by Marian Green
El Ad Properties buys New Frontier for $1.2 billion; will replace with Plaza project
The owner of New York’s Plaza Hotel in May announced it had purchased the New Frontier hotel-casino, with plans to replace the Las Vegas Strip property with a $5 billion multi-use luxury complex. New York-based El Ad Properties, part of the Israeli-owned El Ad Group, called the New Frontier site the last available prime parcel on the Las Vegas Strip. It plans to demolish the New Frontier and develop a $5 billion multi-use ultra-luxury hotel, private residence, retail and gaming complex bearing The Plaza brand on the 34.5-acre site. The project is slated for completion in 2011.
“We are delighted to enter the Las Vegas market and introduce the highest level of luxury and sophistication as defined by The Plaza worldwide,” said Miki Naftali, El Ad Group president. “Though planning is in the early stages, The Plaza in Las Vegas will introduce the classical elegance and grandeur of the storied New York landmark to the Strip. We look forward to being part of a community with some of the most prestigious, dynamic and visionary developments anywhere.”
The Plaza in Las Vegas will feature a luxury hotel, private residences, the Plaza Retail Collection, a state-of-the-art casino, destination restaurants and convention space, according to El Ad.
“There is only one original Plaza, and that will never change, but all that the brand stands for in terms of style, service and luxury will be intrinsic to the Plaza Las Vegas,” Naftali said. “We also look forward to bringing the Plaza brand to other destination cities in the near future, such as Los Angeles, San Francisco, Washington D.C, Boston, London, Paris, Rome, Tokyo and Shanghai.”
Billionaire Phil Ruffin, owner of the 984-room New Frontier, told the Las Vegas Review-Journal that a purchase agreement was signed in mid-May and that he had received a $100 million deposit. Ruffin bought the aging New Frontier from Margaret Elardi in 1998 for $165 million. The deal ended a nearly six-and-a-half-year-long strike by the Culinary Union.
The purchase doesn’t include a 7-acre parcel planned for two 1,283-unit condo-minium-hotel projects that Ruffin is developing with Donald Trump.
The purchase price—about $35 million an acre—raises the bar for Las Vegas Strip land value, Deutsche Bank analyst Bill Lerner said.
“We believe Las Vegas remains attractive to developers due to its iconic destination status and strong demand for new projects. At $35 million per acre, this would represent a considerable premium to recent transactions,” he wrote in a note to investors.
For instance, MGM Mirage paid $17 million per acre for a 34-acre site north of Circus Circus, $17 million to $23 million acre for the 17.5-acre Sahara site and $20 million acre for the 18-acre Imperial Palace site. Lerner states the sale has “profound implications on valuations for Las Vegas operators with significant land holdings including MGM Mirage, which holds approximately 800 acres; Harrah’s Entertainment, with more than 350 acres; Wynn, with 235 acre; and Boyd, with nearly 200 acres.
“Notably, this transaction makes MGM’s most recent purchase appear attractive, and makes our current valuations [for land owned by operators such as Wynn, MGM Mirage and Boyd] seem conservative.”