Tshuva, Dankner may bow to markets and delay Vegas Plaza
Even the strongest Israeli businessmen have to bow before the storm winds of the global crises sometimes. And the markets have been worrying about the massive investment that two of the giants, Yitzhak Tshuva and Nochi Dankner, are planning to make in the gambling Mecca of the desert - Las Vegas. The two mean to invest as much as $7 billion to $8 billion in a luxury gambling, business and residential complex, and the market wonders whether they'll have the wherewithal. (For more, see Page 8, an interview with Sagi Eitan, CEO of Dankner group company Property and Building Ciroiration.)
The global economy will begin rallying from its current crisis in the summer of 2008 and recovery will be speedy, IDB chairman Nochi Dankner has told peers. He has said that he believes the big banks will start lending to businesses again by then, at significantly lower interest rates than prevailed before the crisis, because the U.S. Federal Reserve has slashed its rates deeply. In fact the Fed yesterday lowered its discount rate to American banks in another move to shore up the market.
A spokesman for IDB declined to comment. A spokesman for the Tshuva Group commented last night that its plans are entirely on track and construction will begin as scheduled.
Dankner also believes that construction costs will be 15% to 20% lower, reflecting the blow the entire U.S. real estate market absorbed.
As a result, sources close to IDB believe that construction on the Plaza Hotel in Las Vegas on the grounds of the demolished Pioneer hotel, is likely to begin after this summer, more or less according to schedule, and will cost substantially less than originally planned. Should this scenario not play out, and banks are still not providing convenient credit by the end of the summer, construction will be delayed until the global financial sector stabilizes.
Dankner and Tshuva jointly founded Elad IDB Las Vegas for the multi-billion Plaza project, which is planned to include a 3,500 room luxury hotel, a casino, a shopping center and an exclusive apartment tower.
As the global financial crisis unfolded, in recent weeks Dankner and Tshuva have been discussing the possibility of delaying construction work on the hotel. The final decision will be made closer to June, when construction is scheduled to begin, though for the nonce Tshuva for one insists that work will begin on time. What is happening right on schedule is the planning: it should be completed within six months. According to sources close to the project, licensing for 1.6 million square meters beyond original plans is expected in the coming months, which they believe will dramatically enhance the project.
Tshuva and Dankner purchased the land for construction of the project on the prestigious 'strip' last summer for $1.24 billion. In hindsight the land was bough at peak prices, shortly before the U.S. economy entered into this difficult period on the backdrop of the U.S. subprime market crisis that caused banks to collapse and made business financing difficult.
Nevetheless, Dankner was one of the first who foresaw that the subprime crisis would lead to a global financial crisis whose effects would also be felt in Israel, and prepared the sprawling IDB's equity structure accordingly.