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August 20, 2014

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Carl Icahn: Fontainebleau to sit idle until economy improves

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Sam Morris / Las Vegas Sun

The stalled Fontainebleau project is seen Jan. 15, 2010.

Fontainebleau Resort

The Fontainebleau, construction stopped, is seen dark along the Strip. Launch slideshow »
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Carl Icahn

Fontainebleau

Three pieces of news emerged today about the massive, unfinished Fontainebleau casino resort on the Las Vegas Strip:

--Investor Carl Icahn, who bought Fontainebleau out of bankruptcy in February, confirmed that there are no immediate plans to restart construction on the resort.

--Despite talk that he may sell the property, Icahn indicated he plans to hold on to the asset until business conditions improve.

--Icahn has already gained -- on paper -- a $52 million profit on the property.

Today's disclosures by one of Icahn's companies, Icahn Enterprises L.P. of New York, are significant because they are the first official word from Icahn since the Las Vegas Sun reported in June that a contractor, Taylor International Corp., had pulled $1.2 billion in construction permits for the resort.

Icahn and Taylor International at that time declined to address whether construction would resume anytime soon on the property on the northern stretch of the Las Vegas Strip, between the Riviera and the Sahara hotel-casinos.

Construction on Fontainebleau was halted last summer and its initial developer, Florida-based Turnberry Associates, sought bankruptcy protection for Fontainebleau Las Vegas after banks halted funding for what had been envisioned as a $2.9 billion, 3,815-room resort.

The project was hurt by declining revenue projections because of the recession, an associated lack of condominium sales and cost overruns. Costs to finish the project could reach $1.5 billion, bankruptcy court filings revealed.

"Our real estate segment intends to secure the former Fontainebleau property until market conditions improve," Icahn Enterprises said in a regulatory filing today regarding the unfinished building and 25 acres of land.

Icahn bought the property for $148 million after out-bidding Penn National Gaming to be the stalking horse bidder in the bankruptcy auction.

Icahn's company also disclosed today that in February it completed a "fair value study" on the Fontainebleau property.

"Fair value was determined using 'as is' cost and comparable market sales approaches. The total fair value of the former Fontainebleau property was valued at approximately $200 million, of which $91 million related to land," today's filing said.

Icahn separately controls Las Vegas-based Tropicana Entertainment Inc., which has hotel-casinos around the country including in Laughlin and Atlantic City.

The Tropicana Las Vegas hotel-casino, spun out of the Tropicana Entertainment bankruptcy, is owned by another group of investors and is not part of Tropicana Entertainment.

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