Another Las Vegas construction project bites the dust. On June 9, the Las Vegas Fontainebleau filed for bankruptcy. This newest Las Vegas Boulevard property was to be an upscale resort with over 3,000 rooms. The Fontainebleau was going to include expensive shops, restaurants and a spa. Rumors have been swirling around the possible failure of the Fontainebleau and whether it would file Chapter 11 or not. On Tuesday night, the Fontainebleau and two of its entities filed bankruptcy paperwork. Miami Beach Fontainebleau and Las Vegas Fontainebleau are related business projects but both are separate companies and the Florida location isn’t part of the Chapter 11 filing.

The Fontainebleau is suing several of its lenders and claiming that they are partially responsible for its failure. The chief restructuring officer of the Fontainebleau, Howard Karawan, is quoted as saying, “It is unfortunate that our lenders forced us to take this step. By reneging on the revolving credit facility, they effectively shut down the project and put thousands of people out of work.” Fontainebleau lawyers filed a lawsuit for the company against its lenders. The suit filed on the 23 of April makes a claim that the banks backed out of agreements to give the developer $770. million to complete construction.  The banks in turn counter that Fontainebleau defaulted on a loan. The 3 billion dollar lawsuit against the banks was cancelled in the civil courts and moved to the bankruptcy court. Also, the developer also has complained about a conflict of interest with Deutsche Bank because the bank owns the Cosmopolitan which is a rival in the Las Vegas condominiums market. Both secured and unsecured creditors are listed in the lawsuit. A list of twenty secured creditors has been filed with the complaint. As of now, the unsecured creditors have not been identified.

 If lenders had honored their financial obligations, then the Fontainebleau wouldn’t be in this trouble is the claim the developer is making. Three thousand people working on the construction of the Fontainebleau are now unemployed as of April as are lots of office support staff. Las Vegas employment suffers a big set back with the failure of the Fontainebleau. Not only are thousands of construction workers left unemployed, but the resort was to have employed thousands of people when it opened.

 All this is another set back for Las Vegas condominiums developers. But this is good for buyers, unless you’re a buyer who’s already got money tied up in one of these failed ventures. This is a great time to buy a condo. The Review Journal business section said condos are down 53.4% from one year ago and the average price of a condo or town-home is $65,000. Even though I think Las Vegas housing prices will go down a bit further, I wouldn’t hesitate to purchase at today’s prices.