LAS VEGAS (CN) – A group of teachers, nurses, construction workers and retirees say they were duped into buying a struggling golf course for millions of dollars more than it was worth. The investors say a group of golf course owners and operators targeted unsophisticated investors to buy the Stallion Mountain Country Club for $24.4 million.
“Defendants knew that they would not be able to sell the golf course for such an inflated price to someone knowledgeable about the golf business, so they decided instead to target potential investors with little or no knowledge of the golf business,” according to the federal complaint.
Under the investment structure, purchasers were told they could buy undivided interests in the property as small as 1 percent, “enabling defendants to spread the massive purchase price over a large group of unsuspecting purchasers,” the lawsuit states.
Defendants structured the deal so that $15.2 million of the $24.4 million offering price would be financed through a secured loan.
“This appeared to reduce the amount of cash that individual investors would need to participate in the offering, but it actually saddled the project with a heavy debt obligation that defendants knew would leave the investors with negative cash flow,” the lawsuit states.
Investors, listed on court documents as FSP Stallion 1-26, say defendants sweetened the deal by claiming that defendant Stallion Mountain LeaseCo would continue to operate the golf course after the sale, to lure them into believing they could tell other investors that the course would continue to be operated by experts.
After the sale, LeaseCo operated the 18-hole, semi-private course about 7 miles east of the Strip through July 2007 at a substantial deficit, the lawsuit states.
LeaseCo then stopped making debt service payments to the lender, forcing investors to start “pouring new money into the property to keep the project afloat and avoid foreclosure,” according to the complaint.
Investors have been unsuccessful in turning the property around, and in July notified their lender that they were turning over control of the property.
Listed as defendants are Fairway Signature Properties, Golf Club of Nevada, The Walters Group, Las Vegas Preferred Tee Times, Evergreen Alliance Golf Limited and Stallion Mountain Leaseco. Individual defendants include Michael Luce, Joe Munsch and William Walters.
The investors are represented by William Bryson with Kummer Kaempfer.