Search

×

Dormant Fontainebleau in Las Vegas has new life

The ill-fated, never-completed Fontainebleau Resorts in Las Vegas has been acquired by a partnership led by New York City-based investor Witkoff for US$600 million from Icahn Enterprises.

The 63-storey tower, 70% finished when construction stopped, has been dormant since 2009, two years after privately held Fontainebleau Resorts LLC began work on the US$2.9 billion, 3,900-room project. Business icon Carl Icahn and his firm, Icahn NV Gaming Acquisition LLC, bought the property out of bankruptcy in 2010 for US$150 million.

The property is away from the heart of the Strip, where properties tend to do better on average daily rates, and near another halted casino-resort project.

Witkoff, a global real estate development and investment firm, together with New Valley LLC, an investment company owned by Vector Group, said in a statement that the property was acquired at a substantial discount to replacement cost, a core part of Witkoff’s investment strategy.

Witkoff said it spent four months conducting its due diligence on the resort and the Las Vegas market prior to the acquisition, and has identified numerous ways to unlock the significant underlying value of the property to generate strong returns.

“2755 Las Vegas Boulevard South is one of the best physical assets in the country, which is one of the reasons we were attracted to it,” said Steve Witkoff, chairman and CEO of Witkoff. “Furthermore, the resort is ideally located on the Las Vegas Strip, directly across from the Las Vegas Convention Center, which is in the midst of a US$1.4 billion expansion and renovation. At the basis, we acquired a well-designed, structurally sound integrated resort at a significant discount to both replacement cost and the implied public market valuations of comparable Las Vegas Strip resorts. We look forward to applying our industry-leading value-enhancing platform to this property to unlock its true growth potential.”

Witkoff added that he thinks Las Vegas is one of the strongest lodging markets in the country given its highly favorable dynamics. He said RevPAR and EBITDA growth continue to accelerate and cited that there has been no new supply since 2010.

Comment