Soneet Kapila, the trustee overseeing the Chapter 7 bankruptcy of Fontainebleau Las Vegas Holdings, has brought an action for damages against 12 defendants, including Jeffrey Soffer, chairman and CEO of Fontainebleau Miami Beach and several Fontainebleau Resorts board members. Fontainebleau Resorts was formed in 2005 to operate the Miami and Las
Vegas locations of the hotel. Soffer is also the president and COO of Aventura-based Turnberry
Associates. The complaint, which was filed June 8 in the Southern District of Florida, is seeking unspecified damages and to avoid and recover avoidable transfers, that is, transfers or payments made in the period leading up to the property’s bankruptcy. The five-count complaint includes breach of fiduciary duty, aiding and abetting the breach of fiduciary duty and the avoidance of fraudulent transfers. [more]

Dubai World and Turnberry Ltd. may retain control of the Fontainebleau Miami, according to a report in the Wall Street Journal. Holders of the $620 million construction loan on the property could soon approve a proposal that would inject $100 million into the hotel. According to the terms of the deal, the new equity would come from Dubai World and Turnberry, and the loan would be extended until 2016. Turnberry’s Jeffrey Soffer began a $500 million renovation of the hotel in 2005, but lost the Las Vegas Fontainebleau earlier this year in bankruptcy proceedings. [WSJ]
[more]

The fallout from the failed Fontainebleau Las Vegas casino project continues to plague developer Jeffrey Soffer, who has been hit with a $168 million lawsuit from Lehman Brothers. The fallen investment bank wants Soffer to cover the loan he personally guaranteed for
the ambitious expansion of the Fontainebleau franchise to the Sunset
Strip. This sets the stage for a major legal clash between Soffer and
creditors of his casino project, which was sold to Carl Icahn last
month for a paltry $150 million. The project had previously been valued at $2 billion.
That’s not the end of Soffer’s troubles: the Miami Beach Fontainebleau
resort faces more than $60 million in claims by contractors who worked
on its $500 million renovation, as well as a $660 million overdue
construction loan from Bank of America. [Miami Herald]

Billionaire investor Carl Icahn will take control of the bankrupt, incomplete Fontainebleau Las Vegas by default, after submitting the only qualifying bid for the casino resort. Court papers filed this week canceled the auction for the property, which was scheduled for Thursday in Miami. Icahn Nevada Gaming Acquisition submitted the only qualified bid, for $156.5 million, including financing, and the sale could be finalized by Jan. 27. Eve Karasik, attorney for the Chapter 11 examiner, said two other, unidentified bidders didn’t include deposits and couldn’t demonstrate the necessary financial health. Penn National Gaming dropped out of the bidding race Jan. 14. The 63-story Fontainebleau, which was about two-thirds done when about 70 percent complete at a cost of $2 billion when developer Jeffrey Soffer filed for bankruptcy on the project in June, is on 27 acres at the north end of the Las Vegas Strip. Completion costs are estimated at $1.5 billion.

The glitz and glamour of the New Year’s Eve party at the Fontainebleau
Miami Beach with Lady Gaga performing for those who can shell out $500
to walk in the door or $25,000 for a poolside cabana belies its
financial straits. It’s not the only Miami Beach hotel facing a murky future, although it
may be the highest profile one. The Sagamore Hotel, which is fighting
foreclosure, hopes to strike a deal to open a Playboy club to keep it
afloat. In the last few months, Shore Club and Gansevoort South have
also found themselves facing foreclosure. The fiscal hangover for Miami Beach hotels stems from a boom-time
overindulgence that saw owners borrow enormous sums to buy into the
market and spend lavishly to upgrade properties. Back then, lenders and
borrowers saw no end to skyrocketing room rates and profit margins.
Party now, distress later for Miami Beach hotels” class=”read-more-link”>[more]

Carl Icahn and the Fontainebleau Las Vegas

Investor Carl Icahn doubled a rival offer and put up a $155 million minimum bid for developer Jeffrey Soffer‘s unfinished Fontainebleau Las Vegas casino hotel. Penn National Gaming, a Pennsylvania casino operator, last week offered a $105 million opening or stalking horse bid for the Fontainebleau. Penn initially tried to beat Icahn’s offers during a hearing Monday but stopped at $145 million. Miami bankruptcy Judge A. Jay Cristol approved the broad outlines of the Icahn plan, which Fontainebleau lawyers endorsed, clearing the way for a Jan. 21 auction. [Miami Herald]

Casino operator Penn National Gaming seems to be looking make it big with the help of one of Las Vegas’ biggest busts. After weeks of negotiations, Penn bid $102 million for the Fontainebleau Las Vegas, an unfinished and bankrupt casino hotel that spent about $2 billion on construction and development, according to court records. Developer Jeffrey Soffer, of the Fontainebleau Miami Beach, is pursuing a sale of the Vegas Fontainebleau after filing for Chapter 11 bankruptcy protection on the stalled project in June. Other casino companies also have toured the Fontainebleau site and signed the documents necessary to prepare a bid for the project, said Howard Karawan, chief restructuring officer for Fontainebleau Resorts. [Miami Herald]

A year after a celebrity-studded gala reopening of the $650 million renovation of the Fontainebleau Miami Beach, financial woes have overshadowed the glitz. Contractors say they were ordered to work double- or triple-time to get the Fontainebleau ready for the Nov. 15, 2008 party, replete with Victoria’s Secret models stalking the runway in a televised lingerie show, and are owed more than $60 million. Bankruptcy looms as a possibility, a senior executive admitted, saying the $600 million construction loan weighs heavily on its finances. The investment arm of the Dubai government, which paid developer Jeffrey Soffer’s ownership group $375 million for a 50 percent stake in the Fontainebleau, exercised its option to take over restructuring negotiations if there were problems with the resort’s loans. Nakheel Leisure managing director Hamza Mustaffa said his company was working with Soffer. [Miami Herald]

The company behind the troubled Fontainebleau projects in Las Vegas and
Miami Beach is branching out from real estate to asset management.
Turnberry Associates, based in Aventura, has launched an asset
management division to focus on commercial properties, offering
leasing, marketing and operations support for retail centers, office
complexes, hotels and resorts. The rise of foreclosures will require
the new owners, banks holding properties they may not know how to
manage, to get outside help, said Phil Goldfarb, president and chief
operating officer of Turnberry Associates. The company is already
managing and leasing at Douglas Center, a 12-story Coral Gables office
tower. [more]

While its Las Vegas project remains mired in money trouble,
Fontainebleau Miami Beach is also skirting financial distress. About 30
companies, including construction companies, designers and other
contractors, seek unpaid bills of $65 million, an indication that its
$500 million renovation is not moving smoothly. Jeffrey Soffer, the
developer of both projects, is embroiled in a tangle of litigation on
the Las Vegas project, and the Miami mess — in bankruptcy court and
Miami-Dade civil court — adds to his troubles. Operationally, Howard
Karawan, Fontainebleau Resorts’ chief restructuring officer, said the
Miami Beach hotel has stayed busy despite the economic decline. In
July, a traditionally weak month, occupancy was about 70 percent with
nightly room rates of $200, he said. [more]