Icahn to sell Fontainebleau

"CBRE Group Inc (CBG.N) said it has been hired by billionaire investor Carl Icahn to sell Fontainebleau Resort Las Vegas, five years after taking control of the property.

The Wall Street Journal reported the sale earlier on Wednesday and pegged the deal value at about $650 million.

Icahn, one of the industry's most closely watched activist investors, took ownership of the property in February 2010 after paying its bankrupt owner about $104.6 million in cash."

http://finance.yahoo.com/news/icahn-hires-property-broker-cbre-191153261.html

Sorry about misspelling Icahn's name in the thread title - I had all the letters there, just in the wrong order.

Bill

 

Good to hear, somebody should be able to make it fly, with buying it for a huge discount compared to the cost to get a new development to the stage it sits at now, no need to finish all the floors, downsize some of the "extras" in the original plan and bring 1500-2000 rooms into the market. This property is located at a crucial spot to bring the north strip traffic into mid-strip and along with the delayed Echelon/Resorts World and Alon could be a very much needed set of options on the strip

 

I don't know if the strip can absorb another 1500+ rooms on top of what's already there and planned at Resorts. I wonder if the county poking at Icahn to start maintaining the property made him decide to do sell over spending any money there. I guess the price is right if you intend to complete the hotel but is it too high for anyone who would rather demo the site and start over?

 

Yes - my concern as well - that there'll be too many rooms, particularly once Resorts World is up and running. I think that factored into Icahn's business decision. This way, he'll walk away after tripling or quadrupling his investment - and not have to worry about future risk.

NOTE: Thanks to the Mod who fixed my title's spelling error. Nice work.

Bill

 

Still up at the quiet end of the strip.

Never been there, but then again, does anyone care? LOL!

 

It will probably take awhile for anything to happen there. They've been gutting the steel, and who knows what else, out of there for months.

Still, I hope that it eventually opens up as a casino. I would really like to see the north end of the strip experience a renaissance and rise from the ashes.

 

Really hope they complete it would be a good time to get going to be open when convention. Center expansion is done. One of my Vegas dream is for fbleau to open

 

This is your proof that the economy has actually improved. I never thought anybody would want to buy that thing. Definitely not at a 400% mark-up.

 

What's interesting is looking back, 'The Steve' bought the Desert Inn from Starwood (who is now back on the strip remodeling one of SLS towers) for $270 million.
So is anyone really going to pay $650 million for that parcel?! You would have to be a visionary. Not to mention the property has sat too long, that structurally who ever
buys it would have to spend a chunk of change to meet code, before they even got to finishing the interiors.

There might be some value in scrap steel in glass to reduce the cost of dismantling. You are betting on an unknown. Resorts World seems to be the only developer
bringing something interesting to shift the paradigm back north.

 

Funk, the Desert Inn purchase was 15 years ago and LVB property values are far higher in 2015 than in 2000, including the factor of the real estate downturn. The Riv just sold for 182 million and that piece of property pales in comparison to the location and perks of the DI property which has room for 3 mega resort towers and a golf course.

As far as the structural issues, the Fontainebleau has been encased which means the structure is sound. As far as what needs to specifically done to it due to the property remaining unfinished, we're speculating at best. Obviously the end game would be expensive, but Fontainebleau is an absolutely huge building. To the right developer, there may be possibilities for a mixed use development with corporate office space, condos and hotel rooms. The condo market isn't dead any longer but it also isn't en fuego, so that's less likely. The mixed use possibility remains however and Icahn has proven through the years to be an amazing scavenger. One thing that is near certain.... Whoever buys that property for 600mm isn't buying it as a tear down.

Nick

 

If Icahn really believes it's viable for someone to pay 650 million, then spend 1.5 billion or so to finish it and still make a profit, he'd of done it himself.

 

That's a supposition. You can't simply apply logic to these deals. Icahn routinely buys properties out of bankruptcy for a fraction of the original investment. I can't think of a single acquisition where he moved in and built a business from the bottom up. He's a capitalist, leveraged buyout specialist and brilliant corporate scavenger. At his age, he's not taking on what would amount to an immense undertaking in finishing the largest resort in Vegas, establishing a management team, deciding what to do with retail, food and beverage, entertainment, soft goods, hard goods, contractual obligations with cleaning and fulfillment companies, unions etc. it far more complex than saying he "just would have done it himself". He'll clear several hundred million when it sells. it will take awhile, but he'll come out smelling like a rose for essentially flipping a piece of real estate rather than burying himself in a potential disaster of a resort project. Again, the man is shrewd and brilliant.

Nick

 

Bingo. It's a low-risk, high-yield move. Whomever buys the property from Icahn is the one facing an uncertain future.

Bill

 

Lets wait to call him a genius until he finds a buyer. Right now he is paying something like 7 million a year just to hold the property and if he doesn't find a buyer soon, could be forced to spend millions on cosmetic changes. There are still only so many potential buyers out there, and one would think they would all want to wait and see how Resorts' World is received.

Based on what Echelon sold for, it would seem a 650 million valuation is including value for the structure as is. But while it may be possible to use, and thus reduce costs to finish the resort, doing so is also a design straight-jacket on a potential buyer, in terms of theme, in terms of resort size and number of rooms, etc. It would also make a sale far more complicated as it would take a very detailed assessment of the site for a buyer to be confident.

I won't be surprised if he turns a profit. I will be surprised if he gets 650 million. But I also would not be shocked if he is left holding the bag, or ends up dumping it for less than he spent buying it and carrying it.

 

The man is worth over 20 billion dollars due to his activities I've outlined above. That's $20,000,000,000.00, or 20,000 stacks of 1 million USD. Unfathomable wealth derived from shrewd business maneuvers. Second guessing Carl Icahn on an Internet message board is priceless. The man purchases stock and changes said companies market cap by several billion simply due to the fact that Carl Icahn believes that the stock has a favorable valuation. Does that resonate with this Fontainebleau acquisition and sale?

Nick

 

How many stacks of 14231 USD does he have? That's the only point of reference I understand, so please provide one more conversion.

Icahn is unquestionably a brilliant investor. But I'll bet he has lost money on investments before, and that he will again. Risk goes with the territory.

So the notion that we can't speculate on here as to whether he will do well on one specific investment is also 'priceless'. The defense you offer could be applied to any casino project or big land deal in Vegas ever, Those are all investors who have had enough success to accrue millions if not billions, and we are not. Perhaps we need a forum rule whereby we only congratulate all these pillars of wealth on their shrewd decisions.

There is no question he is a shrewd investor. Until he completes his flip though, Fontainebleau should not be held up as evidence of that shrewdness.

 

That is incorrect. You are generalizing and I'm pointing out a specific leveraged maneuver where Icahn is an an extremely strong position of advantage. This isn't "any" casino project or land deal, this is a specific flip controlled by one of the most brilliant minds in the business world. This deal was highway robbery and billionaires are often the ones that benefit due to the fact that they have the capital and the understanding of how, when and why to complete an advantageous transaction. Seriously, there are so many bartering chips in this deal that Icahn can exploit, that there's no need to continue this. He paid pennies on he dollar and he will make money on this deal. A lot of money.

Nick

 

For all the pointing out you are doing of a 'specific leveraged manoeuvre', the only evidence that you have managed to cite that he is in a strong position of advantage or will be able to sell at his asking price is calling him brilliant and pointing out he has 20 billion dollars.

You have given no actual argument that the property should be easy to sell, nor that it should sell for the price he asked. You have simply assumed that and suggested that no one should assume otherwise because he is rich and this is what he does,

 

We will colonize Mars before the Fontainebleau is completed. Mark it down. There's never been a more sure thing.

There's not a lot of dirt, if any, currently flying at Resorts World. They had a nice ground breaking ceremony, and it appears that is about it.

My money is on the Alon to finish since it is a much smaller/less risky project, and the rest to wait and see if Alon becomes the next SLS.

 

Incorrect. Resorts World is on target and task with doing what they said they'd do - working on the parking structures first and then moving on to the rest of the project in stages.

Bill