Large Las Vegas developer seeks to renegotiate loans

The flagging Southern Nevada real estate market is giving major headaches to developers large and small. The overbuilt housing environment and the mortgage industry woes as one-two punch are putting tremendous pressure on them as they look for ways to survive. It's actually somewhat of a surprise that so many of them have hung in there this long.

Focus Property Group is one of the bigger developers in the Las Vegas valley and it recently announced that it'll cease making interest payments on several loans totaling $500 million. The debt is secured by land located in Las Vegas, Pahrump and Victorville, CA. The company is well-known in the area for actively buying vast tracts of land in the Bureau of Land Management auctions, often persistently outbidding the competition.

Focus relied on hard money lenders to finance the land acquisitions, firms that get funds from private investors and then lend that to developers on short-term basis and usually at interest rates in double-digits. In a market downturn like now, this type of financing quickly becomes harder to satisfy than the usual mainstream arrangements.

The developer has hired the Blackstone Group to advise it on restructuring the multiple obligations and it's not planning to file for bankruptcy. For one it's hoping for forbearance on the interest payments for up to two years. It's also gazing into the future and sees that the real estate and mortgage chaos will likely pass in a few years and the Las Vegas market will predictably become viable again. That assessment certainly has many backers in the local business community. The promising future here might convince its lenders to work out a mutually acceptable solution to the debt dilemma.