The government of Dubai has sold back its 50 percent share of the Fontainebleau Miami Beach but will receive a significant bonus should Florida legalize resort casinos and give the oceanfront hotel a shot at gambling revenues.
The deal leaves the Soffer family the owners of South Florida’s largest resort after six years of having an investment arm of the Persian Gulf emirate as a partner. In 2007, Dubai’s Nakheel Leisure paid $375 million for a 50 percent share of the resort at a time when Jeff Soffer, who spearheaded the Fontainebleau project, was facing a cash crunch as a $650 million renovation of the 1,504-room resort was colliding with a recession and credit crisis.
Terms of the deal weren’t disclosed, but recent Miami-Dade Circuit Court filings show Soffer corporations agreed to an “earnout agreement” with Istithmar Hotels, a Nakheel entity. The South Florida Business Journal first reported on the agreement Monday afternoon.
The Dec. 13 agreement allows Istithmar to earn an undisclosed bonus “in the event the state of legalized gaming in Florida, in the future, facilitates gaming” at the Fontainebleau. The provision essentially lets Dubai retroactively collect what its share would be worth today if the Fontainebleau had a casino. Jeff Soffer backed a push in 2008 to allow large resort casinos in Florida, and hoped to open a string of Fontainebleau casinos around the world before plans for resorts in Las Vegas and Dubai itself fell apart during the recession.
Soffer declined to comment on the agreement, and a request for comment from Nakheel’s media office was not immediately answered. Soffer and his sister, Jackie, preside over Turnberry, the family real estate operation that includes the Aventura Mall, the Fontainebleau and a large portfolio of residential, hotel and commercial projects.
In the lead-up to the global recession, Dubai was aggressively expanding its real estate portfolio. But the credit crisis damaged its holdings and analysts briefly worried the sovereign investor might default on bond payments. That didn’t happen, but Dubai has been looking to unload assets to raise cash and the Fontainebleau appeared on a list of possibilities earlier this year.
The Dubai buy-back comes shortly after Jeff Soffer negotiated an end to litigation with creditors of the Fontainebleau Vegas project, which ended with a liquidated bankruptcy in 2009 once lenders cut off funds for the half-finished high-rise on the Vegas Strip. Turnberry recently withdrew a proposal for a shopping-and-entertainment complex in western Miami-Dade after facing opposition to moving the county’s development boundary.
Turnberry’s re-purchase of Dubai stake accompanies a new $535 million mortgage on the Fontainebleau. That refinancing resets the existing $412 million mortgage on the property and adds another $123 million in new cash for the owners.