Miami Beach's Fontainebleau Hotel: Solid Swimming Pool - Leaky Finances

We were in Miami Beach to attend a wedding this weekend and had a chance to check out the high profile Fontainebleau Hotel mainly because it boasts one enormous swimming pool. We call it a great place to swim (~75 yards long).

But what is with those tall guards all over the deck and the open pool side cabanas with flat screen TVs? We wondered if this was a scene come to life from Woody Allen's film Sleeper. A friend observed that many of the guests looked like they were affiliated with shady elements, whatever that means.

And now we learn from the Miami Herald that although the utterly swank hotel has undergone in solid reality a total renovation, it stands on the shakiest of financial footings, as the owners teeter on the verge of bankruptcy.

Fontainebleau hotel's glitzy rebirth tarnished by debts
The Fontainebleau hotel's grand launch -- with fancy parties and lingerie models -- is a dim memory as financial challenges mount a year later.
BY DOUGLAS HANKS

A year ago, developer Jeffrey Soffer presided over the most lavish hotel opening in South Florida history as supermodels, pop singers and movie stars celebrated his $650 million renovation of the Fontainebleau Miami Beach.

Just weeks from his 41st birthday, the real-estate heir joined family friends James Caan and George Hamilton in the VIP section for a private concert by Mariah Carey. Victoria's Secret models sashayed in a televised lingerie show hosted by Heidi Klum.

Exactly 12 months later, the $5 million weekend bash seems a mere financial footnote as Soffer confronts mounting challenges at South Florida's largest resort.

Among them:

• Contractors claiming more than $60 million in unpaid bills.

In court papers and interviews, contractors say they were ordered to work double- or triple-time to get the Fontainebleau ready for the Nov. 15, 2008, Victoria's Secret show, but that the resort stopped paying its bills at roughly the same time.

• The possibility of bankruptcy.

For the first time, a senior Fontainebleau executive on Saturday said publicly that bankruptcy was an option under consideration as the resort tries to reduce its $660 million construction loan and settle the contractor claims.

Last year, the investment arm of the Dubai government paid Soffer's ownership group $375 million for a 50 percent stake in the Fontainebleau. That deal gave the Dubai entity, part of Nakheel Leisure, the option to take over restructuring negotiations if there were problems with the resort's loans.

Days ago, Nakheel exercised that option, said Hamza Mustaffa, Nakheel's managing director. On Saturday, he said Nakheel and Soffer were waiting for recommendations from a restructuring consultant on the next step, and that one of the options could be a Chapter 11 filing that would let the resort continue operating while forcing creditors to negotiate.

``We haven't made a decision right now if we're going to file, or if we're not going to file,'' Mustaffa said.

While Nakheel has officially replaced Soffer as the lead negotiator with Fontainebleau's banks, Mustaffa said Soffer remains in charge of the hotel and that the partnership is solid.

``This is not us saying, `Jeff, you're out and we're in,' '' Mustaffa said while praising Soffer's role as the Fontainebleau developer. ``We've been working together.''...much more...