106°F
weather icon Clear

10 years since Fontainebleau in Las Vegas went bankrupt

With the economy crashing in spring 2009, developers of the Fontainebleau gave their lenders a dire warning: Without more funds, the project will fail.

Less than two months later, the partially built hotel-casino was in bankruptcy. A decade later, the blue-tinted tower on the north Strip is still waiting to be finished.

The Fontainebleau, soaring 60-plus stories above Las Vegas Boulevard, went bankrupt 10 years ago on June 9, 2009. It has traded hands twice since then, with current owner Steve Witkoff planning to open the 3,780-room resort, which he renamed The Drew Las Vegas, in 2022.

Las Vegas was littered with abandoned real estate projects after the economy tanked, but most were eventually finished, typically after investors bought them at a steep discount. The Fontainebleau, one of the tallest buildings in the valley, also sold for a relative pittance during the recession. But the buyer, billionaire Carl Icahn, barely touched it as the tower became a constant reminder of Las Vegas’ wild real estate boom and devastating crash.

Given the bankruptcy anniversary on Sunday, here’s a look at the Fontainebleau’s history — one marked by big money, big promises and a big flop.

‘Most celebrated building’

Plans for the Fontainebleau were unveiled in 2005. The project — led by Florida developer Jeff Soffer of Turnberry Associates and Las Vegas casino executive Glenn Schaeffer, former president of Mandalay Resort Group — was named after the 1950s-era Fontainebleau hotel in Miami Beach, which Soffer agreed to buy months earlier.

Fueled by easy money, Las Vegas property values soared during the mid-2000s bubble, and developers flooded the valley with housing tracts, office buildings, high-rise condo proposals and megaresort projects.

“With what is happening in Las Vegas, you look (at) that site and we can do a tremendous project,” Soffer said after the plans were announced.

His group broke ground in early 2007. Later that year, the developers said they closed on financing that would be used, in part, to fully fund the $2.9 billion Strip resort.

The Fontainebleau was slated to open in fall 2009.

“It is destined to become the most celebrated building in the world,” Schaeffer said.

‘Will never open’

The economy was already showing signs of cracks by that point. It eventually imploded, with Las Vegas among the hardest-hit areas of the country during the recession.

As the economy spiraled, the Fontainebleau’s developers sued several banks in April 2009, alleging that the “unscrupulous” lenders backed out of their commitment to finance construction of the resort. The banks cited one or more alleged defaults, but the developers claimed there weren’t any, the lawsuit said.

The Fontainebleau was about 70 percent complete, though without the additional funds, the resort “cannot be finished and will never open,” the developers alleged.

Soon enough, construction work slowed at the site, Schaeffer left as president and CEO of parent company Fontainebleau Resorts, and the developers pushed the Las Vegas project into bankruptcy.

Icahn bought the mothballed tower in 2010 for around $150 million. He sold it in 2017 for $600 million to Witkoff, founder of New York development firm the Witkoff Group, and partners.

Soffer, now owner of Fontainebleau Development, and Schaeffer could not be reached for comment.

In an interview at the Drew in April, Witkoff told me he heard “150 nasty rumors” about the building before he bought it, including that it was falling down, that copper cables were stolen and that plumbers poured concrete in the pipes.

In truth, he said, the building is in “exceptional shape.” He also praised Soffer as an “outstanding developer” whose project got derailed by the failing economy.

“He did it impeccably,” Witkoff said of the resort. “The only mistake he made was he ran into the worst financial storm in U.S. history but for the Depression, which is unfortunate.”

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
SuperZoo 2019 takes over Mandalay Bay in Las Vegas
SuperZoo 2019 show for pet retailers brought pet products of all description to the Mandalay Bay Convention Center in Las Vegas. (Heidi Knapp Rinella/Las Vegas Review-Journal)
MSG Sphere at The Venetian to cost $1.2B plus
Scheduled to open in 2021, it is expected to be busier than Madison Square Garden in New York. (Michael Quine/Las Vegas Review-Journal)
Favorite products from SuperZoo 2019
Some of the fun and interesting pet products on display at the SuperZoo in Las Vegas at the Mandalay Bay Convention Center. (L.E. Baskow/Las Vegas Review-Journal)
MAGIC Convention Day 3
The fashion trade show MAGIC, held Monday through Wednesday at the Las Vegas Convention Center. (Elizabeth Brumley/Las Vegas Review-Journal)
MAGIC Las Vegas - Day One
The biannual MAGIC convention show opened Monday at the Las Vegas Convention Center. (Elizabeth Brumley/Las Vegas Review-Journal)
Allegiant celebrates naming deal with tailgate party
Allegiant Air employees celebrate with a tailgate party after the company’s naming deal with the Raiders for the new Las Vegas stadium.
Nevada's sportsbook operators welcome competition
Sportsbook operators from near and far are looking to get into in the established Nevada market, experts say. (Las Vegas Review-Journal)
Get a first look of MSG Sphere construction in Las Vegas
Representatives of The Madison Square Garden Company give the first glimpse of progress Tuesday of the under-construction MSG Sphere — a first-of-its-kind performance venue with high-tech audio and visual capabilities.
There's a new place to play board games in Las Vegas
Matt Smiciklas, co-owner of Boarding School Games, talks about the new Las Vegas business that he co-owns with Emily Labejof. Dedicated tabletop gamers can choose from more than 500 games to play for free in-store. The doors open to the public Saturday, July 20, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Renovations at the STRAT
Analysts say the $140 million renovation project at The STRAT, formerly the known as the Stratosphere, could help the hotel-casino compete with the evolving north side of the Las Vegas Strip. (Bailey Schulz/Las Vegas Review-Journal)
SLS Las Vegas will become Sahara Las Vegas
Owner Alex Meruelo announced during a special event at the SLS Las Vegas that the hotel-casino will become Sahara Las Vegas in its next iteration. Meruelo said $150 million dollars will be spent to renovate the current property. (Heidi Fang/Las Vegas Review-Journal)
Aircraft hinge maker moves to "business friendly" Nevada
Doug Silva, president of Aircraft Hinge, Inc. in Las Vegas, makes every type of hinge for every type of airplane. Silva talks about his company and why he moved it to Nevada. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Daytime fireworks mark the opening of Encore Boston Harbor
The opening of the $2.6 billion Encore Boston Harbor in Everett, Mass. included a three-minute fireworks show launched by Fireworks by Grucci Sunday, June 23, 2019. (Rick Velotta/Las Vegas Review-Journal) @RickVelotta
Elaine Wynn talks about the opening of Encore Boston Harbor
Elaine Wynn, co-founder and largest shareholder of Wynn Resorts, talked during opening festivities of the $2.6 billion Encore Boston Harbor in Everett, Mass. Sunday, June 23, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
People line hours ahead of opening for Encore Boston Harbor
Guests arrive as much as 17 hours early for the 10 a.m. opening of the $2.6 billion, 671-room resort in Everett, Mass. Sunday, June 23, 2019. (K.M. Cannon/Las Vegas Review-Journal) @reviewjournal.com
Allegiant Discusses Investments In Golf Course Software And Game Rooms - Video
Allegiant Discusses Investments In Golf Course Software And Game Rooms.
Crews working 24/7 to complete Circa downtown - VIDEO
Owner Derek Stevens goal is to open the doors to the 1.25 million-square-foot project by December 2020. (Michael Quine/Las Vegas Review-Journal)
Golden Knights Marc-Andre Fleury sells Las Vegas home - VIDEO
Golden Knights goaltender Marc-Andre Fleury has sold his custom home Southern Highlands home in Las Vegas for $2.3 million.
Las Vegas Strip resorts slow to welcome Alexa, Google Home Hub
Alexa, where are you? Smart home and hospitality technology was big at CES in early January. Amazon and Google promoted their voice-activated speakers Alexa and Google Home Hub. Hospitality executives have called the speakers the industry’s future. Yet for all the hype, the revolution is unfolding at a cautious pace on the Strip as well as in other major U.S. hospitality markets. Hotels are focusing their consumer-facing technology investments on adding streaming capabilities, like Netflix, and enhancing their mobile apps, a December report by Hospitality Technology showed. Voice-enabled technology is 10th on that priority list.
What is MGM 2020
MGM Resorts International announced its MGM 2020 plan in January, The plan would improve cash flow by $200 million annually by the end of 2020 and an additional $100 million by the end of 2021. 1,070 jobs were cut as part of the cost-cutting initiative. 881 of those were Las Vegas employees, mostly in management or mid-management positions. Jim Murren
What is MGM 2020
MGM Resorts International announced its MGM 2020 plan in January, The plan would improve cash flow by $200 million annually by the end of 2020 and an additional $100 million by the end of 2021. 1,070 jobs were cut as part of the cost-cutting initiative. 881 of those were Las Vegas employees, mostly in management or mid-management positions. Jim Murren
Find next-level experience
One minute, you’re just trimming hedges and shooting the breeze with your neighbor. But then he brings up Vegas and you’re thinking about the incredible meals, world-class hotels, pools inside of pools and unparalleled entertainment. You’re thinking about iconic artist residencies like Aerosmith. Priorities take shape. Vegas first, lawn and everything else, second. Just like that, Vegas Changes Everything. (Visti Las Vegas/Youtube)
Vegas Changes Everything
A weekend getaway is nice for anyone, but a weekend getaway in Vegas ... that’s a next-level experience with shows, clubs, spas and more. With a chance to see iconic artist residencies like Gwen Stefani, you might just find yourself going from pushing your child on a swing, to pushing back a birthday party. See how Vegas Changes Everything. (Visit Las Vegas/YouTube)
THE LATEST