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LAS VEGAS-The main lender on the off-Strip Greek Isles hotel and casino here is seeking bankruptcy court approval to sell the property at auction–exactly what was set to occur when other creditors jumped in and forced the business into Ch. 11 bankruptcy in April. A hearing on the motion is scheduled for July 16.

Greek Isles is a 202-room hotel and casino located on Convention Center Drive between Las Vegas Boulevard and Paradise Road, where much development is planned. It opened in 1972 as the Royal Inn Casino. Marriott International spent upwards of $230 million a couple of years back buying up the block north of Greek Isles for an eventual convention hotel development. Immediately to the south of Greek Isle lies Wynn Las Vegas Golf Course, which also is slated for redevelopment.

The main lender is Canpartners Realty Holding Co. IV LLC, an affiliate of Canyon Capital Realty Advisors that successfully had a court-appointed receiver take control of the property in March. Canpartners said in court that an appraisal shows the property to be worth $44 million, down from $120 million in late 2007. Meanwhile, the borrower now owes $67 million on the $56 million loan that was used to acquire and renovate the property, which is reportedly now $80,000 per month on average, according to Canyon. The lack of owner equity, the casino’s performance, predictions of further declines in value and performance, and the mounting cost of the foreclosure are some of the reasons Canyon is seeking a quick sale.

The borrower is GIH-SPE II LLC, which acquired the property in July 2007 for $48.8 million and planned to redevelop the site with a new gaming resort. Follow the LLC trail back and the names George J. and John L. Marks show up. The Marks operate Chicago-based Mark IV Realty Inc.

Acting through Convention Center Drive LLC, Mark IV Realty acquired the property in 2000 from the World Wrestling Federation. In partnership with Delta Airlines and United Airlines, Mark IV renovated the property into the Greek Isles, a crew hotel and casino that opened in mid-2001.

The sale in mid-2007 to GIH-SPE II LLC was apparently only a recapitalization because the Marks still control the property, according to the Nevada Secretary of State’s office. Published reports that the time of the sale suggested that the property was acquired by an affiliate of DI Development Group LLC, which is controlled by Harold Rothstein. George Marks did not return a phone call seeking comment.

The lenders who stopped the planned auction a day before it was to take place with an involuntary bankruptcy petition are Beresford Bancorporation Inc.; Bigwal LLC; Windy Point Properties LLC; Dawn Place LLC; Foch Investments, Economy Currency Exchange; Hayner Group, and Frank O’Donnell. Canpartners said in its motion seeking relief from the automatic stay resulting from the petition that the lenders have failed to justify their claims against the borrower.

“Given the timing of the filing and the questionable standing of the petitioning creditors, (Canpartners) submits that the involuntary petition was filed in bad faith and the petitioning creditors have abused the judicial process solely to stall the foreclosure sale,” Canyon states in court filings. “Based on the absence of any ‘equity cushion’ and the mounting losses in outstanding loan payments and accrued interest, Canyon lacks the adequate protection for its security interest in the property and is entitled to relief from the automatic stay to complete the foreclosure sale.”

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