Sixty Chinese nationals who invested in the SLS Hotel & Casino Las Vegas are suing the casino resort, claiming that none of the promises made to them during its development phase materialized.
The lawsuit was filed by Chinese investors on November 30 at the Los Angeles County court and claims that they are victims of the project that has never turned a profit since 2014. The lawsuit also claims that the casino resort is currently on the verge of bankruptcy.
The root of the lawsuit comes from the unfulfilled promises the developers made to Chinese investors in exchange for receiving almost $400 million in loans.
In 2013, the former Sahara Hotel was being redeveloped into SLS Las Vegas. The completion of the redevelopment was financed by 60 Chinese investors who put in $545,000 each on the project’s Phase II, at a 0.5 percent interest rate. In addition, each investor shelled out $45,000 in administration fees when they invested on the casino resort, plus yearly management fees.
The loans were made under the 1990 EB-5 Immigrant Investor Program, which states that foreign citizens (including their spouses and children below 21 years old) could become eligible to apply for a green card if a minimum investment of $500,000 is made in any large commercial US project that could generate or preserve at least 10 permanent full-time jobs for US workers.
Under the agreement, the 60 investors should have received their green cards 30 months after the investment was paid.
Currently, none of the 60 investors have received their permanent resident cards. Some have only received temporary resident cards. On an investment perspective, the claimants also argue that SLS Las Vegas will be violating a requirement in the EB-5 Program if it pushes through with the sale of the hotel.
Stockbridge Capital, the original developers of the SLS Las Vegas, is currently in the process of finalizing the sale of the casino resort to Meruelo Group. When the sale pushes through, it would result in these Chinese nationals being repaid for their investment. This goes against the EB-5 Program’s requirement that the investor keeps a sustained investment in the US.
In addition to the missing green cards and the unwarranted sale, the lawsuit claims that the SLS Las Vegas is making less than 50 percent of its projected revenue since it opened. Because of its underperformance, it is unable to generate enough jobs to meet the required 10 jobs per investor—which delays the green cards even further.
Despite the lawsuits from its investors, Stockbridge said that their shareholders and lenders are in support of the sale. They do not expect the litigation to deter the sale of the SLS Las Vegas to Meruelo, nor are they expecting a bankruptcy filing anytime soon.
Meruelo’s offer is to pay the investors 14 percent of the casino’s equity value instead of giving back the $200 million they invested plus interest. The lawsuit demands the developers to pay $255 million in damages, plus attorney fees and other costs.