Marriott International Bails on Beleaguered Fontainebleau Project
Posted on: October 15, 2021, 05:21h.
Last updated on: October 15, 2021, 08:44h.
Hotel giant Marriott International announced Thursday it had pulled out of the Las Vegas Strip project formerly known as the Fontainebleau and later The Drew Las Vegas. The Bethesda, Maryland-based group said it had “reached an amicable settlement” with current owner Fontainebleau Development.
Fontainebleau told The Las Vegas Review-Journal the project was still going ahead, and it would manage and operate the hotel itself.
“Having come full circle and taken ownership of the site in Las Vegas, we intend to fulfill our original vision and deliver the same extraordinary hospitality experience that our guests have come to expect from Fontainebleau Development,” the statement said.
Fontainebleau first unveiled plans for the Strip development 16 years ago. It was supposed to be a sister property to the company’s iconic Miami Beach hotel. But development was derailed by the Great Recession.
Fontainebleau spent $2 billion before the project was forced into Chapter 11 bankruptcy. Lenders got spooked by the dire economic outlook and bailed. Bank of America and JP Morgan Chase canceled $770 million in funding.
The development has stood dormant ever since, a monument to economic implosion. It has changed hands twice since Fontainebleau cofounder Jeff Soffer reacquired it with the help of Koch Industries in February this year.
Billionaire investor Carl Icahn bought the building in a 2010 bankruptcy auction for $150 million. He sold it in 2017 to the property developer Steven Witkoff.
Witkoff began redeveloping the unfinished megaresort, which he renamed The Drew Las Vegas in honor of his son Andrew Witkoff, who died of a drug overdose in 2011.
But the developer halted construction in March 2020, as the coronavirus pandemic forced the shutdown of businesses in Las Vegas. At the time the pandemic hit, Witkoff was close to finalizing a $2 billion construction loan, but it never came through. History was repeating itself.
Fontainebleau and Koch Industries agreed to take on Witkoff’s debt when they acquired the property this year as part of a process to avoid foreclosure.
On Thursday, Fontainebleau was eager to underline that the Marriott deal had been agreed on with previous owner Witkoff.
But until very recently, the hotel operator had planned to forge ahead on the project with Fontainebleau. In a statement on its website in July, Marriot said the property would open in October 22 as “the first Marriott hotel on the Las Vegas Strip.”
Per the deal with Witkoff, Marriott would invest $50 million over time, which would be converted into an ownership stake.
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