Apparently the Las Vegas real estate market has bounced back to make deals on the Strip profitable again. Two relics or monuments, depending on how you want to look at the, from the “Vegas Era of Greed” are for sale at a price that makes you scratch your head and wondering if they were serious. . The ironic thing is that they bookend the Las Vegas Strip perfectly. At the north end, we have Fontainebleau. At the south end, we have the Skyvue Observation wheel poles.
Both projects were once thriving beehives of workers and construction traffic with the never-ending promise of more jobs, more profits, and more people. Now all they are, are empty skeletons that were stalled when the economy collapsed and the banks and builders decided to start cashing in all that phony paper they had acquired that they thought were backed by something of value. Oops!
Originally known as Fontainebleau, I call it the Big Blue Silo because that is what it is! It’s just sitting there like a Big, Blue, empty silo. Investors put just about $3 billion into the project and it was 80% complete before they realized they had no more money. So they put the locks on it and walked away. At the bankruptcy auction in 2009, Carl Icahn snapped it up for $150 million cash. Cash was the only thing the bankruptcy judge would allow and only one other bidder had real cash in the bank. He sold all the furniture and other valuables to other properties and has let it sit there ever since.
If there is one reason to point to and say why the neighboring SLS is failing, I would have to say next to incompetent management, it would be the Fountainblue is to blame. Think about it: The SLS (formerly the Sahara) is catering to the Hollywood elite at $400 a night and offering them a boutique luxury resort experience on the famous Las Vegas Strip.
In reality, you look out your window and you see the Stratosphere to the north and this to the south. Would you pay $400 a night to have a view of this??
Now his people think they can get $600 million for it all. Good Luck.
The Fontainebleau presents a huge opportunity for potential buyers — literally. It was originally designed to hold more than 2,800 hotel rooms and suites, about 930 condominiums, 300,000 square feet of retail, 543,000 square feet of meeting space, 155,000 square feet of gaming space and a 3,200-seat theater, according to its listing agent CBRE.
The Wheel Will Turn!
The Skyvue Observation wheel This one was publicly doomed from the moment real estate investor Howard Bulloch announced it. Admitting he was not “fully” funded and that he was seeking additional investors as the project moved onward. But somehow he found people as the markets started to crash. People willing to believe that Vegas was indeed immune from collapse and a giant observation wheel and shopping experience could boom at the very south end of the Las Vegas Strip.
Then again, maybe he and his fellow investors were being overly optimistic and hoping that the rumors of Harrah’s (now Caesars) doing the same thing would result in a huge buyout. Not taking into account that Caesars was only $18 billion in debt at that moment. Not the $24 billion they are now.
He had the hustle, I will admit that. As ground broke and dirt moved, the economy around him collapsed, he went looking for the gold (or the fool with the gold). As others gave up and walked away from their projects, he kept looking and found people to buy into his dream. It started, it stopped, it started then it stopped and nothing for the last three years.
Sources say they are looking at $10 million an acre or $385 million for the 38.5-acre site. That’s about what land is selling for mid-strip. The Frontier site and around there maybe. But a little too high for the far south end with no real view and with any airport restrictions, that will be a tough sell.
The Vegas Hustle
So now you may be wondering how we got these two monuments there. The easy answer was that they were at the end of the very long line of flippers and hustlers. The unfortunate ones who joined in the boom at the end and never saw the cliff they were standing on the edge of.
From the mid-1980s until 2009, Vegas was booming. I mean really booming. I used to somewhat joke that you could buy a piece of property on Monday and flip it for twice what you paid for it before the check ever cleared the bank on Friday. It happened! In reality, there really wasn’t much cash running through all these projects. It was all paper. Financed debt. A lot of it and it was moving fast.
Almost every week some scammer or hustler had a press conference about some project they were going to build on the Strip or near the tourist corridor. It was going to be bigger and better and fancier than the last one. They had the charts and the paintings and the smiles. Often times they got the building permits and zoning approvals with just a plan sketched out on a napkin because they knew once they made it public, someone else was right there willing to buy it from them at a profit.
Nobody asked the basic questions. Do you have a plan? Do you have all the financing? Do the property owners know you want to do this? (occasionally the answer would have been “No”) Or maybe the honest question should have been “Are you serious or is this a ploy to make the land more valuable to sell before you even break ground” And that answer would usually have been a loud “Hell Yes!”