Alongside talks on debt settlement on the failed Plaza Casino and Hotel project in Las Vegas, IDB Development Corp. Ltd. and its subsidiary Property and Building Ltd. (TASE: PTBL), which jointly own half of the project, are restructuring the rest of their real estate business in the city.
Yesterday, the two companies, which own the Las Vegas properties through jointly held IDB Group USA Investments Inc., announced that they were buying out their partner's management rights in two projects, and that they were selling a third project. IDB Development and Property and Building have recorded an aggregate loss of more than NIS 500 million on these three projects, as well as writing off almost NIS 1 billion on the Plaza Casino project.
In September 2005, IDB Development and Property and Building contracted to buy three projects in Las Vegas in partnership with brothers Jacob and Marc Schimmel, and Darko Horvat. The brothers are Nochi Dankner's partners in Ganden Holdings Ltd., the controlling shareholder in IDB Holding Corp. Ltd. (TASE:IDBH) (Horvat has sold his share). In 2008, Horvat and the Schimmels sold their shares in the Las Vegas projects to a third party, a local partner, which is currently the controlling shareholder in the three projects' management companies.
To date, IDB Development and Property and Building have invested NIS 2.2 billion in the three projects (and written off a quarter of the investment), and IDB has now decided to sell the Sahara Hualapay project to the local partner for $4.7 million (after jointly investing $14 million in it. The Sahara Hualapay is a planned mixed use residential, commercial, and office project on a 18-acre site.
IDB Development and Property and Building will now own two projects in Las Vegas: Queensridge Towers and Great Wash Park. These are huge projects on which IDB had hoped to make big profits, but Nevada is one of the states hardest hit by the US real estate crisis. $420 million has been invested in the first stage of the Queensridge Towers for the construction of 219 condominiums, of which 65 have not been sold. Great Wash Park is a 72,000-square meter commercial and office project, half of which has been built, but only 60-70% of the space has been let.
In addition to these three projects in Las Vegas is the Plaza Casino and Hotel project, which has never gotten off the ground (except for the purchase of the site). IDB Development and Property and Building (each of which owns 25% of the project) have already written off NIS 1 billion on it, and they are expected to write off the balance of the shareholders equity invested in it - $93 million each - as part of the negotiations for a debt settlement on the project.
Dankner's IDB and Yitzhak Tshuva's Elad Properties own the Plaza Casino project in equal shares. Market sources increasingly believe that Dankner and Tshuva have decided to give up the land for the project because of the wide differences between them and the banking syndicate that financed its purchase, and because they can give up the land without a penalty because they took a non-recourse loan to buy it.
Published by Globes [online], Israel business news - www.globes-online.com - on November 12, 2012
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