Las Vegas Plaza's value plummets
Accountants of Tshuva, Dankner's company publish going concern warning. Value of land, purchased for $1.2 billion, slashed to $700 million. IBI analyst: Clearly, Plaza project will not happen
The land, acquired for $1.4 billion in equal shares by IDB group Tshuva's privately held Elad Group in the beginning of the year, dropped in value to $700 million. A valuation of the property from the beginning of the year slashed its value to $1 billion.
PBC Group, which holds a 25% stake in the project, posted a NIS 279 million (roughly $74 million) loss for the quarter due to the fall in value of the Las Vegas project.
The land was financed mainly through loans, and presently the company is having difficulties repaying the $620 million debt – the first payment is of which is due on April 2012.
Due to the company's difficulties in meeting its financial obligations, its accountants posted a going concern warning, which means that without the intervention of the owners or debt restructuring, the company will be declared insolvent and the banks will be able to seize the Las Vegas property.
The company noted that it had hired consultants to formulate an arrangement with the creditor banks.
"The main fall in value of the Plaza project was incurred due to an estimated postponement in construction start, stemming mainly from the recent developments on global markets which do not allow for external financing for long term projects," says PCB Chairman Rafi Bisker.
According to PBC CEO Sagi Eitan, "In light of recent developments on the global markets, mainly in entrepreneurship financing, many financing applications for Las Vegas projects were turned down in the US and therefore a banking deduction was made on the Plaza project.
The land is in a high value area and once markets begin to recover, this land will realize its potential."
"It is now clear that the Plaza project will not happen. Clearly the problem now is in the bank's court (a 13-party consortium among them Harel Insurance) which are stuck with the land, and with debtors who will surprise us if they do not give the consortium back the property on the renewal date," wrote IBI analyst Shay Lipman.
CEO Eitan adds that "the group continues to post growing revenue from yield bearer property which is our core business.
"The company has recently completed the acquisition of the remaining rights over the HSBC building in New York and has signed long term leases with high profile renters such as Baker & McKenzie – the top law firm in the US. Once the agreement with them is sealed, the building will be 90% occupancy."
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