The odd couple

Israeli mega-developers Tshuva and Dankner take on Las Vegas.

By ARYEH DEAN COHEN
April 17, 2008 14:28
The odd couple

dankner tshuva 2243.88. (photo credit: Courtesy)

The Jews created Las Vegas; now the Israelis are hoping to improve upon it. While the Mafia lent discreet support to the creation of the State of Israel - at least to hear Frank Sinatra tell it - Bugsy Siegel, Meyer Lansky and the rest of those who got casino gambling going in Vegas might be a bit surprised to see Israelis looking for a piece of the action. Israelites have built towers in the desert before, but this one will be really special: If partners Yitzhak Tshuva and Nochi Dankner and their Elad IDB Las Vegas company have their way, come 2011 their Plaza Las Vegas will stand high on the Strip, the largest Israeli real-estate venture ever undertaken, and the second largest private real-estate development in the world, according to Plaza officials. When the two mega-developers' estimated $8 billion project is completed, it will feature a state-of-the-art casino that will trump anything Trump's ever done: 16,340 square meters of casino space, making it the largest on the Strip. But in an era where casino income is no longer the main source of cash for Vegas developers, the pair aren't hedging their bets: Reports of submitted plans indicate there will also be seven towers rising to a height of 200 meters, featuring 4,100 hotel rooms and 2,600 resort condominium units; 12,495 sq.m. of restaurant space - currently the hottest source of major income in town, according to Vegas insiders - 32,320 sq.m. of shops, a 4,640 sq.m. health club, huge convention center and a movie theater on the site where the two ceremoniously imploded the Frontier Hotel and Casino last November. That's a lot of brick and mortar. Tshuva is reportedly a firm believer in providence pointing the way, and while promoting gambling may not exactly be what he has in mind, company officials are convinced the opportunity that awaits them in the desert is no mirage. "We are excited to bring the Plaza to Las Vegas," Tshuva says. "The new project will exude the same elegance and grandeur that the Plaza in New York is known for. We look forward to becoming part of the Las Vegas skyline and will bring high-quality service and excellence that is expected with the Plaza brand." The project is not only a move west, however, but a springboard to a whole company dimension. "The Plaza in Las Vegas is not only our expansion of the hospitality brand, but also our first step into the gaming industry," explained Miki Naftali, CEO of Elad Group, Tshuva's commercial real-estate and development firm based in New York, in an interview with Hotels Magazine. With that in mind, the project's directors hired Danny Wade, former vice chairman of the board of MGM Mirage, as chief operating officer, essentially to run its gaming business. One Vegas observer called Wade "an excellent personnel move on their part," adding that Wade is "a student of the industry." With Wade's help, the Vegas operation hopefully will lead to deals in other gambling meccas, specifically Macau, where Naftali said Elad is investigating opportunities as well. Another luxury hotel/condo project in Singapore is in the works, and Naftali said the firm is also seeking deals in other US and international cities. TSHUVA HIMSELF certainly won't miss the opening, despite the fact the 59-year-old head of Elad never wears a watch - a reminder, he said in a profile on Ynet, of how his parents couldn't afford to buy him one for his bar mitzva. Israel's third richest man in 2006, according to a Forbes magazine survey, still has clear memories of growing up in a transit camp outside Netanya, 11 in a room with no food in the refrigerator when the family moved to Israel from Libya a half year after the self-confessed strong patriot was born in 1948. So it was all the more satisfying for him to put Israel on the New York real-estate map when he bought the Plaza Hotel in 2004 for $675m., giving Israeli passersby cause to wonder just what an Israeli flag is doing flying outside the hotel. Tshuva's firm belief in family has carried over to his own firm. To renovate the Plaza - a Herculean task that had New Yorkers wondering just what would be the new face of their landmark hotel - he picked his daughter, architect Gal Nauer, who is expected to also be asked to work her magic in Vegas. Son Elad is also a leading figure in the firm, as indicated by it being named after him. While Nauer still hasn't been officially named to head up the Vegas project, local sources say "it stands to reason she will be involved." The two partners in the company couldn't have taken different paths to the top. Dankner, 54, was born into a business family and took IDB - Israel's largest holding company with large stakes in Cellcom and Bank Hapoalim - to new horizons. He's the personification of the new Israeli businessman: worldly, educated, charismatic. Tshuva, the self-made master builder and number 214 on the list of the world's billionaires, had to quit school at 12 to help support his family. He started his career working for the Defense Ministry in Tel Hashomer, then was involved in building the Bar-Lev line in Sinai. In 1998, he took his place in the local business firmament by buying a stake in the Delek company, of which he eventually took control. He later moved into the petrochemical field as well before going global, especially in real estate. Now this Israeli big business "Odd Couple" is out to dazzle Vegas. Their idea seems a pretty solid one. With the desert city booming, attracting increasing numbers of visitors as it tries a more family-oriented appeal, the Plaza Las Vegas stands to make the two men and their respective companies a pile of chips. According to the Las Vegas Convention and Visitors Authority and other statistics, there were some 39.2 million visitors to Sin City in 2006, with $10.9 billion in gaming revenue for Clark County and $6.28b. on the Las Vegas Strip itself. Land value itself is spiraling, with reports the Israelis paid as much as $35m. per acre for the prime turf they bought on the north side of the Strip. WITH ALL that in their favor, Vegas analysts agree the two Israelis' chances to make a killing are good, and veteran Vegas developers are already gearing up for a tough turf battle. "The casino community here looks at them as another very well qualified entrant into the industry," says Richard N. Velotta of The Las Vegas Sun and In Business Las Vegas, who has been covering the tourism and gaming industry in the city for many years. "They know that they are resourceful, they know that they have a track record in other communities." While some aren't certain the pair can pull off the deal, "they're being looked at as being a good, tough, competitor. Just the fact that they have that track record, especially in New York, is something that really works in their favor," Velotta says. That said, he notes there are certainly some issues, particularly that "they are not really established in the gaming industry. It's one thing to do well in the hotel or condominium industry, but another thing to get the patter down for the gaming industry." He also notes Tshuva and Dankner face a win-Wynn situation: beating out the Wynn casino across the street. Boyd, MGM Mirage and even Sheldon Adelson's Palazzo, which opened in January, will be tough competitors. Some Vegas wags also think the Israelis paid too much for the land. On the plus side, Velotta says, is chiefly location, location, location. "That part of the Strip is the central location for all that is going to be the future," he predicts. "By the time they are ready to open, the focus is going to be more on the north side of the Strip. And because they'll be brand new, that in itself generates a lot of excitement and enthusiasm. It's been proven in the past that whenever a new resort property opens, a lot of people come here just to see it." Great access and proximity to Trump Tower, which will likely send the Plaza its players, and to the Fashion Strip Mall will all work in the project's favor, Velotta says. IT WOULD certainly look like the odds favor the Israelis' investment paying off, but some are worried about the possible impact of the US lending crisis. Not the builders, however. Naftali said in his podcast, "We have a great track record, we have a lot of experience in development, we have a lot of equity to invest and obviously we own a fabulous brand, so based on all that... for the commercial banks we are a perfect player right now." Reports indicate that if the current financial turmoil continues, the pair might simply wait it out a bit, and there were even some Israeli media reports recently that the two had a falling out over how to proceed. However, a source familiar with the discussions between them insists "the two are pretty much on the same page," despite the fact that at the opening of the New York Plaza, Tshuva had Paul Anka on hand to sing the Israeli master builder's favorite song: "My Way." Both sides refused to comment directly on the deal, a representatives saying it was "too premature" to do so. Tshuva, the source said, prefers to build the whole complex simultaneously, while Dankner prefers to have the hotel and casino establish the Plaza brand - as Tshuva did in New York - and then do the rest. Tshuva wants to push ahead despite the current dicey financial markets, while Dankner leans toward waiting for better times. Velotta says that a delay might still happen. "It wouldn't surprise me, and I only say that because there have been a few projects that are under development now that are having some difficulty, and that generally results in a lot of companies that have a huge investment to reexamine their situation and possibly set things back. "On the plus side, if you invest now while the going's bad, you'll be ready when the going's good, and I think that's what everybody thinks is going to happen... But you don't know for sure. So if they wait, they do have the disadvantage of being at the end of the line when the party starts, but if they move now, they might move too soon." Velotta advised a phased approach to the project, with latest reports indicating that will indeed be the plan. WHILE THE over 100,000-strong Jewish population - the fastest growing in the US - is bound to applaud the idea of an Israeli flag flying on the Strip, its biggest opponent is another Israeli, London-based Poju Zabludowicz. One of the leading shareholders in El Al, he owns the Plaza Las Vegas, the former Union Plaza, on the end of Fremont Street downtown. Zabludowicz is claiming his property has the exclusive right to the name, and that the new plans are undermining his attempts to upgrade his property. He has asked a local court to keep the name out of the hands of his Israeli competitors. The case has become a source for amusement for Vegas observers, however, since they say the existing property isn't exactly the height of luxury. "They say that they own the name and they're going to keep it," says one Vegas insider. "Here are these guys in this very low budget place which is kind of a dump, for people who really want to pay $20-$50 a night... So anybody who mistakes that Plaza with the ones in New York [or proposed for Vegas] obviously doesn't have a lot going on, because the mistake would actually be more favorable to the existing Plaza people - they might get some customers they didn't expect to get, thinking it's the real Plaza from New York." Zabludowicz's legal team failed to gain a summary judgment from the court against Tshuva and Dankner, but the court battle rages on. Still, that Plaza brand is seen by Velotta as a key to the project's success - bringing in high rollers to play baccarat and other high-end games at the casino. He anticipates their pulling in between $300m.-$600m. from these efforts, focusing on offering deals to New York Plaza guests to come play in Vegas and Israeli customers as well. "That's the way other companies have done it, some very successfully... They know their players, they know how to attract them, and this is something Danny Wade's going to be able to help them with... as long as they market correctly and get those players in the door, they'll be fine." Crazy gamble or a sure winner? Velotta, at least, expects the real estate wheel to pay off for the Israeli pair. "The pluses really outweigh the negatives. The location, the hiring of a guy who is savvy in the industry... There are a lot of problems they have to deal with, a lot of issues that haven't been resolved, but the long-term outlook and the overall picture, I think they're going to be fine. They're going to be a serious competitor in this market if they can keep things on track." While Dankner and Tshuva wait for the first roll of the dice and posh purchasers for their luxury condos, it appears they won't be alone. Lev Leviev's Africa-Israel has already announced plans to build a huge casino/resort center in town, leaving those watching from back home to wonder just how much further the race by Israeli developers to the promised land of the Nevada desert will go.


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