Bankrupt and locked up, the Lucky Dragon Hotel & Casino sits like a gaudy prisoner behind a cyclone fence at 300 W. Sahara Avenue.
So close to the action, so far from prosperity.
Gaming industry analysts have called the Lucky Dragon debacle many things: the victim of a lingering recession, a miscalculation of the market, and just plain unlucky. With a nine-story tower, 203 rooms, and a 27,500-square-foot casino on a diminutive 2.5-acre footprint, its size left the $165 million development with little margin for error.
And its errors, it appears, were almost as plentiful as its players. Attempts to sell it faltered. An early attempt to auction it was canceled after a lack of interest. When it finally changes hands, it’s sure to be for a small fraction of its construction price.
It backs up to one of the poorest and most blighted neighborhoods in Southern Nevada. It’s on a grimy section of Sahara, a short walking distance to Las Vegas Boulevard in a place only the late casino hustler Bob Stupak would have called the Strip.
Is it in what you would call a “prime” location?
That’s what its developers called it in 2012 and 2013 in their hyperbolic and, as time would tell, hollow pitches to potential Chinese partners who sought a secure investment and green card status through the U.S. Citizenship and Immigration Services’ EB-5 visa program.
For a $20 drug deal or a back-alley date, perhaps, but as a place for an upscale, authentic Asian-themed casino and hotel?
Prime? You can’t say it’s on the Strip, or even on Las Vegas Boulevard. Although the Lucky Dragon would surely have benefited from the completion of other planned casino developments on the Strip’s care-worn north end, it at no time was considered prime real estate.
While dropping the names of the Venetian and Paris in its sales material, the developers emphasized the project’s authentic Chinese theme: “Lucky Dragon will be the Las Vegas’ only casino resort built from the ground up to showcase the rich, ancient culture of Asia through all aspects of its service and amenities."
Back in 2012, the Lucky Dragon had something going for it. It was being represented by Las Vegas real estate developer Andrew Fonfaand and by former Las Vegas Sands President William Weidner, who was touted as its President of Gaming Operations and Development. Although by then Weidner had parted company with Sands, he was well known in Asian casino circles and had a track record of success.
Foreign investors were reassured that their contributions to the project would be “Secured By: Lucky Dragon Hotel & Casino and its underlying 3 acres.” A year later, one advertisement pitch enthused about the lack of debt encumbering the development.
Despite the highly confident sales push, by the time Lucky Dragon applied for $25 million in Tax Increment Financing from the city of Las Vegas in 2015, a play for public subsidies that was unsuccessful, it was clear that it had relied heavily on the hunger of Chinese investors for a piece of the action. Although $60 million had been raised, it told the city in its application, its funding formula was dependent on many more millions in EB-5 equity investment.
By that time, the costs of the Lucky Dragon project had risen from $115 million to $140 million, according to the developers. (Recent published reports placed its cost at $165 million.)
Despite the lack of the TIF handout from the city, the project moved toward completion. A May 5, 2016 article in Vegasinc.lasvegassun.com reported the casino was fully financed thanks to commitments from the Weidner and Fonfa families. The article also noted that, although Weidner was still listed as the company’s president on a website, his son James Weidner had become “the active financial partner in the project.” A Review-Journal article noted what was missing from the company’s public statement: the disclosure of a recent $90 million loan Fonfa took out on the property.
The management change might make some people wonder when William Weidner — easily the most experienced, credible and recognizable name associated with the project — distanced himself from the development. The news came at a time Weidner’s former employer, Las Vegas Sands, was battling multiple federal investigations into its business practices in Macau. The events allegedly occurred during much of Weidner’s tenure with the company. One subject of investigation included the transfer of more than $62 million to a well-connected political consultant in a series of transactions that, according to the Securities and Exchange Commission, “frequently lacked supporting documentation or appropriate authorization.” The casino giant ended up paying millions to settle the investigations.
The Lucky Dragon’s financial downfall, predictable during its construction, became painfully obvious on Sept. 1, 2017 when private lender Snow Covered Capital, LLC filed a Notice of Default with the Clark County recorder with a claim it was owed $48.8 million. In a February 2018 declaration in support of Lucky Dragon’s Chapter 11 bankruptcy reorganization, its vice president of finance, Bing O’Peek, outlined the company’s fiscal straits. Although it had touted creating nearly 500 jobs, he admitted just 68 people worked there full-time with 30 more part-timers on the premises. It had stopped paying its bills.
More stunning was the tally of EB-5 investments: 179 people had transferred $500,000 each into the Lucky Dragon company. Their total contribution: $89.5 million, according to the court filing.
The worst news, noted a 2018 Valuation Consultants appraisal: The market value of the completed project was approximately $60 million.
While some will write off the collapse of the Lucky Dragon to a series of unfortunate business events, the kind that seem to occur in Las Vegas from time to time, others are bound to ask how a casino touted as a sure thing grew so unlucky so quickly.
So close to the action, so far from prosperity.
John L. Smith is a longtime columnist and author. Contact him at [email protected] On Twitter: @jlnevadasmith