Rumors swirl over Las Vegas Fontainebleau fate

May 5, 2009 5:04 PM
Gaming Insider by Phil Hevener |

There’s even talk of it as a CityCenter II

The Las Vegas Fontainebleau’s financial problems may become an invitation for what one veteran observer of big deals thinks of as a white knight with vision.

"What a chance," he was saying, "for someone to swoop in and become instantly bi-coastal."

He was thinking of the recently remodeled legendary Miami Beach resort of the same name and the unfinished Fontainebleau on the north end of the Strip. There are ongoing South Florida efforts to expand Miami-Dade County gaming in a way that would benefit beach resorts. Success is just a matter of time.

Fontainebleau co-owner Turnberry Associates has reportedly decided it is not putting any more money into the Las Vegas venture. This talk, whether it is factual or merely part of the poker game between the Fontainebleau and its suddenly reluctant lenders, raises the possibility of the north Strip property becoming another Cosmopolitan with lenders taking control of an unfinished project.

The Fontainebleau was plunged into uncertainty as its developers filed a $3 billion suit against a group of lenders who have decided not to loan money needed to complete it for an opening later this year.

The Las Vegas project was conceived at a time several years ago when banks and private equity groups were willing to give solid gaming projects whatever they needed.

That’s all changed in the last year but even that dreary bit of reality may be in the process of doing a slow 180. At least two private equity groups have been heard making the sounds that suggest they are looking for distressed projects with a strong upside. There may be others but Oaktree and Colony Capital have been mentioned in several news stories, none of which, by the way, had anything to do with the Fontainebleau.

Dubai World might even find a way to be involved, considering it already owns about half of the Miami Fontainebleau and its top officials have been quoted concerning their interest in a variety of troubled U.S. resort assets.

This is a good time to be looking for bargains, they have said. Dubai’s Las Vegas focus has been confined to CityCenter until now and recent reports of the emirate’s financial problems, if true, may preclude other big thinking.

It was a good five or six months ago that I became aware of industry followers talking among themselves about an apparent slowdown at the Fontainebleau site. All anyone had to do was drive by the site between the Riviera and Sahara and look at all the things that did not seem to be happening.

No, no, no was the not-for-attribution response of project insiders who insisted an October opening was very realistic. Fontainebleau principals may yank a rabbit out of a hat and find money that does not seem to be there for anyone else trying to get a big gaming resort built.

Kind of sounds like CityCenter II, this search for financing to bring a big dream to life.

The uncertainties connected with project timing can be a friend or an enemy considering there are years between conception and opening day, but as a former CEO was recently telling me, "I’m not sure why they would want to open this fall, the current market being the way it is."

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