Question of the Day - 21 September 2020

First of all, it hasn't been the Fontainebleau for more than two years, since New York-based developer Steven Witkoff eventually bought the hulk from Carl Icahn for $600 million in August 2017 and renamed it The Drew (after his late son Andrew, an opioid victim).

For Witkoff to finish the megaresort would have entailed a $2.5 billion investment. The completion date was originally announced for 2019, but it was pushed way back to the second quarter of 2022, then November 2022. That was as close to finished as The Drew would ever get. The pandemic undoubtedly sealed its fate. With Strip room rates plummeting, uncertain demand, and the likelihood that economic normality wouldn’t return for as long as two years, it was an inopportune time to be shopping a multi-billion-dollar megaresort to Wall Street. 

The Drew construction project was suspended in April.

Meanwhile, payments on bonds and stock held by at least five South Korean corporations worth nearly $500 million were supposed to be made on May 8, but they never were and the Drew went into default. At the time, BusinessKorea reported that a payment deferment request had been made "in relation to local conditions."

But it didn't look good for the Korean companies, which were junior investors, as the payment deferment was applied to senior investors, U.S. banks constituting half the project. The South Korean investors constituting the other half were facing principal losses if the senior investors gave up and disposed of their assets. In other words, it looked like all the investments in the ill-fated property were well on their way to going bad.

At the time, a spokesperson for the Drew said, "We remain committed to the project and are actively working with our partners and lenders. We are confident that we will be successful in completing the Drew Las Vegas.”

Then in early June, the Las Vegas Review-Journal reported that a total of $36 million in contractor liens had been levied against the Drew. The general contractor was owed $18 million, with architects and subcontractors suing for the remainder. The R-J wrote that some liens had been paid off, but in combination with the default on bond payments, plus the liens that hadn't been paid, it didn't look good for the 67-story north Strip building.

That was the last news we saw of the Drew. And in this case, we'd have to say that no news is bad news.