|By Douglas Hanks, The Miami
HeraldMcClatchy-Tribune Regional News
September 29, 2009 - Creditors for the stalled Fontainebleau Las Vegas want to oust developer Jeffrey Soffer from the bankrupt project and have a court sell the unfinished high-rise, and have filed a lawsuit in federal bankruptcy court to do so.
"With completion of the Project by the Debtors not possible, a sale of the Project to a third party and liquidation of the remaining assets is the only viable course," the lenders wrote.
The request sets up a dramatic showdown between Soffer and a group of lenders who backed his $3 billion venture to transfer the Fontainebleau brand to a 3,889-room condo-hotel and casino on the Vegas strip. (The Miami Beach Fontainebleau is not involved in this lawsuit.)
Soffer's lawyers had not answered the motion filed late Friday, and his legal team did not respond to requests for comment Monday.
The motion marks a significant shift in the nearly four-month fight in bankruptcy court over how to salvage a project that needs an estimated $1.5 billion more to finish.
The Fontainebleau Vegas is the biggest single venture in the Soffer family's storied real estate empire, which Soffer and his sister Jackie Soffer run as the principal partners in Aventura's Turnberry Associates.
Lenders claim the Vegas Fontainebleau is so flawed they don't want to spend any more money on construction or even to fund the bankruptcy. Soffer's lawyers say they're negotiating with a potential buyer for the project, and need more time under bankruptcy protection to complete the deal.
Construction halted this spring after Soffer lost $800 million in construction funding from a separate group of lenders. The lenders suing for liquidation fronted roughly $1 billion for the effort.
Now those lenders have taken their argument to the next level, asking the case be moved from a Chapter 11 restructuring to a Chapter 7 liquidation. After spending $17 million in loan proceeds during bankruptcy, Soffer's team "has nothing to show for it," the lenders wrote.
They cite three main conflicts of interest that would "poison" any effort by Soffer to negotiate a sale of the Fontainebleau Las Vegas:
A Turnberry construction firm that served as general contractor on the Vegas project is also a creditor, with a $675 million lien on the property. The fee mostly consists of sub-contractor claims, along with a $64 million general-contractor fee.
Soffer personally guaranteed at least a portion of roughly $250 million in debt used to build the retail area of the Vegas complex. Since he has no personal guarantees on the hotel or casino debt, the lenders argue, Soffer has an incentive to boost the price of the retail portion in a sale of the entire project.
Executives working for the Vegas project also work for the Fontainebleau Miami Beach, giving Soffer a chance to shift expenses from Florida to the lenders in Nevada. They note Fontainebleau Resorts Chief Operating Officer Howard Karawan presides over both resorts but collects his paycheck in Vegas.
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