Carl Icahn Wins Some, Loses Some In The Billion-Dollar Casino Game

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You win some, you lose some.

It’s a familiar saying. Particularly in the casino business, where players are winning some and losing some at the table games all day long.

Casino owners aren’t immune to these ups and downs either. They win some, and they lose some, just like the rest of us.

Just ask billionaire Carl Icahn. He originally made money as a corporate raider and real estate developer. However, he’s been winning and losing in the casino industry as of late.

Icahn and the Fontainebleau win

Icahn won one this week when he unloaded the unfinished Fontainebleau Resort Las Vegas casino project. He sold out to an investor group led by New York developer Steven Witkoff for $600 million. In fact, he earned a tidy profit on the deal. Especially considering he bought the still-under-construction Fontainebleau for a reported $148 million.

It was 2010 and the Las Vegas, Nevada property’s original developers had filed for bankruptcy. Construction had completely stopped. Questions regarding when, or if, the $2.9 billion, 68-story hotel-casino and condo development would ever open, surrounded the project. But those question appeared to be of little interest to Icahn.

Flipping casinos

Icahn does own and operate Tropicana Casino & Resort Atlantic City in New Jersey. He also has a controlling interest in Tropicana Entertainment, which owns more than half a dozen other casino properties around the country. But he never wanted to run the Fontainebleau.

Actually, when it comes to big, billion-dollar casinos, it appears Icahn is far more interested in something else. Something akin to those popular house-flipping home renovation shows that populate the programming of so many cable stations these days. Only on a much grander scale.

“This successful investment is an example of our ‘contrarian’ modus operandi, which seeks to invest in undervalued assets and businesses, nurture, guide and improve their condition and operations, and ultimately sell them for large gains,” Icahn said in a statement regarding the Fontainebleau Las Vegas sale.

Of course, you can’t win ’em all. And questions regarding an opening date for the Fontainebleau are now somebody else’s problem. However, it’s also worth looking at a deal that Icahn ultimately lost.

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Icahn and the Taj Mahal loss

Back when President Donald Trump was just a real estate mogul trying to build an empire of Atlantic City casinos, he wrestled away ownership of the under-construction Taj Mahal resort and casino from 1980s talk show host Merv Griffin and Resorts International.

In 1990, the Trump Taj Mahal opened, and Trump himself called it the eighth wonder of the world. It was most definitely the largest casino in the world, and the final $1.2 billion price tag reflected that. Within about a year, it also became the largest casino in the world to file for bankruptcy.

Through restructuring, Trump Entertainment Resorts ultimately took control. But by the end of the 1990s, Trump was essentially divested from the company that bore his name, and Atlantic City really.

Trump Entertainment Resorts filed for bankruptcy in 2014 and planned to close the Taj. Local unions struck a deal to keep it open. Icahn stepped in to provide some financing, and when Trump Entertainment Resorts emerged from bankruptcy in 2016, it was a subsidiary of Icahn Enterprises.

Icahn had control of the Taj Mahal, but it didn’t do him much good. Labor issues persisted, and by October 2016, Icahn was forced to shut the property down.

By the time he was ready to flip this billion-dollar casino, Icahn claimed to have already poured $350 million into it.

Four cents on the dollar

In April 2017, Hard Rock International and Florida’s Seminole Indian tribe bought the Taj for the paltry sum of $50 million. That’s about 4 cents on the dollar from the original $1.2 billion construction cost. Plus, it’s only about 15 percent of the money Icahn estimated he put into the property.

Of course, Hard Rock is in the middle of a massive renovation, for which costs have already ballooned up to $500 million. With plans to reopen in the summer of 2018, the jury is still out on whether it will be a win for them. But the decision is in for Icahn.

As much as the Fontainebleau was a win, Icahn’s experience with the Trump Taj Mahal must be considered a loss. But hey, even when billion-dollar casinos and hundreds of millions of dollars are on the line, you win some, you lose some.

Martin Derbyshire

About

Martin Derbyshire has more than ten years of experience reporting on the poker, online gambling, and land-based casino industries for a variety of publications including Bluff Magazine, PokerNews, and PokerListings. He has traveled extensively, attending tournaments and interviewing major players in the gambling world.