I have one question for Koch Real Estate Investments, the fourth owner of the unfinished Fontainebleau-Drew project, a hulking eyesore on the northern end of the Las Vegas Strip.
Do they know a good demolition expert?
The company, the Dallas-based real estate arm of the politically uber-powerful Koch Industries, said in a statement late Thursday it acquired the development, which sits on 24 acres between the recently completed expansion of the Las Vegas Convention Center and an empty 27-acre parcel for a planned, but financially unattainable, sports arena.
“We believe strongly in the Las Vegas market and see the property as a great opportunity to contribute to the long-term success and positive trajectory of this vibrant and innovative region,” Koch Real Estate President Jake Francis said in a statement.
The intentions are noteworthy, but this site is cursed.
Shutterstock: Drew Las Vegas
The 67-story blue-tinted tower has sat three-quarters finished since 2009, a reminder of the recession that gripped Las Vegas that year, devastating the gaming industry and the city’s economy. Construction was halted and the $2 billion project was sent into bankruptcy.
Corporate raider Carl Icahn grabbed the Fontainebleau out of foreclosure in 2010 for a mere $150 million and stripped the building bare, selling off furnishings, specially made escalators, even a construction crane that perched precariously from atop the tower.
Local elected leaders complained about the uncompleted monstrosity as reports surfaced that windows were popping off the empty building. Icahn was politely asked to at least try and beautify the site. Instead, he sold the project in 2017 for $600 million to New York developer Steven Witkoff, who had grandiose plans for a resort-casino. Witkoff renamed the development Drew Las Vegas in honor of his son, Andrew, who died of a drug overdose in 2011.
Nevada gaming regulators found him suitable in January 2020, a designation Witkoff hoped would help in securing $2 billion in financing to finish the development by Christmas 2022. He even lured respected gaming executive Bobby Baldwin out of retirement to be Drew’s CEO.
Witkoff told the Gaming Control Board he invested more of his own money in the Drew than any of his previous commercial and residential projects. He also hoped to disprove many of the urban myths surrounding the building.
Drew Las Vegas developer Steven Witkoff (center) with general counsel Katie Lever and gaming attorney Frank Schreck/CDC photo by Howard Stutz
“We did our due diligence,’” Witkoff said. “The two main points (were that) the work completed on the property was all good and the design was forward-thinking for us to do what we want to complete the building. We know the condition of the entire property.”
However, COVID-19 arrived two months later. Gaming was shut down in Nevada for 78 days. The pandemic continues to ravage the state’s economy and the gaming and tourism industry.
Reports surfaced in June that the Drew was in default.
Koch Real Estate said it was partnering with Miami-based Fontainebleau Development, the original developer of the Fontainebleau Las Vegas, in the acquisition of the “to-be-completed Las Vegas resort.”
That’s not a comforting message.
Fontainebleau Development bailed on Las Vegas, returned to Miami, and expanded its flagship Miami Beach hotel and condominium tower, leaving behind an ugly and unfinished blemish on the Strip.
Former Las Vegas casino executive Glenn Schaeffer initially led the Fontainebleau Las Vegas development, which broke ground in 2007. When the economy tanked and lenders backed away from the financing, the Fontainebleau was dead.
Except no one seems ready to admit its ultimate fate.
The leaders of several well-known casino companies kicked the tires of the Fontainebleau over the years but believed restarting construction on the building was not a profitable venture. Witkoff thought differently. In the end, he was vexed by the unlucky building.
Icahn owned the Fontainebleau when the Las Vegas Convention and Visitors Authority demolished the Rat Pack-era Riviera for its expansion. I suggested at the time a few dynamite sticks be tossed over the wall and take down Fontainebleau as a two-for-one deal.
Now, the $980 million West Hall sits next door to a giant stain on the Strip.
Koch, in its statement, said it shares an interest with Fontainebleau Development “in the recovery and growth of the Las Vegas hospitality industry.”
Visitation on the Strip declined 55.2% in 2020 to just over 19 million visitors, Las Vegas’ lowest total in 30 years. Expanded airline travel and the return of the convention and meetings industry are the tonics Las Vegas needs in its latest recovery. More promises on a much-maligned casino project are not a solution.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
