However, the potential buyer said he would like to structure a new agreement to buy the property during the next few weeks if Hooters' owners are willing.

"I believe (the owner) has a good understanding of market dynamics and what it takes to close a trade of the asset," Hedwigs Las Vegas Top Tier principal Richard Bosworth said. "Both the buyer and the seller need to take a long, hard look at the realities of the markets ... and see if there is common ground to move forward in the future."

Santa Monica, Calif.-based investment group Hedwigs did not make a $500,000 nonrefundable payment on Friday, leading Hooters to cancel the deal.

During the past 14 months, the investment group spent $6 million in nonrefundable fees and other costs related to closing the deal.

Richard Hessling, who runs Hooters as president and owns a minority share in the property, said his company now has three options: continuing to operate under the current ownership, looking at another sale offer or looking at expanding the property.

"We're certainly going to evaluate every possibility," Hessling said. "We've always believed this is a very good piece of real estate. Current credit markets aside, we didn't need to do anything at this point in time."

He declined to speculate on any future deals with Hedwigs.

Analysts were not surprised the deal fell through because of the current market environment and the lack of information from both the buyer and seller about how the deal was going to be financed.

"We have long suspected this deal was never going to get consummated," KDP Investment Advisors bond analyst Barbara Cappaert said Monday. "Particularly last year when the financial markets started falling off and there was very little financing going on from the fall on."

Cappaert said information on who Bosworth's partners were and where financing for the deal was coming from was never explained.

In the past 60 days, bond analysts from Moody's Investor Service and Deutsche Bank in notes to investors expressed skepticism about the sale because of the lack of that information.

Wachovia Capital Markets bond analyst Dennis Farrell Jr. said Monday in an investor's note that the bond community had "always been skeptical of this transaction coming to fruition due to its poor location, weak cash flow performance and challenging financing environment."

Hooters generated $66.7 million in net revenues in 2006, slipping to $65 million last year. However, operating expenses of $59.1 million and $58.3 million, respectively, did not result in adequate cash flow to cover debt service and capital expenses.

The financial woes continued, with revenues falling 6 percent in the first quarter of this year to $16.1 million.

Hedwigs agreed in April 2007 to buy the newly remodeled and rebranded Hooters Hotel for $225 million, including debt, in an unsolicited offer.

The deal was scheduled to close June 30, a deadline Bosworth said in May was "a very tough date to meet" because the property carries $130 million in senior notes at 8.75 percent that would come due with the sale.

Any new debt would be refinanced at a different, possibly higher, rate.

Bosworth said the capital markets were not "liquid enough" to fund the transaction as originally proposed.

"Even the best of deals were having trouble getting done," Caapaert said. "The only thing we're really surprised about is that it took this long to finally be terminated."

Hooters Hotel is owned by 155 East Tropicana, a joint venture between Florida-based Hooters, which owns 66.7 percent, and the previous owners of the Hotel San Remo and Hessling.

The 155 East Tropicana group purchased the Hotel San Remo in August 2004, began $130 million in renovations seven months later and reopened as Hooters Hotel in February 2006.

Hessling said there will be continued interest in the 9-acre site from possible buyers because of its location a block off the Strip.

"We've always believed in the value of this site so we'll see what happens," Hessling said.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.