Bankruptcy Finally Declared by Fontainebleau

assure1 | Jun 17, 2009 | Views: 195 |

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As of June 9, the Fontainebleau Las Vegas Condominiums project is at a dead stop. Bankruptcy was filed in Florida for the troubled company. The Fontainebleau is located on

Las Vegas Boulevard

which is prime Las Vegas real estate. It was going to be a multi-use resort with a hotel casino, condos, posh shopping and fancy restaurants. Over the course of the last few weeks, many people have been speculating over the fate of the Fontainebleau. Fontainebleau and two of it’s entities, Fontainebleau Las Vegas Holding and Fontainebleau Las Vegas Capital Corp., all individually filed paperwork on Tuesday night. Fontainebleau has two affiliated locations, the one in Las Vegas and one located in Miami. Although they are affiliated, they are legally separate entities and the Miami Beach location is not impacted by this bankruptcy.

The developer of Fontainebleau has claimed in separate legal paperwork that various lenders have hampered the success of Fontainebleau Las Vegasand contributed to its demise. In the Review Journal, Howard Karawan is quoted as saying, “It is unfortunate that our lenders forced us to take this step. By reneging on the revolving credit facility, they effectively shut down the project and put thousands of people out of work.” Fontainebleau lawyers filed a lawsuit for the company against its lenders. The suit filed on the 23 of April makes a claim that the banks backed out of agreements to give the developer $770. million to complete construction.

The lenders in turn counter that Fontainebleau defaulted on a loan. The three billion legal action has been moved from civil court to bankruptcy court. The Fontainebleau alleges a conflict of interest involving the Deutsche Bank because it is the owner of the Cosmopolitan which is a rival company. Also included in the lawsuit are creditors including both unsecured and secured. A total of 20 secured creditors are listed in the complaint, as of now, the list of unsecured creditors hasn’t been filed with the courts yet.

The Fontainebleau builder says that if the lenders kept their agreements these events wouldn't have happened. In April, 3,000 construction workers working on the Fontainebleau were let go as were additional office staff employees. The loss of the Fontainebleau is really bad for the employment rate in LV. Construction jobs lost already number in the thousands just from the Fontainebleau alone, and now Las Vegas faces delays in the addition of hundreds of new jobs in the hospitality industry with the delaying of the Fontainebleau's opening.

All this is another set back for Las Vegas condominiums developers. With the bad news comes the good news for buyers. This is a great time to buy a condo. The price of condos is down 53.4% from last year and the market average is $65 thousand. Even though I think Las Vegas housing prices will go down more, I wouldn't hesitate to purchase at today's prices.