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Dec. 17, 2008
Copyright © Las Vegas Review-Journal

Fontainebleau, what's really up with you?

Many questions linger as sales center opens

By ARNOLD M. KNIGHTLY
LAS VEGAS REVIEW-JOURNAL
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Construction continues Tuesday at the site of the $2.9 billion Fontainebleau project on the Strip.
Photo by Duane Prokop.



A model room of a Fontainebleau suite is shown at the preview center, which opened last week on the Strip.
Photo by Craig L. Moran.



A model at the Fontainebleau preview center shows the outside of the resort, slated to open next year.
Photo by Craig L. Moran.

Fontainebleau Las Vegas' preview center opened last week with little fanfare but lots of questions about when, or if, its 1,018 condominium units will go on sale.

Officials for the $2.9 billion mixed-use development insist the 3,815-room project is on schedule to open in 10 months despite a recession that has slashed gaming revenue and visitor numbers on the Strip.


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    • The two-story preview center, across from the construction site next to the Skyy condominiums north of Circus Circus, includes a model of the project, three hotel room floor plans and a short film introducing some of the amenities at the project.

    Officials, however, have been unavailable for interviews, only issuing statements through a company spokeswoman.

    The owner, Fontainebleau Resorts, instead used last month's unveiling of a $1 billion redevelopment of the Fontainebleau Miami Beach to increase "brand awareness" of the Fontainebleau name.

    Howard Karawan, chief operating officer of Fontainebleau Resorts, said in a statement last week that the Miami opening, which featured the "Victoria Secret Fashion Show" on CBS, brought the name "incredible media exposure."

    "The momentum continues to build as business levels and media interest are very strong," Karawan wrote. "While these are challenging economic times, we are extremely encouraged by the response we have had to the Fontainebleau brand."

    The preview center show hypes the project's seven-acre pool deck, 27 restaurants including a Nobu and a 5,000-square-foot chocolate shop. There will also be a 68,000-square-foot spa with 55 treatment rooms.

    The Strip resort will also have a 100,000-square-foot casino and a 300,000-square-foot retail center called The Runway.

    An employment center seeking to hire 6,000 workers will open in the spring at Town Square.

    Fontainebleau Resorts, which received a $4 billion loan last year, has enough cash to complete the project, according to a November note by bond rating house Moody's Investor Services.

    Problems may arise once the $2.9 billion project opens, however, if gaming revenues and visitor numbers continue to fall, one analyst said.

    "The likelihood of continued weak gaming demand trends in Las Vegas increase the risk that the company will not be able to meet its debt service burden once the project opens in late 2009," Moody's bond analyst Keith Foley wrote Nov. 6.

    Moody's downgraded approximately $2.5 billion of corporate family debt and raised its probability of default rating to Caa1, indicating substantial risk of default, from B2, or highly speculative.

    Fontainebleau Resorts, which is controlled by Miami-based developer Jeffery Soffer, initially planned to raise $700 million to $900 million through condominium presales, but the condo-hotel market has struggled in recent months.

    Only 60 percent of the 599 condominium units at Palms Place have closed sales since February, and Trump International Hotel & Tower stopped marketing nearly 300 units to focus on closing its current contracts and its hotel business.

    The Signature at MGM Grand had five foreclosures between Dec. 4 and Dec. 9, according to Blockshopper.com, a Chicago-based real estate data service.

    The Fontainebleau or its parent company could court additional investors to relieve some of its debt load.

    Melbourne, Australia-based gaming company Crown Limited paid $250 million in April 2007 for a 19.6 percent stake in Fontainebleau Resorts.

    A subsidiary of Dubai World bought a 50 percent stake in the Miami property in April for $375 million.

    Dubai World, however, has already invested $6 billion for a 9.4 percent stake in MGM Mirage and 50 percent interest in the $9.1 billion CityCenter project. CityCenter could pose a more direct challenge to the Fontainebleau. The mixed-use Strip development with 6,300 hotel rooms is scheduled to open around the same time as the Fontainebleau.

    Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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    perry wrote on December 26, 2008 10:56 PM: don't they know high rise condo will not work it is a fad. trump tower is a hotel now.


    Greg wrote on December 17, 2008 11:54 PM: RE: Progressive

    There can only be one Steve Wynn, and Steve Wynn is not building condo towers. He learned the gaming industry from the casino floor, and has stuck to his core business. Optimism is good in business, but condo towers are not resorts with gaming.


    Progressive wrote on December 17, 2008 04:28 PM: Let me just remind everyone of what folks were saying about Steve Wynn and the Mirage in 1989? They were betting on him going bust within a year. What about when Tropicana was built in the 60's at the end of the strip, how that would not work, and that it was too far from downtown which was the center of the action and main Vegas attraction.


    Greg wrote on December 17, 2008 02:45 PM: Dumb, dumb, dumb. My middle name came from the man who dreamed and planned the country's first mall. He was ahead of the market, and times, a visionary. Now to the rules or real estate, tried and true. Condo towers will have some, "some" hit and miss success in Las Vegas, with big winners and big losers. But traditionally their value is sustained only by markets with (1) beachfront views, (2) Washington DC federal government infrastructure, and (3) a hugely dense and centralized population in New York City. Even given three million people in a tourist city location like Vegas with ample transience, I don't think so. Not in my lifetime, anyway, for the majority of these projects. It was amusing in 2004-2005 watching these new suits brand new in town talk highly as experts, promoting big new properties, while wearing big knotted ties, young stylish haircuts and pointed fashion dress shoes, which are really never in conservative financial style. There support was often from people outside Nevada who would walk away, or flip properties, only rolling the dice with little regulation, local growth controls, and cheap costs of money. Most of the deals were not worth the paper they started on.


    Jobsneeded wrote on December 17, 2008 02:30 PM: They are going to open. Getting a job here will be the holy grail. Its new and going to be very busy. The sad part is they expect 250,000 applications for 6000 positions. Times are tough and we need the jobs!!!


    Mark$ wrote on December 17, 2008 01:14 PM: The Chamber of Commerce and its sycophants in the corporate media serve up the Kool-Aid (spiked with visions of dollar signs & wishful thinking) and there are plenty who will drink. Dare not let something so cold & harsh as REALITY spoil the fun ..


    casinocon wrote on December 17, 2008 11:16 AM: If they build boring, ugly resorts like Fountainebleu (or however you spell it, rhymes with "ewww")they will NOT come. The Vegas of the future will look like the Vegas of the past, much smaller, and hopefully more "loser friendly". If the "brains" had any brains at all, they would realize that bigger is not always better. The gamblers that built Las Vegas (I mean the players, not developers here) came for comps, free RFB, at little chance at winning once and awhile, service, interesting themed resorts, and VALUE for their entertainment dollar (since that is what the bigwigs keep claiming gambling is, which we all know is b.s.) Vegas as we know it is over. Vegas as it will be may look familiar to oldtimers.


    laguna wrote on December 17, 2008 11:05 AM: Hey Ken,
    That bus-boy job may be still be available, beats sitting on mom's couch.


    derek marlowe wrote on December 17, 2008 11:03 AM: ken,t.m. and mark,

    it must really suck to be you guys.


    jimbojones wrote on December 17, 2008 10:58 AM: Bye Bye Vegas. Bye Bye!!


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