- Korea’s Mirae, Hana, and NH could face serious losses as New York-based Witkoff Group defaults paying $2.5 billion.
- The borrower had secured the loan to turn an abandoned property into the tallest building and newest casino in Las Vegas.
- Many consider the site of the project is either cursed or an eyesore.
- South Korea’s largest lending institutions could incur heavy losses should US banks scrap the project and seize assets acquired in the deal.
Construction of the Drew Las Vegas could be halted following Witkoff Group’s failure to repay a loan totaling to $2.5 billion. The development project “suspended principal and interest payments” on the property since the beginning of last month, Business Korea reported.
Following the developer’s default on the loan payment, Las Vegas Strip’s tallest building could stay empty and abandoned instead of becoming the newest and one of the most prestigious casinos in the region.
Probably, the default resulted from the setback the project experienced in March when COVID-19 effects caused the constructions to be paused. The Witkoff Group, a company that owns at least 1000 square kilometers of commercial property in the US, had secured $2.5 billion at the beginning of this year to meet extra costs of turning an abandoned property into a casino.
A local Korean media report said the failed payment amounts to about $500 million in project financing that undisclosed US banks gave to the Witkoff Group.
South Korea’s largest institutional investors like Mirae Asset Management, Hana Financial Investment, and NH Investment & Securities, among other companies, have invested $490 million in the 68-storey resort. The property was supposed to include a casino, theater, and 3,700-key Marriot hotel.
While the deferred payments apply to the US banks, if these entities scrap the project, sell the assets acquired in the real estate deal, and be ready to part with some losses, the Korean investors will suffer heavy losses.
A Cursed Site?
Many Las Vegans believe the site of the proposed project is an eyesore, cursed, or both.
Turnberry Associates, a Miami-based developer, broke ground on building the property in 2007, hoping to create the Fontainebleau Las Vegas, a Miami Beach hotel recreation. However, the 2008 financial crisis made lenders back out of the deal, resulting in the halting of the construction.
In 2010, billionaire Carl Icahn bought the property at $150 million. Unfortunately, it sat empty even after spending $10 million on it annually. In 2017, he sold it to Steven Witkoff at $600 million.
While the scheduled opening of the casino was in 2020, several setbacks made it to be postponed to 2022. In January, it didn’t seem like money was an issue in project completion.
Mirae is Not So Lucky with US Hotels
Mirae’s US hotel targets haven’t been the best. The company’s gamble on The Drew Las Vegas could add to a second failed deal after the COVID-19 pandemic made its deal with Chinese-based Anbang go sore.
This April, Anbang sued Mirae for backing out of a deal to acquire deluxe hotels in the US for $5.8 million, claiming that the Seoul-based asset manager did so because of the negative effects of COVID-19 on the US hotel industry.