Published Thursday, Nov. 5, 2009 | 4:09 p.m.
Updated Thursday, Nov. 5, 2009 | 8:30 p.m.
- Fontainebleau developer plans appeal of rulings (11-2-2009)
- Subcontractors fall short in effort to move Fontainebleau case (10-26-2009)
- Executive named examiner in Fontainebleau bankruptcy case (10-16-2009)
- Fontainebleau president among execs leaving project (10-15-2009)
- Fontainebleau a symbol of bad timing, not the only victim (10-12-2009)
- Fontainebleau judge wants quick sale of bankrupt project (10-2-2009)
- In reversal, Fontainebleau lenders suggest liquidation (9-25-2009)
- Fontainebleau: Bank no longer ‘seeking to destroy’ project (9-17-2009)
Several Fontainebleau Las Vegas subcontractors, including two Fortune 500 construction companies, said Thursday they've organized and are stepping up efforts to find financing and gaming partners to complete the project.
More than 80 percent of the value of hundreds of millions of dollars in subcontractor liens are represented on the first lien holders committee, the group said.
The group includes Fortune 500 companies Tutor Perini Corp., builder of the CityCenter and Cosmopolitan projects in Las Vegas; and MDU Resources Group.
MDU owns Fontainebleau contractor MDU Construction Services Group.
"We are in discussions with a number of potential partners, including hotel and gaming operators and financial partners," Ronald Tutor, chairman and CEO of Tutor Perini, said in a statement. "We are exploring a variety of options that we can propose to the bankruptcy court, including debtor in possession financing."
Tutor Perini owns Fontainebleau subcontractor Desert Plumbing & Heating Co. while MDU owns subcontractors Bombard Electric, Bombard Mechanical and Desert Fire Protection.
Other companies on the committee include Aderholt Specialty Co., Conti Electric, W&W Steel, AMI Hospitality and Zetian Systems.
Las Vegas attorney Gregory Garman of the Las Vegas law firm Gordon Silver, which represents many of the lien holders, said the participation of Tutor Perini and MDU in the group is significant in that those national companies have the financial strength to provide potential partners or Fontainebleau buyers with construction guarantees including price guarantees.
Such guarantees would be advantageous to a potential buyer, since investors don't want to worry about construction delays and cost overruns.
Aaron Smith, president of interior finisher AMI Hospitality, said the subcontractors want to be in a position to take control of the project should a bid from Penn National Gaming or another potential buyer not satisfy the subcontractors' liens.
Smith said the group has been in discussions with potential lenders about finishing the project in a way that would make economic sense, even in the current recessionary environment.
The financial outlook for the 3,815-room Fontainebleau, even if it's completed, has been questioned because of the recession that has reduced visitation to Las Vegas -- even as more hotel rooms open in the city at CityCenter and other projects.
"The Vegas market has been down before. We are confident that it will bounce back once again, and when that happens the Fontainebleau can be a gem that helps the city prosper," said committee member John Harp, chief executive of MDU Construction Services Group.
"More than $2 billion has been invested in the Fontainebleau project," he said. "We want to complete this project so that the money is not wasted, and so that it creates jobs and revenue for the people of Las Vegas and Nevada."
Weina Zhang, chief executive of Fontainebleau window contractor Zetian Systems Inc. of Las Vegas, said group members are open to any proposal that will get construction back on track at the resort.
"As long as you have the money, we'll talk to you," she said.
Controlled by Miami developer Jeff Soffer, work halted on Fontainebleau and the company filed for bankruptcy protection this summer after Bank of America and other lenders halted funding because of cost overruns and other problems with the project.
Even before the bankruptcy, doubts were cast about its financial viability because of a lack of condominium sales associated with the recession.
Once valued at $2.9 billion, $1.675 billion has been borrowed against the unfinished project. Estimates to complete it have ranged from $1.5 billion to $2 billion and a bankruptcy court examiner is now supervising procedures to sell the project.
Fontainebleau has said $615 million of contractor liens have been filed in the case, but it's unclear of that amount which are valid.
Harp said the lien holders estimate builders' liens against the project actually total $350 million to $400 million.
He said the subcontractors committee members feel public statements by Penn National about the lack of value at Fontainebleau indicate Penn may make a bid for the project that won't cover their liens.
He was asked if the lien holders may accept equity in Fontainebleau, rather than cash, in a deal with any potential partner.
"Everything's on the table," he said.
Harp said Fontainebleau offers a relatively low-cost opportunity for an investor with long-term confidence in the Las Vegas market.
The subcontractors met Thursday in Las Vegas and agreed to issue a statement about their organization in hopes of attracting interest in their cause.
Prior to Thursday, Harp said, potential investors and gaming partners may have had difficulty expressing interest in the project because there was no formal organization of Fontainebleau subcontractors.
"We're hoping they will reach out to us now," he said.