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StumbleCarl Icahn to take ownership of Fontainebleau Las Vegas resort
Sam Morris / Las Vegas Sun
The Fontainebleau, construction stopped, is seen along with its marshalling yard on the Strip.
Published Tuesday, Jan. 19, 2010 | 6:43 p.m.
Updated Wednesday, Jan. 20, 2010 | 7:08 a.m.
Carl Icahn
Fontainebleau
Sun Archives
- Will a big wager on Fontainebleau pay off? (1-16-2010)
- Deadline for Fontainebleau bids set for Friday (1-11-2010)
- Fontainebleau judge details guidelines for credit bid (12-8-2009)
- Fontainebleau: Half-built bargain bid up by billionaire (12-7-2009)
- Fontainebleau lenders sue construction companies over liens (11-27-2009)
- Fontainebleau retail component seeks bankruptcy protection (11-27-2009)
- Contractors make another bid for Fontainebleau (11-26-2009)
- Penn National’s bid sets up auction for Fontainebleau (11-5-2009)
- Fontainebleau subcontractors organize to finish project (11-17-2009)
- 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)
Carl Icahn is expected to take over ownership of the bankrupt Fontainebleau Las Vegas resort after two potential competitors vying to buy the property failed to submit qualifying bids as of a 5 p.m. deadline Friday.
The U.S. Bankruptcy Court in Miami, where Fontainebleau filed for bankruptcy protection last year, is expected to conduct a hearing Jan. 27 to approve the sale of the Las Vegas Strip property to Icahn, who bid $156.2 million for it last year.
In an interview today, one of the competing bidders said his bid was shot down by an independent examiner appointed to oversee the sale of the resort.
San Francisco-based real estate investor Luke Brugnara said he entered a higher bid of $170 million, backed by a New York hedge fund, according to bidding procedures posted by the bankruptcy court. Brugnara said he was told by the examiner that he didn't submit the proper paperwork by today's deadline.
Brugnara said he would have needed at least 30 days to arrange financing – a reasonable request in today's economy. The examiner, he said, wanted to close the deal as soon as possible in order to pay loans coming due.
"What you don't want is a fire sale," he said. "Expediency is secondary to the recovery of maximum dollars for the benefit of impaired creditors."
And yet, Icahn – known for his strategy of buying depressed assets in down cycles – is one of few investors able to immediately dip in his pocket in any economy. (With an estimated net worth of $9 billion, Icahn is ranked No. 43 on Forbes' list of the world's wealthiest people.)
While bankruptcies in years past commonly attracted many competing bids, the relative lack of interest in the Fontainebleau may be the latest sign that loans – even small ones – are hard to come by in the casino industry, according to financial analysts.
Since the spectacular collapse of the housing and stock markets last year, banks have begun loaning money for the construction and expansion of smaller casinos in parts of the country with less competition, analysts say. Lenders are especially reluctant to lend money for new casinos in Las Vegas, which is saturated with hotel rooms at a time of depressed demand.
Brugnara, indicted by a federal grand jury in April 2008 for allegedly filing false tax returns, said the rejection of his bid is unrelated to previous run-ins with federal and state regulators.
According to the U.S. Attorney in San Francisco, Brugnara failed to report more than $45 million in capital gains from the sale of multiple properties, including the former Silver City casino in Las Vegas. Last year, Brugnara pleaded guilty to filing a false tax return in 2000 but rescinded his plea agreement and fired his attorney, court documents show.
Brugnara said the claims against him are false and that he's "not worried" about his case, which is set to go to trial next month.
Nevada casino regulators denied Brugnara a gaming license in 2001, citing a failure to file federal tax returns and other major blunders. Such denials are rare, as regulators generally allow applicants to withdraw their applications before a vote so as not to hurt an investor's future chances of entering the casino business.
The Silver City's gaming license expired without a new owner and the casino - a tired relic from the 1970s – was demolished. Brugnara still owns a piece of the land it sat on. His casino plans dashed, he built a retail center with a Ross and Walgreens instead – cheeky counterpoints to nearby luxury resorts.
The various parties involved in the Fontainebleau bankruptcy, including bankers and contractors, in November approved the rules by which potential buyers could submit bids for the property.
Among other things, bidders were required to enter a deposit and submit an offer that was at least $1 million over Icahn's bid.
Icahn could not be reached for comment. In a court filing, attorneys for Examiner Jeff Truitt said Truitt received two "submissions" for Fontainebleau on the bid deadline. The filing didn't identify the parties that made the submissions.
"However, for various reasons, including that neither of the submissions were accompanied by either the requisite deposit or satisfactory evidence of the financial ability to close a sale transaction, the examiner has determined that the submissions are not qualified bids," the court filing said. "Accordingly, the only qualified bid received by the examiner is the Icahn Nevada Gaming Acquisition LLC bid. Based on the foregoing and in accordance with the bidding procedures, there will be no auction for the assets."
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"San Francisco-based real estate investor Luke Brugnara said he entered a higher bid of $170 million, backed by a New York hedge fund..."
So much for Wallstreet being more conservative and responsible and not investing people's money in risky ventures anymore. I wonder where these pinheads think the next bailout is going to come from? The words "hedge fund" alone should automatically disqualify his bid. If Ichan has the cash and is ready to roll then let him have it and get the thing finished.
We might just see some new jobs out the deal too.
Buying at less than 10 cents on the dollar for this property is hardly a risky venture.
Mr. Brugnara should know better than to show up at a card game asking for credit. He was quoted as saying that the site is worth $200m. I'd get a handle on what land is really worth before you buying vertical assets. That land isn't worth $7m an acre and opening just the retail portion would have been a joke that would have been heard clear down to the Hawaiian marketplace!
With the permits that have been reportedly been taken out for the Fountainbleau property, hopefully the work will be starting soon.
Those who know people involved with Icahn also know that there is no intention of recommencing meaningful construction within a year's time. You may see some limited activity to further "weather proof" the structure, but you will not see development of a functioning hotel-casino in 2010.
I agree with vegas222, Icahn is going to do some maintenance and hold out till the economy improves..
Ichan is the right guy for this property. Probably he completes just the bottom 10 floors and sets up a mid-level casino with decent odds to attract gamblers on the strip and a number of floors of rooms. I don't think that place is going to be filling 1000 rooms immediately and I doubt Icahn is assuming that will be the case. Keep it 20% complete.
Central Committee Members and Comrads !
Icahn has the cash and does not need to fill out papers for a loan, he will bring in a top notch Vegas operator to open a casino, concert hall, hotel rooms, restaurants, condos and interval ownership. He will provide the financing for all buyers so they can avoid mortgage companies and banks ... he will be the bank. Then, at the right time, he will sell for a nasty little profit. Will he now seek the Miami Beach Font? Geez, lets hope so. The man has a brain.
Let the chips fall where they may.
Finally! Agreed here as well that Ican probably won't complete this structure any time soon. But now he's got the ball rolling on opening up this place and helping to revitalize that end of the Strip. The ball may be rolling very slowing, but this is a real sign of progress.
People like Wynn may have shaped Vegas and brought as far as it's come now. But we need people like Ican and Ruffin to bring Vegas back and carry it further than others can.
Icahn strikes again...Tropicana Entertainment, Tropicana Atlantic City, now Fontainebleau and still gunning for Trump Entertainment. All for pennies on the dollar! Gotta love it. Hopefully he brings the FB construction site some life again.
You know that LV is hurting with that kind of steal. The billion dollar question is how far down before the middle class see any day light.
goingbust- I agree - no reason to try to finish out the entire building yet. Start from the bottom up - Casino and retail - hotel (maybe 25%) and lock-off the rest. Visitors would not know the difference except the elevator stops on the 11th floor...Less $ up-front and less $ to operate with reduced staff -
Nashville, Tn just approved $585 million plus interests on a 33 year note with Goldman-Sachs to build a new convention center to compete with Las Vegas, Orlando, et al. What do you guys think of that decision by our Mayor? Opening would be in 2014 or 2015.
Hopefully he starts construction on the stalled project soon. It would be nice for this property to be in business soon, it'll help the comunity. It can start generating cash flow not that he needs it badly while he is waiting for the right time to unload the property.
typo error, I meant community.
The sooner it starts the sooner it finishes! The Union labor factor here in Vegas isn't going to get any cheaper, finish it and save the increased cost of labor. And please! BDOVER I don't want to hear about how lazy the Unions are and how this project should be finished non-union! You couldn't man a project this size non-union anyway.If Mr.Ichan is as smart as we all give him credit for he will go pretty much with the same contractors, same blue prints and same Engineering. These Companies that have worked on this project will pretty much walk in off the street and start where they left off.
Don't the contractors still have thier tools inside the hotel?
Hire all the Mexicans at the Home Depots to finish this yob. It will be done in 3 weeks.
Maybe Ichan will think of a better name for the place. At any rate, I look forward to that property being finished. Might bring some much needed traffic to that end of the strip. Could help Riviera and Sahara, Then again, It could be the final nail in their coffin.
i want a room right on da corner of building!looks like it b a great view...weeeeeeeeeee