A bankruptcy judge has declined to overturn the results of last week’s auction of 1,340 acres of undeveloped land in the stalled Park Highlands planned community in North Las Vegas.
That means the winning bidders for the land, who offered $21 million for the property, will likely take title to the property soon.
They’ll then likely spend the next couple of years adjusting development plans and waiting for the economy to improve before development resumes.
“We anticipate that the overwhelming majority of future value increases will come as a result of a general improvement in the local economy,” the winning bidder, KBS Strategic Opportunity Reit Inc., said in a statement.
KBS, of Newport Beach, Calif., is part of the KBS development companies. It teamed up with other investors to buy the Park Highlands acreage, which is entitled for more than 7,200 residential units, 120 acres of commercial and resort uses as well as parks and other public facilities.
The development of Park Highlands has been stalled by the poor local economy and two bankruptcies within two years of its lead development company, an entity called November 2005 Land Investors LLC.
Billionaire Ross Perot Jr.’s company in Dallas, Hillwood Communities, already owns some 400 acres at Park Highlands and had unsuccessfully bid for the additional 1,340 acres last week.
After losing the auction, a Hillwood affiliate asked Bankruptcy Judge Mike Nakagawa to cancel the auction results and let the Hillwood affiliate buy the land for the same price, $21 million.
Hillwood said this plan offered a better return to creditors since it was willing to forgive nearly $5 million in debt it claims to be owed for Park Highlands infrastructure costs — a claim disputed by Park Highlands lenders.
Hillwood also cited alleged irregularities in the auction, but attorneys for the winning bidders noted Hillwood had failed to object to the sale during a confirmation hearing the day after the auction.
They argued the effort to derail the auction results was merely a “manufactured basis for the delaying the sale of the property to the detriment of debtors, their creditors and KBS.”
Nakagawa this week without comment refused to consider the motion on an expedited basis; a hearing was scheduled for next month.
But with the closing of the land sale to KBS and its partners imminent, Hillwood says, the issue will be moot by the time the January hearing rolls around.
“We are disappointed by the bankruptcy judge’s ruling that upholds the result of the auction on Dec. 12,” said Fred Balda, president of Hillwood Communities.
Balda said Hillwood’s role in the case was to break a logjam in which 78 lenders owed $178.9 million were divided over what to do with the land after its initial developers twice defaulted on the debt.
He said that with the lenders stalemated, the city of North Las Vegas and surrounding property owners were being “held hostage,” so Hillwood acquired November 2005 for a nominal sum last year with the goal of “dislodging the property from the lender morass.”
“Hillwood initially attempted to reconcile the interests of the different lender groups, but approximately half of the lenders threatened to file an involuntary Chapter 7 bankruptcy if Hillwood did not put November 2005 into voluntary Chapter 11 bankruptcy and liquidate its holdings. Hillwood complied, and the bankruptcy auction was held.
“While we would have hoped to be the prevailing bidder at the auction, we are pleased that the November 2005 property is now in the hands of an institutional owner that will incur the time and expense necessary to reposition the property in a way that makes sense for its investors, the city of North Las Vegas and the various other land owners (including Hillwood) within the Park Highlands community. In this respect, Hillwood has achieved its goal,” Balda said.