Israeli companies burned by Vegas project

Subsidiaries of Delek Group, Netanya, Israel, and IDB Group, Tel-Aviv, Israel, have written off US$500 million in losses on their project to bring The Plaza Hotel to Las Vegas.

The companies purchased The New Frontier and Casino, located on the Las Vegas Strip, for US$1.2 billion in 2007 and subsequently demolished the building to make way for a new-build Las Vegas Plaza, a luxury hotel casino. The purchase was one of the most expensive in Las Vegas history. However, the project stalled with the economic downturn in Las Vegas, with the company blaming difficulties in obtaining financing for the new hotel’s construction.

“Most of the write-off was for the Plaza project, due to the assessment that the start of construction will be delayed, which is mainly because of developments in international capital markets where it is impossible to obtain substantial outside financing for long-term development projects,” Rafi Bisker, chairman of IDB Group subsidiary Property and Building, told Israeli business daily Globes.

As large as the US$500 million write-off is, its only one of many hotel casino projects in Las Vegas that are shelved or failed with big losses for developers, which Fortune Magazine recently reported as totalling US$15 billion.