Investors still playing the game in Vegas
September 12, 2017 3:00 AM
by Phil Hevener
Las Vegas continues to play a starring role as a magnet for big money investors with dreams for replicating the success of others.
But Las Vegas continues to enjoy an ace in the hole that may not be found elsewhere – a good relationship with government that remains intent on protecting its number one producer of tax revenue against competition from all areas. It’s all a matter of getting to the right place at the right time.
You want a bigger airport? You’ve got it. You want a stadium big and modern enough to welcome a major league sports team that could create a superior marketing magnet. It’s on the way. The same is true of the need for better-than-ever convention facilities.
Yes sir, it is the big and little conveniences that can make a big difference in a hotly competitive market.
The recent sale of the project that was to be a Fontainebleau means the “flipper” (Carl Icahn) will be pocketing a billion-dollar profit, give or take a few bucks. Not a shabby deal, and allegedly all it took was patience.
Icahn never appeared to have had any intention of operating the property himself but he was sure somebody would eventually. All he needed to do was be patient. He had not taken a close look at it himself when he outbid Penn National Gaming by some $50 million in a 2010 Miami bankruptcy court sale paying a bit more than $150 million.
“We’re a disciplined company and we have a good sense of what has to be done before there is an opening,” Penn CEO Peter Carlino said at the time. The Fontainebleau still required a lot of spending by someone.
And so the project sat as Las Vegas Strip watchers tapped their feet nervously, worried this unfinished venture would become something of an emblem for the tough times that were sucking life out of the local economy.
What did Icahn have in mind, Steve Wynn asked during a long ago phone call.
Icahn shrugged off such inquires and said it sounded like it might be worth his time. After all, he made money buying the Stratosphere and then reselling it.
Whatever Icahn was feeling, he projected confidence since he had been associated with so many previous big deals.
And then along comes California developer Steve Witkoff who has been checking on Las Vegas Strip opportunities. He already owns the Sierra in Reno. It had previously been a holding of both MGM and Hilton.
The Fontainebleau continued to be the most buyable property on the Strip, at any price.
With the local economy looking better – much better than in 2010 – Witkoff may be in the right place at the right time but his chances of success are in the hands of people other than himself. For $600 million he and his partners have bought themselves the right to spend to more than a billion – maybe $2 billion – to turn the Fontainebleau into a resort that will welcome the world.
Or maybe he has something else in mind. The past is not always a good tool for determining the likely shape of the future.