|By Douglas Hanks, The Miami
HeraldMcClatchy-Tribune Regional News
June 10, 2009 - --The Fontainebleau Las Vegas filed for bankruptcy protection late Tuesday night, weeks after lenders refused to fund more construction at the $3 billion project.
The Chapter 11 filing marked the biggest setback yet for the Soffers, one of South Florida's legendary real estate families, and adds to the woes facing the project's namesake, the Fontainebleau Miami Beach.
Both properties are owned by Fontainebleau Resorts, which Jeffrey Soffer formed after purchasing the iconic Miami Beach hotel in 2005. He is a partner in Turnberry Associates, the real estate firm founded by his father, Donald, who made his fortune developing Aventura out of swampland.
Along with funding a $500 million renovation of the original Fontainebleau, Soffer announced plans for the Vegas property, a 3,000-unit condo-hotel on the famous Strip. The project fell victim to cost overruns, a depressed condominium market and expectations for a slow recovery to a severe downturn in Vegas tourism.
The initial bankruptcy petition filed in a Miami court contains few details, but portrays an unfinished project with little value and massive debt. The petition lists assets of $50,000 or less, and liabilities of more than $1 billion. Workers have stopped building the Vegas Fontainebleau tower, and Fontainebleau executives hope bankruptcy protection will let them find lenders willing to finish the project. The filing says another $800 million is needed to complete the building.
In a statement issued late Tuesday, Fontainebleau executives said the bankruptcy filing for the Vegas project will not affect the Fontainebleau Miami Beach, which did not rely on condo-hotel sales for its lavish redo. The executives blamed the bankruptcy petition on banks cutting off the Vegas project, which Fontainebleau Resorts attempted to reverse with a lawsuit.
"It is unfortunate that our lenders forced us to take this step. By reneging on the revolving credit facility, they effectively shut down the project and put thousands of people out of work," said Howard Karawan, the chief operating officer now carrying the title "chief restructuring officer of Fontainebleau Las Vegas."
"Our goal now is to secure funding to complete this world-class project and restructure our existing debt," Karawan's statement continued.
It's unknown how extensive the corporate ties might be between the Vegas Fontainebleau and Turnberry Associates. Fontainebleau Resorts is headquartered at Turnberry Associates, which issued a $100 million completion guarantee for the Vegas project.
A Fontainebleau spokesman said Tuesday that a guarantee would apply to cost overruns once the project was completed and was not payable if construction halted.
Bilzin Sumberg, a Miami firm, filed the petition, likely one of the largest filed in South Florida. The petition lists 26 pages of secured creditors, including many of the world's top lenders, such as Bank of America, Goldman Sachs, UBS and Wells Fargo. It also lists state retirement funds in Virginia and Louisiana.
The Miami Beach Fontainebleau suffered a rocky opening with months of costly construction delays and still faces millions of dollars in claims from contractors. Executives said the severe downturn in conventions and meetings also battered revenue forecasts at the 1,400-room hotel, the largest in South Florida.
While the Miami Beach project was under construction, Soffer sold a 50 percent stake in the oceanfront hotel to an arm of the Dubai government. He then took $275 million of the proceeds and shifted them to Vegas to cover cost overruns there, according to reports by debt analysts.
The statement says Fontainebleau Resorts has secured financing to pay for its bankruptcy, and now is searching for a lender to finish construction on the project, which is described as 70 percent complete.
The filing comes weeks after Glenn Schaeffer, former president of the Mandalay Bay casino, left his post as CEO of Fontainebleau Resorts.
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