Editor's note: "Bricks and Mortar" is a series of columns written by real estate reporter Nicholas Yulico meant to help TheStreet.com readers generate real estate and gaming-related stock ideas.

Melco PBL ( MPEL) shares jumped 13% Friday after being slammed earlier this week, when rumors of a problem with the Macau casino owner's credit facility weighed on the stock.

Melco's second-quarter results, released Friday, were weak, as expected, because of the delayed opening of VIP game rooms at the company's first casino, Crown Macau.

However, the company -- which I've picked as a buy for my Bricks and Mortar mock portfolio -- reported positive July and August trends for the Crown, and management did its best to soothe investors about the credit facility fears.

Melco said average daily VIP rolling chip volume -- a key Macau operating statistic -- was $20 million in the second quarter. The volume more than doubled to $44 million in July and has improved another 25% to $55 million since the beginning of August.

For the second quarter, Melco reported a loss of $69.2 million, or 6 cents a share, widened a loss of $5.2 million, or 1 cent a share, a year earlier. Heavy property-related expenses dragged down results.

The period marked the first quarter that included any casino results, since the Crown property opened in May. Thus revenue for the quarter soared to $45.1 million from $5.5 million a year earlier.

Melco said Crown's market share of total gaming revenue in Macau was 1.7% in May, 2.7% in June, and 4.9% in July. In August, the share rose to 7%, management said on the company's conference call.

Melco shares recently were up $1.31 to $11.41. Prior to Friday, shares had tumbled 24% this week because of rumors floating around that Melco's new $2.75 billion credit facility was in danger of falling apart. The stock is still significantly below its $19 December IPO price.

The credit facility is set to provide financing for City of Dreams, Melco's next casino development, which will cater to the mass market. The facility will also fund development of a third casino, which will cater to day-trippers and will be located on the Macau Peninsula.

On the earnings call, management said it is still finalizing documentation with its lenders for the facility and portions of the facility are still being syndicated. Management said it was confident the syndication and facility will be completed.

The company also said that the doors are not closed for syndication in Asia, unlike the U.S., where credit markets have been roiled.

But what happens if the syndication does fall through? Several investors and analysts pressed management about a worst-case scenario on the conference call.

Lawrence Ho, Melco PBL's chief executive, said there would be strong shareholder support to boost the company in a hypothetical worst-case scenario.

As a reminder, Melco PBL is a joint venture between Melco International Development, a Hong-Kong listed holding company, and Publishing and Broadcasting Ltd., an Australia casino development and media firm.. The two parents own roughly 80% of Melco PBL's stock, meaning there is a very small float.

I feel Ho's comment suggest there is a good chance that the two parents will step in to provide the backing of the company's future casino projects if there are difficulties finalizing the credit facility. The Macau market is seeing tremendous growth.

Melco International and Australia's PBL are currently precluded from buying back the entire Melco PBL vehicle since there was an IPO in December. However, given a disaster scenario where the credit line cannot be syndicated -- which is unlikely -- then the two parents likely could avoid shareholder lawsuits by offering to buy back all of Melco PBL.

Importantly, Melco also has support of several large institutional shareholders, including Janus Capital ( JNS), its second-largest institutional shareholder. Janus raised its Melco PBL stake by 38% to 12.8 million shares in the second quarter.

Melco International and PBL, the parents, are very well-capitalized and are in the midst of doing a $250 million convertible bond offering, which will fund a massive share buyback. This convert deal, which Melco PBL management said will be finalized in a few weeks, will not affect Melco PBL's balance sheet or income statement. Instead, the parent companies will be using the convert proceeds to reduce the float of Melco PBL.

This should prove a solid floor under the stock and will help scare away short-sellers, who continue to pile into Melco.

This is undoubtedly a tough market for all stocks. But I feel the negativity on Melco has reached its low. At $11.50, the risk/reward of the stock is very positive. So long as something doesn't go wrong with the credit facility, I see shares moving to the upside.

By 2010, Melco is expected to have three casinos up and running in Macau, and I expect the company to grab a significant share of the overall Macau gaming market, where growth has been tremendous.

Home Solutions Plunges

In other Bricks and Mortar mock portfolio news, Home Solutions of America ( HSOA) shares were sinking 22% Friday to $3.16.

Earlier this week, Home Solutions disclosed a major related-party transaction and warned that it has likely violated certain covenants of a credit facility. It also said the Securities and Exchange Commission and Nasdaq made informal inquiries into the company's public disclosures.

As a reminder, I've been flagging the stock as overvalued since late April. The stock has since fallen 37%.

On Friday, the company said it has not defaulted on its credit line and is still able to borrow under the facility. However, lenders have still not approved the resolution of a note payable that relates to the company's purchase of its Fireline subsidiary last year.

Home Solutions plans to scrap a note payable due to Brian Marshall, who owned Fireline and is now Home Solutions' largest shareholder and a company executive, in exchange for letting Marshall collect certain accounts receivable related to Fireline.

The company said Friday that it is in "advanced discussions with its lenders to receive a waiver." If the lenders do not consent to the agreement, then the company will seek to restructure the lending pact in order to comply with the covenants.

"We have an excellent relationship with our lenders and are confident that we will reach a speedy resolution," said Frank Fradella, Chairman and CEO of Home Solutions, in the statement. "However, if we are unable to, we would restructure Marshall's agreement to avoid an event occurring which could trigger a default."

The company also said it is conducting an independent review of all related-party transactions, such as the ones with Marshall. Home Solutions' quarterly report this week revealed that one of its $100 million contracts was with a company that is 50% owned by Marshall.

Bricks and Mortar Portfolio
A Look at How Nicholas Yulico's Picks Have Performed
Rating Date Price at Rating Rating Current Price* Return**
Brookfield Properties (BPO) 1/23/2007 $28.67 Own $22.47 -21.6%
Global Real Estate ETF (RWX) 1/23/2007 $64 Own $56.35 -12.0%
Ryland (RYL) 1/23/2007 $56 Flag $31.15 44.4%
Trump (TRMP) 1/23/2007 $17.50 Flag $6.56 62.5%
Penn National (PENN) 2/6/2007 $45.56 Own $55.49 21.8%
Hilton (HLT) 3/2/2007 $34.69 Own $43.92 26.6%
Melco PBL (MPEL) 3/12/2007 $15.46 Own $10.10 -34.7%
Home Solutions of America (HSOA) 4/24/2007 $4.98 Flag $4.05 18.7%
Starwood Hotels 7/12/2007 $72.37 Own $54.15 -25.2%
Average Total Return, Unweighted 8.9%
Close At Start of Portfolio Current Value
S&P 500 1427.99 1411.27 -1.2%
U.S. MSCI REIT Index 1140.36 924.71 -18.9%
*(8/16/07 closing prices)
**For "flagged" stocks, a drop in price is tracked as a positive for the portfolio, and a rise in price is a negative.

'Bricks and Mortar' is a mock portfolio meant to generate investing ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.