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LV Sands, Elad Group deny New Frontier land deal report7 January 2009
By Howard Stutz
LAS VEGAS, Nevada -- What began as a Web site report in Israel on Tuesday morning spun into speculation that one of two casino operators were looking at taking the vacant New Frontier site off the hands of the Elad Group, which has stalled in its plans to build a $5 billion version of New York's Plaza Hotel on the Strip location.
However, the news may be nothing more than Internet-fueled fodder.
Reuters News Service in Jerusalem picked up a story from Israel's TheMarker financial news Web site that the owners of Elad Group wanted to see whether Las Vegas Sands Corp. Chairman Sheldon Adelson was interested in providing some financial help for the project.
Israeli businessmen Yitzhak Tshuva and Nochi Dankner were reportedly in New York to meet with bankers for the Plaza Hotel. It was unclear whether they would meet with Adelson.
In a statement after the original Reuters article appeared, Dankner's IDB Development said that a partnership with Adelson was "not being considered by us and is not on the agenda."
Las Vegas Sands spokesman Ron Reese also denied the Israeli media report.
On the surface, the story seemed far-fetched.
Adelson's Las Vegas Sands recently avoided bankruptcy through a capitalization effort that reduced the 75-year-old billionaire's majority ownership stake in the company. Adelson and his family also infused more than $1 billion in cash into the casino operator. Meanwhile, Adelson's net worth fell some $24 billion during the stock market collapse last year.
Also, Las Vegas Sands canceled development of its $600 million Strip condominium tower and several projects on Macau's Cotai Strip.
Deutsche Bank gaming analyst Bill Lerner, however, gave the report some legs when his daily investors note commented that Las Vegas Sands could swap stock in exchange for the New Frontier's 35-acre site. Elad bought the now-demolished New Frontier for $1.25 billion in 2007 from Phil Ruffin.
"If Las Vegas Sands proceeds with this transaction, the company would be issuing more stock for future 'greenfield' development in an environment where it has been impossible to raise capital to complete their original development pipeline," Lerner wrote.
He reminded investors that Las Vegas Sands had 18 acres behind the Sands Expo and Convention Center along Sands Avenue that is surrounded by land owned by rival Wynn Resorts Ltd. Lerner has dubbed the site "the toilet bowl" because of its shape.
"In our view, the Elad site makes strategically less sense," Lerner said.
Meanwhile, Lerner tossed out another scenario. The Israeli reporter mistook Adelson for Wynn Resorts Chairman Steve Wynn.
Before last month's opening of the $2.3 billion Encore, Wynn Resorts paid half the costs to remove the New Frontier sign from the site and add landscaping to the vacant parcel. In interviews, Wynn has said he is friendly with the Elad partners. Reached in Macau on Tuesday, Wynn said he has no interest in the New Frontier site other than to make sure the landscaping looks nice.
Elad took out a $625 million loan with Goldman Sachs to purchase the site, but has since received a postponement for repayment of the loan and is seeking to change the terms and get a further postponement.
Elad officials have said the company is continuing to plan the Plaza Hotel and will begin building after it receives financing for construction. However, most analysts and experts believe the development is dead for all of this year and well into 2010.
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