If casinos were retail stores, Carl Icahn would be Sam Walton. To say that the billionaire corporate raider and fixture on Forbes' annual list of the richest Americans knows how to strike a deal is understatement-of-the-year material. It's as if he has a book of coupons with images of financially struggling casinos in it and plucks out the appropriate coupon when necessary. And that property usually runs better by the time he sells it, typically for a profit.
Which is why Icahn's recent purchase of the shuttered Fontainebleau hotel-casino lends a knight-in-shining armor narrative to what was supposed to be a nearly $2 billion slice of Miami on the Vegas Strip. The project stalled last spring after a consortium of banks pulled $800 million in financing. Estimates on how much it will take to finish the project range as wide ($500 million to $1.5 billion, some say) as opinions on what to do with it: finish it on the cheap, keep it a midtier property like Mandalay Bay or make it high-end.
The decision is complicated by twin tourism-related evils: stagnating room demand combined with excessive supply, i.e., thousands of new rooms added by the openings of CityCenter and Westgate Tower at Planet Hollywood.
Icahn could also strike a comfortable balance, sort of midscale chic. The Las Vegas property won't be able to match the architectural significance of its Miami sister. Designed by Morris Lapidus, it set the luxury standard on Miami Beach when it opened in 1954. The argument can also be made that the Strip, for all its energy, is not as picturesque as the Atlantic Ocean, which fronts the Miami property.
But the Las Vegas project can be special, if Icahn isn't shy about heavily investing in its future. His history with casino companies suggests this could be the case. In 1997, after assuming majority ownership of the bankrupt Stratosphere in Las Vegas, along with a handful of other properties, he invested hundreds of millions upgrading the skyscraping hotel-casino. A decade later he sold his holdings for $1.3 billion, scoring a nearly $1 billion profit.
Tropicana Entertainment, which owns the Tropicana hotel-casino, filed for bankruptcy in May 2008. Enter Icahn, who will be the majority owner of the company when it emerges from protection. He's recruited some of the most respected names in gaming to run the property and has pumped $125 million into an ambitious renovation and expansion.
Icahn could write a similar script for the Fontainebleau, which promised a unique, fun, Miami-style vibe.