SLS Las Vegas, located on the Las Vegas Strip at West Sahara Avenue.
The Las Vegas hasn’t turned a profit since opening in 2014 and is on the ‘’verge of bankruptcy,’’ according to a lawsuit filed in Los Angeles County by 60 Chinese nationals who lent money to the project in exchange for U.S. citizenship.
Chinese investors lent roughly $400 million in two nearly equal portions in 2013 and 2014 to help owners Stockbridge Capital Group and sbe Entertainment convert the Sahara on the north Strip into the SLS Las Vegas.
The loans were organized under the EB-5 Pilot Program that allows foreign citizens to potentially receive U.S. citizenship if they invest $500,000 in “at-risk’’ large-scale projects that create jobs. The five-year loans carried just a 0.5 percent interest rate. Each investor paid $45,000 in administration fees to invest in the project and must pay a yearly management fee.
None of the 60 individuals in the class action case have received their permanent green card, they say in a lawsuit filed Nov. 30 in Los Angeles Superior Court. All the investors contributed to the second portion, known as Phase II.
The plaintiffs are seeking $255 million in damages plus attorney fees and other costs.
Stockbridge Capital Group in May agreed to sell the casino to Meruelo Group, owner of the Grand Sierra Resort in Reno. Stockbridge, which has been pumping millions of dollars a year into the SLS to keep it afloat, downplayed the lawsuit’s talk of bankruptcy.
“The company does not expect the litigation will deter the sale and it does not in any way anticipate a bankruptcy filing,” the San Francisco-based company said. It called the lawsuit “without merit” and said lenders and shareholders support the sale.
Meruelo is now seeking to renegotiate the loans from the Chinese investors, the lawsuit stated. The Chinese loans come due in 2018 and 2019 as does a roughly $185 million loan by a separate party.
The inability to reach an agreement with the Chinese investors has prevented Meruelo from applying for final approval by the Gaming Control Board.
Meruelo is offering to repay the Phase II Chinese investors in 2023, according to the lawsuit. Rather than receive the $200 million they invested plus interest, they would receive an amount that is equivalent to 14 percent of the casino’s equity value. The offer is the third by Meruelo since May.
“We either consent to the sale to Meruelo or the company will file bankruptcy — that is what we are being told verbatim,” said Jeffrey Bell, the attorney representing Phase II Chinese investors.
- Chinese investors vs AMERICAN DREAM FUND - Las Vegas Regional Center & Henry Global Consulting Group & Stockbridge Investment Company, LLC & Evans, Carroll & Associates, Inc.
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