James Packer’s highly ambitious plans for a huge casino on the strip in Las Vegas has been abandoned at a cost of $44 million.

Crown Ltd announced this morning that it and its partners in the $5 billion proposal are bowing to the realities of post-credit crunch financial markets and abandoning the deal.

Crown owned a 37.5% stake in the project vehicle, LVTI LLC, which had planned to develop a 27-acre site based on an old water park theme on the strip. The partners had been paying monthly holding charges while they made up their mind. They had already postponed a decision from last year on acquiring the site.

Real estate group CBRE was said to be looking to market the site and Crown confirmed around six weeks ago that it was reviewing its options: a disclosure forced on it by a story in the Sydney Morning Herald by reporter Michael West.

This morning it said in the statement to the ASX:

The recent upheavals in world credit markets has made it increasingly difficult for Crown and its partners to develop a commercially viable project.

As a result of the strategic review the joint venture has decided not to proceed with the project.

Crown will write off its investment in the project to date of approximately $A44 million.

Casino firm Crown, Texas developer Christopher Milam and private equity firm York Capital Management, had planned to build the tallest tower in Las Vegas as part of the casino complex and 5000-room hotel project. That tower project was knocked on the head last year by US aviation regulators because the planned development was under a flight path to Las Vegas Airport.

At the same time, Nevada, Southern California, New Mexico, Texas and Utah have seen economic conditions slide, thanks to the subprime mortgage crisis and the recession in the housing industry.

That has seen gaming revenues across Nevada drop for all types of casino (international and local). But Crown’s investment in Macau through the Melco company with elements of the well-connected Ho family seems to be doing better than expected by investors.

Crown shares fell 14 cents to trade around $10.28 at 11.30am.