Joseph Snider, a Moody's Investors Service senior credit officer, explained that even though Lake Las Vegas began development in 1964 and the current owners took over in 1988, they did not have positive earnings until this year. The developers have built the infrastructure, putting in a dam and a 320-acre lake, he noted. "The revenues were on the small side and they generated losses," he said. Now the company will sell lots in a very buoyant Las Vegas housing market that also has a tight land supply. "Lake Las Vegas has reached the inflection point in its development cycle and should be in a position to harvest cash flows rather than continue to pour massive infrastructure spending into the community."
Although the owners will still derive significant residual values at the back end if things go according to plan, they are currently withdrawing more than the accumulated equity capital of the company. Moody's would feel more comfortable if they still had substantial skin left in the game, a Moody's report notes. A Lake Las Vegas spokeswoman and a CSFB banker did not return calls.