frontage across from the Mandalay Bay. The Desert Land parcel, as it’s known, is near 30-plus acres also owned by Bulloch and once intended for the Sky-Vue Observation Wheel that Never Was.
Hundreds of investors pooled their money back in 2007 to make a $26 million loan to Bulloch’s Desert Land. The loan, the last in a series of refinances that put millions in “cash out” in Bulloch’s pocket but resulted in no improvements to the property, was brokered by Aspen Financial, a company owned by Jeff Guinn, the son of former Governor Kenny Guinn. The State of Nevada revoked Guinn’s license in 2013.
Bulloch stopped making payments to the beneficiaries in 2008, when the interest payments rolled into the loan ran out, the market crashed and Jeff Guinn could not muster another refinance based on an inflated appraisal.
Two years ago, after stiffing the lenders for almost a decade (but paying hundreds of thousands of dollars in extension and forbearance fees to Guinn’s Aspen FInancial) and sensing the time was right to renew his efforts to market or develop the land, Bulloch offered the lenders roughly 25 cents on the dollar. Close to two-thirds of the beneficiaries accepted the deal to sell their shares to Bulloch’s new entity, Desert Land Associates, giving Bulloch the right under NRS 6458.340(l) to in effect, conduct his own short sale to himself.
The minority lenders who balked at the offer filed suit. Today Judge Elizabeth Gonzalez approved a deal that will net all the lenders, not just those who challenged the deal in court, about fifty cents on the dollar. Bulloch, who owes more than $50 million in principal and interest, is getting off cheap and can claim clear title to his property for roughly $14 million.
What Gonzalez’ order doesn’t spell out is what will happen if Bulloch fails to make the payments spelled out in his offer. Given Bulloch’s track record of defaults, lenders know they may very well end up back in court.
Last week on the witness stand, Bulloch was forced by Judge Gonzalez to admit he’s had interest in his Strip parcels from Centauri Hotels. The company did not respond to my requests for comment.
I’m no attorney but it seems to me Nevada lawmakers may want to take a second look at a law that allows a borrower to string lenders (many of them elderly) along until the majority will accept pennies on the dollar.
Here is Gonzalez’ order. LVEGAS-#218171-v1-DKT_Findings_of_Fact_and_Conclusions_of_Law