Las Vegas Business Press :: News : A really new Frontier: $1.5 billion for Strip veteran

A really new Frontier: $1.5 billion for Strip veteran

Price sets new record for land on resort corridor

BY DAVID MCKEE & TONY ILLIA

Would he redevelop it? If so, when? And why was it taking so long?

Putting years of speculation to rest last week, New Frontier Hotel & Casino owner Phil Ruffin confirmed to Reuters what was leaking out over the Internet -- that he was putting the finishing touches on a deal to sell the venerable Strip property ... and for a record price.

The previous day, online newsletter The Slatin Report had revealed that the Israeli firm Elad Properties was on the brink of announcing it had bought the New Frontier for $1.5 billion. Elad, whose high-end portfolio includes the Plaza Hotel in New York City, is owned by Israeli billionaire Yitzhak Tshuva.

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Tshuva, 58, is listed by Forbes as the world's 382nd-richest man and the third-richest in his native Israel. (He was born in Libya but has lived in Israel from the age of six months.) His business ventures include cable TV, oil and gas exploration, insurance, real estate and the importation of cars into Israel. Tshuva's personal net worth is estimated at $2 billion.

STICKER SHOCK

Minus the seven acres of land under Donald Trump's twin-tower condominium project, Elad would be paying almost $43.5 million an acre for land that Ruffin purchased in 1998 for $4 million per acre.

"Quantum leaps seem to be the rule instead of the exception," said Applied Analysis principal Jeremy Aguero, reacting to the growth of on-Strip land values. Aguero characterized Slatin's scoop as "probably fairly accurate with regard to the negotiations that are going on. We heard that folks were looking at it and the price was going to be substantial," he said, "but I was surprised to hear the price as high as it was."

"They (Elad) are going to buy it," confirmed an industry source close to the deal. Ruffin "was not actively looking to sell," said the source. "But he was approached by a group that put a good enough price on the table that he had to seriously evaluate." Although the offer was unsolicited, the source continued, Elad has been eyeing the Vegas market "for a little while."

The first hint of an Elad/Ruffin pact appeared on March 11, when Dror Marmor, of the Israeli publication Globes, reported that Tshuva would "invest hundreds of millions of dollars ... building a hotel on the Las Vegas Strip." No specific Strip location was cited at the time.

RUFFIN CHANGES HIS TUNE

Slatin's item March 19 was picked up the same day by a Vegas-centric architecture blog, Two Way Hard Three. In the following day's Las Vegas Review-Journal, Ruffin issued several non-denial denials. "Everything is very preliminary," he said of Elad. "I think they are just kicking the tires and checking the place out ... We're playing with the price right now, but nothing is final," he added later.

That same morning, however, Reuters quoted Ruffin as saying that, while no pact had been inked, "the deal could be signed in a couple of weeks." He cited low capital-gains tax rates and escalating construction costs as his main reasons for cashing out.

News of the New Frontier sale electrified the stocks of Boyd Gaming, MGM Mirage and Riviera Holdings, the prices of which jumped like hyperactive terriers. Riviera closed trading on March 21 at $24.85, just a dime shy of its 52-week high. Riviera's flagship Las Vegas property is one of the last few major pieces of Strip land still in play.

Deutsche Banc analyst Bill Lerner struck a cautionary tone, in an investor note, warning that the sale price might actually be closer to $30 million per acre, or just over $1 billion. Still, he continued, Boyd's nearby Echelon Place land, valued by the company at $15 million an acre, could arguably be worth two or three times as much now.

Pointing out that his company is currently shopping 26 acres across from the Sahara Hotel & Casino, Michael Parks, a senior associate of the CB Richard Ellis Global Gaming Group, kept his powder dry. "There is no asking price at this point. We are going to wait and see how this deal shakes out," Parks reported. "It's not unrealistic to think that Strip values aren't going to reach $40 million an acre. The last major closing was Harrah's purchase of the Westward Ho site, which (it) got for about $18.3 million per acre. Having Trump Towers on the Frontier site (might) have helped push the value upwards because it adds additional room inventory with more affluent guests."

WHAT DOES IT MEAN FOR TRUMP?

If consummated, an Elad sale might throw a wrinkle into the adjoining Trump site, according to Trump International Las Vegas Vice President of Sales & Marketing Jack Christie. "Phil Ruffin and Donald Trump were in my office three weeks ago, talking about plans for Tower Two and connecting walkways to the New Frontier. Any sale (of the Frontier)," he added, "would impact what happens to the Trump Towers."

Ruffin has been trying to redevelop the New Frontier site, on and off, since he purchased it in 1998. A proposed San Francisco theme ran into litigation but Ruffin still had a $2.5 billion megaresort on the boards and capital lined up.

"Montreux is not going to be heavily themed, but an upscale resort based on a village in Switzerland," said the industry source. "There will be a large retail component at the front of the property, with a ride based on the Eye (Ferris wheel) in London. Ruffin has been speaking to retail partners such as Eddie DeBartolo ... and Chicago-based General Growth Properties, which owns the adjacent Fashion Show Mall."

Then again, all those talks could be on hold. Elad did not answer the phone at its New York office and Ruffin did not return a call from the Business Press.

dmckee@lvbusinesspress.com | 871-6780 x318

tonyillia@aol.com | 303-5699

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