A fight among heavyweight developers erupted in U.S. Bankruptcy Court on Friday over the fate of 1,340 acres of land in the stalled Park Highlands planned community in North Las Vegas.
Four days after a consortium of investment companies won an auction for the land with a bid of $21 million, a Ross Perot Jr. company filed a motion asking the court on Friday to set aside the auction results and let it buy the land.
A Perot company already owns the stalled and bankrupt Park Highlands development.
That company, November 2005 Land Investors, had no hope of covering the community’s $178.9 million in debt because of the recession so it put Park Highlands into bankruptcy this summer with the intention of another Perot company acquiring the land at auction.
But the second Perot company, Hillwood Communities of Dallas, was outbid at Monday’s auction. Hillwood dropped out after deciding against increasing its final bid of $20.2 million.
Hillwood Communities is part of Hillwood Development LLC, which says it is ranked among the top 10 residential land developers in the United States and is known for its high-profile projects like the American Airlines Center sports complex in Dallas.
Losing the auction was likely a disappointment to Hillwood, which had boasted to the Wall Street Journal in September that with its 400 contiguous acres that are not part of the bankruptcy, “No other bidder sits in our unique position.”
The auction was won not by Perot’s Hillwood company, but by a consortium of investors that includes the publicly-traded KBS Strategic Opportunity REIT of Newport Beach, Calif. — part of the KBS group of companies that have done $21 billion in real estate deals since 1992.
On Friday, a third Perot company called BOH Park Highlands asked that the KBS bid be disregarded and that it be awarded the land.
In what has grown to become a convoluted bankruptcy case, BOH Park Highlands claims to be owed $4.98 million for infrastructure work at Park Highlands. Lenders to Park Highlands dispute this.
So as not to disrupt Monday’s auction, BOH Park Highlands and the lenders agreed the $4.98 million would be deducted from the winning auction bid and held in escrow until disputes over the $4.98 million claim are resolved.
This means the lenders, should BOH Park Highlands win the dispute over the infrastructure work, would ultimately receive just $16 million less administrative expenses from Monday’s winning bid of $21 million.
On Friday, BOH Park Highlands said it’s willing to buy the land for $21 million and drop its demand for the $4.98 million for the infrastructure work, meaning the bankruptcy estate and the lenders would definitely receive all of the $21 million less whatever administrative expenses are approved by the court.
BOH Park Highlands attorneys said in their motion the Perot company’s plan to buy the land is a good deal for both the bankrupt company and its creditors.
"It will benefit the debtors’ creditors and estates not only by increasing the value received from the sale of the property by almost $5 million, but also by fully and finally resolving the (infrastructure) litigation, obviating the need for continued, costly litigation relating to the determination of BOH’s rights" under the litigation claim, their filing said.
The filing also charged that problems during the auction harmed BOH and Hillwood. These Perot companies said they were discouraged from including a waiver of BOH’s infrastructure claim during the auction so there would be an apples to apples comparison, otherwise, "Hillwood/BOH would have submitted a higher and better bid at the auction."
BOH is represented in the case by the Fort Worth, Texas, law firm Haynes and Boone LLP and the Las Vegas firm Jolley Urga Wirth Woodbury & Standish.
An attorney for Monday’s winning bidder, KBS and its coinvestors, urged Bankruptcy Judge Mike Nakagawa on Friday to reject the last-minute effort by the Perot company to overturn the auction results.
"KBS believes that the motion is simply BOH’s manufactured basis for delaying the sale of the property to the detriment of debtors, their creditors and KBS," said a court filing by attorney Bob Olson of the Las Vegas office of the law firm Greenberg Traurig LLP.
"BOH, which has a lengthy history with debtor and the property, failed to qualify as a bidder, failed to bid at the auction, did not oppose the sale of the property to KBS at the sale (approval) hearing (Tuesday) and did not reveal this offer to the court at the sale hearing. BOH’s failure to do any of these things before the auction and sale hearing should preclude them from raising objections now after the sale has been approved by this court," Olson's filing said.
"It further strains credulity that BOH suddenly realized that they could bid more only after the auction occurred and the order approving the sale was entered. BOH is a party to the (infrastructure) litigation and presumably had given thought to settlement structures. Moreover, these (bankruptcy) cases were filed because BOH desired to purchase the property,” the filing said.
Nakagawa hasn’t yet scheduled a hearing or indicated when he may rule on the motion to set aside the auction results.