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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

More than $1.2 billion: New Frontier sale sets record

16 May 2007

LAS VEGAS, Nevada -- An Israeli-owned real estate investment group, in what is being called the most expensive large-site transaction on the Strip, has bought the New Frontier and its 36 Strip acres for more than $1.2 billion, the casino's current owner, Phil Ruffin, confirmed late Tuesday.

Ruffin said El Ad Properties, which controls several landmark New York City buildings, signed the purchase agreement last week for the hotel-casino site.

Ruffin, a Wichita, Kan., businessman who paid $167 million for the New Frontier in 1998, had been seeking an equity partner to help finance redevelopment of the New Frontier into a 2,750-room Swiss-themed resort.

He said a $100 million deposit on the deal arrived Monday.

"We're under contract, and that means we're doing the deal," Ruffin said. "We've been successful with the property, but it got to a point where it was better to let someone else come in and redevelop the site."

Ruffin had been in negotiations with El Ad since March. An Internet-based real estate Web site reported a deal had been struck to sell the New Frontier to El Ad for $1.5 billion on March 19, but Ruffin denied the reports.

Ruffin and gaming sources familiar with the deal said El Ad will close the aging Western-themed hotel-casino when the transaction is completed in 90 days. The 984-room New Frontier will be demolished, and El Ad will build a replica of New York's landmark Plaza Hotel on the site.

El Ad bought the Plaza in 2005 for $675 million and is remodeling the renowned property, which includes converting some units into Manhattan's highest-priced condominiums.

Ruffin said the 1,000 New Frontier employees were being informed of the sale this morning.

Phone calls to El Ad officials, whose offices are in New York City, were not returned late Tuesday.

On its Web site, El Ad estimates its holdings in Manhattan at more than $2.5 billion. In addition to the Plaza, the group owns 21 Astor Place, The Grand Madison and the O'Neill Building.

"They are setting records for the prices they are getting for the condominiums at the Plaza," said John Knott, executive vice president of the Global Gaming Group from CB Richard Ellis, who was familiar with details of the transaction.

Ruffin said the deal with El Ad does not include the seven acres on the backside of the New Frontier site which hold the $1.2 billion Trump International Hotel & Tower. Ruffin said the nongaming towers will continue to be owned in partnership with New York billionaire Donald Trump.

The initial 1,282-unit Trump International first tower is expected to be topped off in a May 25 ceremony and opened sometime next year.

"Donald has already heard about the deal, and he was thrilled to death," Ruffin said. "This is going to be a really good deal for the towers, and it will help them out tremendously."

Gaming and real estate analysts have estimated prime Strip land values at between $20 million and $30 million an acre. Recently announced transactions involving the Sahara and land on the north end of the Strip have been estimated at between $17 million to $23 million an acre.

The New Frontier's acerage increased in value as activity took place on the surrounding properties. Wynn Las Vegas opened in 2005 at a cost of $2.7 billion across the Strip on land that once housed the Desert Inn. Wynn Resorts is building Encore, a $2.1 billion addition to Wynn Las Vegas that is expected to open in 2009.

On the north side of the Desert Inn Super Arterial, Boyd Gaming expects to break ground next month on the $4.4 billion Echelon on the site of the Stardust, which was imploded in March.

At more than $1.2 billion, the 36 Frontier acres sold for more than $33 million an acre, which Knott said is the most expensive large-site transaction on the Strip.

Harrah's Entertainment paid the equivalent of almost $85 million an acre for the 4.3 acre site at the northeast corner of the Strip and Flamingo Road that houses Bill's Gamblin' Hall, formerly known as the Barbary Coast. Harrah's swapped land with Boyd Gaming Corp. for the site.

Ruffin was ranked 717th on Forbes' global billionaires list in March with an estimated net worth of $1.4 billion. He was considered the savior of the New Frontier when he acquired the casino from the Elardi family.

The property had been the site of the nation's longest ongoing work stoppage when more than 550 employees, backed by the Culinary Workers Union, walked off the job in September 1991.

The workers spent 2,325 days on the picket line, going back to their jobs at 12:01 a.m., Feb. 1, 1998, when Ruffin took possession of the casino.

Over the years, Ruffin had floated several ideas for redeveloping the New Frontier, the most recent being a $2 billion, 2,750-room hotel-casino called Montreux and themed after the Swiss resort near Lake Geneva.

The property originally opened in 1942 as the Hotel Last Frontier and renamed the New Frontier in 1955. Reclusive billionaire Howard Hughes bought the property for $14 million in 1967 and dropped "New" from the hotel's title. The Frontier was controlled by the Summa Corp. before it was purchased by the Elardi family. Ruffin added the "New" back to the name.

The New Frontier launched the Las Vegas career of Elvis Presley, who played his first-ever show at the casino on April 23, 1956. The Frontier was the site of the final performance of Diana Ross and The Supremes on Jan. 14, 1970.

Magicians Siegfried and Roy had a seven-year run at the Frontier starting in 1981 in "Beyond Belief." The show racked up 3,500 performances for more than 3 million showgoers before the duo signed a $57.5 million deal with casino developer Steve Wynn to perform at The Mirage.

More recently, the New Frontier has been known as the home of Gilley's Saloon and Dance Hall, which features bikini bull riding three nights a week and live mud wrestling twice a week.