Bankrupt $3B Fontainebleau Las Vegas Project Gets Scooped Up by Icahn for $150M

February 25, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user mrak75

Despite the fact that the gaming industry in Las Vegas is struggling, Icahn Enterprises L.P.’s acquisition of the Fontainebleau casino and resort project is still quite a deal. Subsidiaries of the company, spearheaded by renowned billionaire investor Carl Icahn, purchased the $3 billion unfinished development along the famed Las Vegas Strip from Fontainebleau Las Vegas L.L.C.–which filed for Chapter 11 bankruptcy protection in June 2009–for a the bargain basement price of $150 million.

Sited on a 25-acre parcel, Fontainebleau was designed to be a 63-story, 7 million-square-foot tower containing 3,889 luxury guestrooms, a 100,000-square-foot casino, upscale restaurants, as well as meeting and convention facilities. The project had reached 70 percent completion at the time of the developer’s bankruptcy filing.

As noted in leisure industries consulting firm HVS’s Las Vegas Casino and Hotel Market Outlook 2010 report, 2009 brought Sin City the most severe downturn in its history. Recovery is contingent on the rebound of the national and international economies. Icahn Enterprises has not revealed any plans for Fontainebleau, but evidently, the company’s leader can see way beyond the lackluster demand that currently plagues the gaming market.

“Icahn is just that, an Icahn,” Jacob Oberman, director of gaming research and analysis with real estate services firm CB Richard Ellis’s Global Gaming Group, told CPE. “He has a strategy for properties but far be it from me or other analysts to guess how he’s going to extract value form Fontainebleau. He is a creative thinker and he’ll know who to approach, and people will approach him.”

The credit crunch left a bevy of Las Vegas casino projects in the lurch over the last year, so distressed assets are abundant–yet there hasn’t been an overwhelming number of desperate sales. Analysts differ in opinion when speculating about whether investment transactions will increase this year, but Matthew Jacob, director and senior casino analyst with Majestic Research Corp., says there’s a possibility that they will: “Unfortunately, we’re not seeing a big pickup in gaming market trends, so we may see opportunities for investors to buy properties at low equity valuations if the market continues to struggle.”