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Marriott exits unfinished former Fontainebleau project

Updated October 15, 2021 - 10:21 am

Marriott International has cut ties with the unfinished former Fontainebleau, a long-stalled resort project on the Strip that changed hands early this year.

Marriott spokeswoman Sara Conneighton confirmed to the Review-Journal on Thursday that the hotel chain “recently reached an amicable settlement with the hotel’s owner that has resulted in Marriott exiting the project.”

She did not provide any further details.

Marriott had been part of the hotel-casino project since early 2018. As recently as this summer, its website stated that the megaresort, which it called the JW Marriott Las Vegas Blvd., would open in October 2023.

Its departure is the latest twist for a 60-plus-story, multibillion-dollar project that has come under new ownership three times in the past decade or so and still never opened — leaving a towering reminder of Las Vegas’ mid-2000s real estate frenzy, the devastating crash that followed and, more recently, the pandemic’s severe spillover effects.

Florida developer Jeffrey Soffer’s firm Fontainebleau Development, which acquired the property in February, said in a statement to the Review-Journal that as it “moves forward with the project in Las Vegas, we feel it is important to make clear that, upon opening, the hotel will be managed and operated by Fontainebleau Development.”

It also noted the “agreement with Marriott International was made with the building’s previous owner.”

“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.

Soffer was the project’s original developer.

His firm still has not announced when it expects to resume construction and open the resort, nor has it unveiled what the hotel will be called.

Ownership changes

Plans for the Fontainebleau were unveiled in 2005, and the project, led by Soffer and former Las Vegas casino executive Glenn Schaeffer, broke ground in 2007. But the real estate market soon crashed, the economy spiraled downward, and the unfinished project went bankrupt in 2009.

Billionaire Carl Icahn acquired the property in 2010 for around $150 million. The Plaza, in downtown Las Vegas, reportedly bought furniture, bathroom fixtures, wall safes, carpeting and wallpaper that were supposed to be used in the Fontainebleau.

As the economy improved, Icahn sold the property in 2017 for $600 million — quadruple his purchase price — to developer Steve Witkoff and real estate firm New Valley, a subsidiary of cigarette maker the Vector Group.

In early 2018, Witkoff and Marriott unveiled the resort’s new name, Drew Las Vegas; the plans for two Marriott brands there, JW and Edition; and an expected opening in late 2020.

Around the same time, Marriott’s top boss, the late Arne Sorenson, told analysts the company would invest $50 million over time for an ownership stake in the project.

The Drew — named for Witkoff’s son Andrew, who died of an OxyContin overdose in 2011 at age 22 — was slated to feature nearly 3,800 rooms, retail, nightlife and more than 550,000 square feet of convention and meeting space.

Pandemic effect

Witkoff, who pushed the opening to 2022, said early last year that he was close to obtaining a roughly $2 billion construction loan for the project. But in March 2020, as Las Vegas rapidly shut down over fears of the coronavirus outbreak, he suspended construction of the resort.

Contractors later filed tens of millions of dollars’ worth of liens alleging unpaid bills for their work at the Drew. Several ex-employees also sued Witkoff, alleging they were laid off from the project amid the pandemic and weren’t paid what their contracts called for.

Soffer then reacquired the property in partnership with the real estate wing of Kansas conglomerate Koch Industries. The new owners acquired debt on the project and gained ownership through a process that lets people avoid foreclosure.

After their acquisition was announced, a Marriott spokeswoman told the Review-Journal that “nothing has changed with respect to our role in this project.”

“Marriott remains the hotel operator and we have two brands — the Edition and the JW Marriott — that are a part of this resort and casino complex,” she said at the time.

Marriott’s Conneighton did not respond to an email asking for more details on the “settlement” with the current owner and for an update on the planned $50 million investment.

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

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