A tale of two resorts

By Liz Benston

Tuesday, June 3, 2008 | 6:57 p.m.

While one North Strip resort falls victim to the washed up credit markets, its neighbor, the under-construction Fontainebleau Las Vegas, is moving ahead as well as can be expected during the economic slowdown.

Today, Australian resort giant Crown Ltd. abandoned plans for its proposed $5 billion Crown Las Vegas resort at the site of the former Wet 'n' Wild water park, saying the tight credit market made it difficult "to develop a commercially viable project on what remains an attractive location on the Las Vegas Strip."

Crown had a 37.5 percent stake in a joint venture with an option to build on the 27-acre site and expects to write off about $42 million in the project.

While that was an expected outcome of banks tightening their loans for new projects, especially those without an established track record in Las Vegas, the progress of the Fontainebleau, which is partly owned by Crown, remains more of an open question.

The $3 billion resort is scheduled for a late 2009 opening but many question whether it will be able to maintain that timeline and budget given that construction costs and design changes have boosted costs for other projects like MGM Mirage's CityCenter.

In a note to investors today, Deutsche Bank bond analyst Andrew Zarnett noted concerns about the project opening on time and on budget. He also lowered profit expectations for the resort's first year of operation, based on lower than expected profit margins, but said profits could improve the following year.

That's also not surprising given that Las Vegas operators are projecting profit to flatline this year.