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Howard Stutz

New Frontier owners to seek funding; hotel to close July 15

13 June 2007

LAS VEGAS, Nevada -- The New York-based private-ownership group buying the New Frontier's 34.5-acre Strip location is expected to seek financing from Israel's largest investment company for up to $8 billion to redevelop the site.

Meanwhile, a spokeswoman for the New Frontier said Tuesday the 984-room Western-themed hotel-casino will close at midnight July 15.

Elad Group, which is controlled by Israeli billionaire Yitzhak Tshuva, said in May it would pay more than $1.2 billion for the New Frontier site and spend $5 billion more to construct a replica of New York's famous Plaza Hotel. The complex would include a casino and a hotel with 3,500 rooms and 300 private residences.

Published reports in Israeli media said the cost of the New Frontier redevelopment would be between $6 billion and $8 billion, which includes the price of the land. The New Frontier will be demolished in favor of the ultraluxury, mixed-use development.

Israeli-based business and real estate publications reported Tuesday that Elad has asked IDB Development, which is headquartered in Tel Aviv, Israel, to help finance the project. IDB bills itself as Israel's largest investment company, with holdings throughout the country and overseas.

IDB and Elad would each own half of a joint venture in the New Frontier site.

According to Globes online, IDB is providing financing for two other Las Vegas projects, the Village at Queensridge, a mixed-use development, and One Queensridge Place, a high-rise residential development.

Deutsche Bank gaming analyst Bill Lerner said it appears the plans for the New Frontier site have grown. Globes reported that the project would also include a retail shopping center.

Lerner said the developers would attempt to make back some of their investment through sales of the residential components and the retail offering.

Elad is spending $400 million to redevelop the Plaza Hotel in New York, which it bought for $675 million in 2005. Some of the revamped Plaza's units are being converted into Manhattan's most expensive condominiums.

Lerner estimated Elad is getting up to $6,000 a square foot for some of its condominiums. In Las Vegas, some of the high-end residential units at MGM Mirage's CityCenter are selling for more than $2,000 a square foot.

"I'm not sure what their expectations are in Las Vegas, but we've seen what the Elad guys are doing in New York," Lerner said. "The scope of their development has changed and it seems like there might be more in the pipeline than they have previously announced. The assumption is they would help bring down the development costs through the residential or retail sales."

The New Frontier is operated by Kansas businessman Phil Ruffin, who bought the casino in 1998 for $167 million, but was never able to find an equity partner to help redevelop the site.