The Fontainebleau, one of the newest casino resorts being built on the Las Vegas Strip, could be finished by one of its lenders. Its owners filed Chap. 11 on the 3,815-room resort, which will likely cost $3 billion when finished, Any new owner purchasing the property will be expected to shell out $1.5 billion to finish the resort before it could even begin operation -- and in this economic climate, that would mean a foreclosure auction with few, if any buyers, looking for a steal.
Jeffrey Soffer, a Miami businessman and the casino's developer, said he wants to put more capital into the bankrupt project, according to court documents. Other third-party investors, rumored to be Apollo Global Management LLC and Penn National Gaming, have expressed interest in acquiring the project.
However, with court mediation, the Fontainebleau's lenders and its owners are finally working to continue to finish the project. Previously the owners sued its lenders for calling a halt to $656 million in financing.
I think it only makes sense to do so. Its lenders, among them Bank of America, will make no money on a foreclosure auction. The only buyers interested in an auction are those wanting a bargain considerably less than the $1.5 billion owed. While lenders are trying to make a stand by foreclosing against those defaulting on loans, it doesn't make financial sense to do it and lose even more money. (Apparently I'm not the only one who thinks so, a Facebook group called Finish Fontainebleau Las Vegas began posting in May.)
A completed casino resort is much more marketable than a half-completed one. And if they're lucky, the market may pick up in the next year or two and they might see some profit. Maybe it's worth the gamble.
Photo of the Fontainebleau Las Vegas courtesy of Finish Fontainebleau Las Vegas