Icahn adding to his ‘second-hand store’

Jan 26, 2010 5:05 PM

But what will he do with the Fontainebleau

Carl Icahn’s casino holdings resemble a second-hand store, with Icahn buying the stuff no one else wants and holding it until the day when, lo and behold, there is a market for what no one had wanted.

Icahn pretty much said this himself in Las Vegas news stories, pointing out that he is the last man standing for an expected Miami bankruptcy court auction and therefore appears to have the Las Vegas Fontainebleau all but locked up.

So the question is this: Assuming the deal is completed, what does he expect to do with it?

Probably not much of anything for the time being.

And who can blame him, although there is no shortage of people frowning at the notion of a half-finished 60-story structure looming over the Strip for who knows how long.

There are some industry followers who can see Icahn flipping the wannabe resort to Penn National at some point, but that’s unlikely. The Fontainebleau never did look like Penn’s kind of place. Penn would be more likely to buy the neighboring Riviera or Sahara.

Las Vegas right now is not a market in need of another three-billion-dollar hotel, which, according to most opinions, is only about 70 percent complete, a statement that implies the need for more spending … eventually.

But probably not now, although the fact Icahn appears to be getting it for next to nothing (relatively speaking) will put a modest completion plan within reach. The rooms could be priced with an appeal for budget-conscious visitors.

A gaming professional who understands big projects offered, "I can’t see it being completed for any less than about a billion dollars."

Industry veterans who have had good views of Icahn doing his magical thing – turning small investments into healthy profits by virtue of his ability to show the patience and discipline that puts him in the right place at the right time, do not expect him to invest significant capital upgrading the Atlantic City and Las Vegas investments he is well on the way to acquiring via separate deals.

Icahn told a Las Vegas reporter he will wait to see what happens with the Las Vegas market before deciding what approach to take with the Fontainebleau. That may mean letting it sit a couple of years, maybe longer.

Icahn can expect a satisfying profit eventually, but why should he be in a hurry to spend whatever a completed Fontainebleau will require so he can get $150-$200 a room?

In the meantime the Fontainebleau is a painful example of the damage that can result from bad timing. Las Vegas was rolling along in the best of times when plans were hatched in 2005 to create a Vegas version of the iconic south Florida resort.

Former Mandalay Resorts president Glenn Schaeffer and the condo-oriented Turnberry group combined their talents in what seemed like a can’t miss kind of dream team.

But the dream became a nightmare when everything went wrong.

On the other hand, the fate of the Las Vegas Fontainebleau could quickly take a positive turn depending on the eventual success of a proposed 2010 ballot initiative to extend casino gambling to Miami Beach and hotels such as the Fontainebleau, which is said to be facing possible bankruptcy a bit more than a year after a massive remodeling and grand opening.

If Miami-Dade gambling expands enough to benefit the south Fontainebleau even as its financial health deteriorates, Icahn will obviously give some thought to the profit that could come his way from owning major casino resorts in three major resort cities – Atlantic City, Las Vegas and maybe, just maybe, Miami Beach.

Yes, timing is everything as Icahn calculates the possibility of a hat trick and the possibilities for making it to the right place at the right time to pocket another big profit.

Question? Comment? E-mail me at: Phil Hevener