- Donald Trump’s former Special Advisor to the President on Regulatory Reform sells unopened casino for $600 million 7 years after purchasing the site for $150 million
- Developer Steven Witkoff and his group of investors hope to ‘unlock the sites potential’ following acquisition
Seven years ago, Business magnate Carl Icahn and his firm, Icahn NV Gaming Acquisition acquired the former unfinished Fontainebleau resort out of bankruptcy in 2010 for what now appears to be a bargain price of $150 million.
Now, it has been confirmed that Icahn has sold the site for a whopping $450 million profit to Developer Steven Witkoff and investors New Valley LLC for $600 million after two years on the market, but for $50 million under the original asking price.
Icahn Spied an opportunity despite the recession
The financial crisis which swept the world had a damaging effect on the fortunes of many, especially in the casino entertainment business.
In June 2009 Fontainebleau Las Vegas LLC (and owners of the unfinished resort) filed for bankruptcy after the sudden departure of former president of Mandalay Resort Group, Glenn Schaeffer, who was responsible for securing more than $3 billion in loans for the project and, as a result, Bank of America refused to disburse additional funds for construction.
As the only viable bidder after outbidding Penn National Gaming (which later pulled out of the race), Icahn acquired the dormant location and included a debtor-in-possession loan, which provided funding to stabilize the building and cover employees’ salaries.
The investment has been a huge success for Icahn despite the casino resort never having opened its doors and being used as a firefighter training site ever since, with Icahn highlighting the success in a recent statement: “This successful investment is an example of our ‘contrarian’ modus operandi, which seeks to invest in undervalued assets and businesses, nurture, guide and improve their condition and operations, and ultimately sell them for large gains.”
Will the resort finally open its doors?
In 2015, CBRE (the broker for the sale) claimed the resort would cost about $1.2 billion to finish, coupled with the $600 million purchase, that works out at roughly $500,000 per room, which is half the average cost of building a new resort from scratch.
Steven Witkoff and his investors have spied this as an opportunity recently saying that the 68-story hotel-casino and condominium project was attractive because it could be considered one of the finest assets in the US.
He also went on to give hope that the project could be completed by adding in a separate statement: “We acquired a well-designed, structurally sound integrated resort at a significant discount to both replacement cost and the implied public market valuations of comparable Las Vegas Strip resorts, and We look forward to applying our industry-leading value-enhancing platform to this property to unlock its true growth potential.”
Despite failing to reveal any further plans it is looking more and more likely that one of the Las Vegas Strip’s most recognisable projects could be about to have lift off.
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