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Fontainebleau Owner Jeffrey Soffer Working to Restart
Las Vegas Project Before Problems Spill into South Florida

By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

Jun. 11, 2009--As the Soffer real-estate empire wrestles with the bankruptcy of its largest project, a crucial question looms: How much of what goes wrong in Vegas will stay in Vegas?

This week's Chapter 11 filing for the $3 billion Fontainebleau Las Vegas has developer Jeffrey Soffer, heir to one of South Florida's top real-estate portfolios, pushing for the $800 million needed to restart construction at the troubled and unfinished casino tower.

But Soffer's team is emphasizing that the condominium and hotel project's woes will not infect its namesake, the newly renovated Fontainebleau Miami Beach, which Soffer bought at the same time he announced the Vegas project in 2005.

"Fontainebleau Miami Beach is not collateral" on the Vegas debt, said Scott Baena, a bankruptcy lawyer with Miami's Bilzin and Sumberg firm who represents the Fontainebleau Vegas. "It's not a borrower. It's not cross-collateralized. It is on the other side of the Mississippi."

But various Soffer ventures have certainly crossed streams with the Fontainebleau Las Vegas, which landed on the bankruptcy track in March after most of its lenders cut off funds for the project mid-construction. It had been plagued by cost overruns, a depressed market for its more than 1,000 condo-hotel units and worries of a prolonged tourism downturn in Vegas.

Turnberry Residential Limited Partner -- an affiliate of Turnberry Associates, the Soffer family's flagship development firm in Aventura -- issued a $100 million completion guarantee for the Vegas project, according to court documents, interviews with a Fontainebleau spokesman and Baena, and an earlier report by debt analysts.

Depending on the agreement that could force Turnberry to put $100 million into the troubled project.

Turnberry Associates is the Aventura real-estate firm started by Soffer's father, Donald, and owner of commercial and residential projects -- including the Aventura Mall -- said to value more than $7 billion.

Soffer himself guaranteed at least a portion of more than $200 million in loans for the retail portion of the Vegas tower, a separate legal entity that has not filed for bankruptcy, Baena said.

And last year, with the real-estate market tanking and the economy in the first phases of a deep recession, Soffer sold a 50 percent stake in the Fontainebleau Miami Beach to an investment arm of the Dubai government.

Out of the $375 million in proceeds, $200 million went to Vegas to cover construction overruns at the Fontainebleau there.

The Fontainebleau Miami Beach also is facing its own problems: a severe downturn in hotel rates across South Florida, weak demand for meetings that the 1,400-room hotel was counting on to keep occupancy up, and about $45 million in claims from contractors following a $500 million renovation.

But the hotel remains busy, and Howard Karawan, chief operating officer of Fontainebleau Resorts, said recently that the oceanfront Miami Beach property generates enough revenue to cover debt payments.

In its bankruptcy petition, Fontainebleau Las Vegas lists more than $1 billion in assets and debt, along with between 1,000 and 5,000 creditors.

Fontainebleau Resorts is suing its Vegas lenders, including some top banks: Deutsche Bank, Bank of America and Barclays.

Fontainebleau executives claim the banks unfairly stopped funding the project with 30 percent of the construction still unfinished. Craig Rasile, a Miami lawyer representing Bank of America, declined to comment.

That court fight could ultimately determine the fate of the 3,889-room Fontainebleau Las Vegas. "You can't make a lender lend in bankruptcy," said Tom Lehman, a bankruptcy lawyer for Tew Cardenas in Miami.

The Chapter 11 bankruptcy papers filed in Miami cite the Lehman Brothers collapse as one of the problems facing the Vegas project.

In a statement, Soffer said he didn't think Vegas would tarnish his family's real-estate empire.

"This move should not in any way affect Turnberry's other assets," the statement read. "I'm confident that Fontainebleau Las Vegas ultimately will be another addition to our family's legacy of successful projects."


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