The Plaza Hotel may be coming to Las Vegas. And rooms will certainly be pricey.
Elad Properties, the Israeli-owned real estate investment group that is deep into an extensive renovation of the landmark hotel in New York City, is about to announce that it is purchasing the New Frontier Hotel & Casino in Las Vegas.
Sources say the purchase price could be as sky-high as $40 million per acre -- or $1.5 billion for the 38.5-acre site.
If the deal is consummated, it is a sure bet that the Frontier -- which opened in 1942 and has been in continuous operation ever since -- will finally close and disappear, as did its nearby cousin, the Stardust, last week. The site will become one of several new megadevelopments, including the Stardust, Sahara and Echelon, being planned or under way on the north end of the Las Vegas Strip.
Outdoing them all in pacing and planning is the category-killer:
66-acre, $7 billion CityCenter development, which is proceeding at a rapid clip after selling out its first several hundred units. Its scale -- in combination with the slowdown in the marketplace -- has basically slowed or stopped many other Las Vegas projects in their tracks.
Not Elad, apparently. Elad's plans for the property were not available, and representatives of the company declined to comment, but reliable local sources in Las Vegas and in New York confirmed that a deal is at hand, although the price could not be verified.
The High Costs of Redevelopment
Las Vegas sources say that Frontier owner Phil Ruffin, who turned down an offer of about $20 million an acre in the past, is ready to part with the property. Ruffin bought the hotel in 1998; two years later, he unveiled plans to demolish the 986-room hotel and its 100,000-square-foot casino and replace them with a huge San Francisco-themed resort complex. But the dramatic falloff in tourism that struck the city following the attacks of Sept. 11, 2001, forced him to shelve those plans.
As the market returned -- fiercely -- and Las Vegas development reached a fever pitch, Ruffin came forward with a new plan in 2005 for his faded Frontier: the $2.6 billion Montreux Las Vegas, including a 3,000-room hotel. Ruffin never backed down, getting his entitlements in place, and, as recently as last month, he had lined up financing from
Bank of America
Eager to move forward, he was looking for an equity partner to put in about $250 million -- although he had initially said that he intended to build the jazz-themed Montreux without partners.
But with construction costs soaring and a mountain of competition rising, Ruffin might have decided to let someone else take the not-inconsiderable development risk. In addition, he might have found that partners were not all that willing to take the relatively minor chunk he wanted to assign them.
Elad, which is owned by Israeli businessman Yitzhak Tshuva, won't be the first New York entity horning in on the New Frontier property: Donald Trump, with Ruffin as his partner, has built and sold out a 1,282-unit condo-hotel tower on a 3.5-acre parcel on the site; a second is in planning. The towers are located at the rear of the Frontier site.
Elad has spent lavishly on its renovation of The Plaza, which it acquired in 2005 for $675 million. (Condo sales at The Plaza have gone less briskly than at other super-luxury Manhattan developments, such as 15 Central Park West; the owners announced March 19 that they had hired Versace Home Decor to design model apartments to help move the units.)
A Storied Past
The New Frontier passes for a Las Vegas antique, and it shares a history and provenance with the town that gave it breath. Its first iteration -- in 1930 -- was as a bar called Pair O' Dice, which was augmented and recast as a casino hotel, the Last Frontier, in 1942. It was renamed the New Frontier in 1955, and a year later hosted Elvis Presley's very first Las Vegas performance.
When Howard Hughes bought the property in 1967 for $14 million, one of the sellers was today's Las Vegas kingpin, Steve Wynn. Hughes dropped the "New" from the name; Ruffin restored it after a refurbishment of the decidedly un-new property.
So will Elad bring the Plaza name to Las Vegas? (It would join the Waldorf-Astoria as another exported brand, while
Morgans Hotel Group
will be bringing the Hollywood-Miami axis to town when they build out the Delano and Mondrian hotels on the Echelon project.)
Although Elad owns numerous Manhattan properties, The Plaza is its signature brand. And The Plaza would certainly be a step up from the New Frontier's current big draw: Gilley's, home of the mechanical bull. However, there is already a property called the Plaza Hotel Vegas on Fremont Street in downtown.
Of course, since the deal isn't done, anything could happen. In 2005, Ruffin, a Kansas City real estate developer, sold the Cable Beach Resort in the Bahamas to Bahia Mar Development -- after insisting that the buyer was a different company, Hard Rock Hotels. But in the end, with the Bahamian government pitching in, the resort went to Bahia Mar for just under $150 million. The company is now preparing a $2 billion redevelopment project.
At the time of publication, Peter Slatin had no positions in stocks mentioned.
Slatin publishes the independent real estate newsletter theslatinreport.com. He has written extensively about real estate and architecture for publications ranging from Barron's to The New York Times, and is on the editorial board of Real Estate Portfolio, published by the National Association of Real Estate Investment Trusts. He was the founder and editor of Grid, an award-winning real estate business magazine.