The plug’s reportedly being pulled on construction at the boutique Lucky Dragon Hotel & Casino on the beleaguered north end of the Las Vegas Strip.
A source with knowledge of the project says a scenario many predicted and dreaded will soon come to pass. Lucky Dragon has burned through its capital, and other potential sources of funding to complete the project have dried up.
We’ve made frequent stops at Lucky Dragon to track its progress, and recently noted the building’s distinctive red windows now cover the entire exterior of the nine-story hotel tower.
Sadly, indications are that work inside Lucky Dragon are about to be put on hold indefinitely.
Serious concerns about the financial state of Lucky Dragon arose in November 2015 when the project’s developers took the drastic step of appealing to the Las Vegas City Council for $25 million in subsidies to keep Lucky Dragon moving forward. The attempt to shake loose public funds was rejected.
At the time, real estate developer Andrew Fonfa and gaming executive William Weidner warned they might have to slow or stop work on the project without the assistance of the city. Approaching the City Council was a Hail Mary pass, as we’ve yet to come across another case in Southern Nevada history where public funds have been used to fund a hotel-casino.
It appears the Lucky Dragon developers weren’t over-dramatizing their financial dilemma. The construction company for the project, Penta Building Group, will purportedly soon discreetly shut the site down and Lucky Dragon is likely to sit dormant until further financing can be found.
Lucky Dragon has already cost its developers $24 million in equity. To-date, Lucky Dragon has been funded an additional $60 million by Asian investment, specifically through the EB-5 program. The EB-5 program allows foreign investors to contribute funds to American development projects in return for permanent legal residency in the U.S.
Due to shifts in the Chinese economy (including a crack-down on political corruption), investment has slowed significantly and Lucky Dragon has come up short, resulting in the end of construction for the unspecified future.
While Lucky Dragon said it had $30 million in bank financing lined up late last year, that loan was contingent upon the project getting public funding assistance. Since that didn’t happen, it’s rumored the bank loan also didn’t happen.
Penta has continued construction at a furious pace (the hotel tower was topped off in November 2015), but now Lucky Dragon is said to have depleted its cash and Penta isn’t the kind of company that would be foolish enough to let developers run a tab.
A real estate expert without specific knowledge of the Lucky Dragon project said, “It’s very possible there are people not getting paid right now.”
Building the “shell” of a hotel, then having it sit dormant, isn’t unprecedented on the Las Vegas Strip. The Octavius Tower at Caesars Palace, for example, was built to a certain point (exterior only) but stalled in 2009 thanks to the economic downturn. Construction resumed when the economy improved and the hotel eventually opened in 2011.
Hopefully, the looming pause in construction at Lucky Dragon will be just that, a pause.
An alternate outcome, of course, could be a fate similar to that of the unfinished Fontainebleau Las Vegas, all but abandoned in 2007. It’s unsightly carcass is an eyesore to this day, although it’s believed there are currently qualified buyers in negotiations to purchase it. Fingers crossed.
And don’t even get us started about the SkyVue observation wheel.
As for Lucky Dragon, this is likely to be a serious, publicly embarrassing blow. It’s also a blow to the surrounding area, where SLS Las Vegas and other businesses anxiously await the opening of other casinos, including Resorts World and Alon Las Vegas, to give Las Vegas visitors more reasons to visit and play on that challenging portion of The Strip.
No official statement about Lucky Dragon’s rumored financial pickle or imminent work stoppage has been forthcoming.
It should be noted the financial fortunes of Lucky Dragon could change at any time. Let’s hope a bold investor will see the potential of this unique resort and swoop in to make the Year of the Monkey the Year of the Dragon.