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Published Thursday, Jan. 14, 2010 | 3:41 p.m.
Updated Thursday, Jan. 14, 2010 | 7:33 p.m.
Sun archives
Penn National Gaming, which spent months investigating the purchase of the unfinished Fontainebleau Las Vegas resort on the Strip, will not bid on the property at an upcoming bankruptcy auction, a spokesman for the Pennsylvania-based casino company said today.
With Penn National Gaming out of the running, billionaire investor Carl Icahn, who outbid Penn by about $10 million for the right to kick off the bidding process, could end up owning the resort unless other bidders emerge by a Friday deadline.
With Las Vegas saturated with hotel rooms in the recession and money for casino development on the Strip hard to come by, it's uncertain whether anyone else will emerge with the money and inclination to buy the Fontainebleau. Icahn bid a mere $105 million in cash for the property, in addition to $51 million in financing – money that will be put toward paying back debts owed lenders and protecting the vacant building from the elements.
Fontainebleau's developers had already spent $2 billion on the resort when lenders pulled financing for the building in the midst of the downturn, forcing the property to declare bankruptcy. Penn National estimated it would cost $1.5 billion to finish the resort and had accumulated cash and loans to finish the job. Penn exited the bidding process after offering about $95 million in cash and the same financing package as Icahn's.
An independent examiner appointed to collect competing bids will determine by Jan. 19 if any bids are backed by the money and expertise to take over the project. If any bids exceed Icahn's offer of $156.2 million, an auction will be held Jan. 21 to determine the winning bid.
Several companies have signed confidentiality agreements with the examiner to review closely held financial and construction documents on the Fontainebleau. These groups, whose names haven't been disclosed, have yet to publicly announce a bid for the property.
If anyone has seen the rendering's of the Fountain Bleau project in it's compleation it's fabulous! Along with the City Center I'm sure it will bring many new visitors to Las Vegas. Spectacular buildings and the sites bring people to Las Vegas. We need to start thinking about tearing down old Casino's like Circus Circus and developing the property of the old Evanna Trump Casino on the corner of Las Vegas blvd. and Sahara and building something new where the old Frontier use to stand next.
i have some interest in penn nat. from horse racing side and am glad they pulled out. rather see them try for stations properties as this is where they do best. strip is not the place to be. over last 10 years strip has become for rich and lazy crowd and your 1st timers. repeat customers want a better deal and you see most of us moving to stations or boyd's last 10 years
I don't think Ichan has any intention of opening the resort. $156 million to him is peanuts but it would take far more to finish or even partially finish the resort.
It just seems that the more likely scenario would be to mothball it and open or sell the property when the economy improves.
Icahn won't sink another dime into this property. He'll button it up and sit on it for 5 years until the market starts coming back. Then he'll sell it for $500 million and look like a genius.
Are there terms of the auction that the buyer has to complete the project right away,or like was said above,mothball it?
In the pending case No. 09-21481 in Southern District of Florida statutory lienholders will sell their assets to the highest bidder. There is no requirement that the successful bidder complete the project within a time frame.
Dan Nita
Proprietary Finance Ventures