Dankner, Tshuva lose big time in Las Vegas

Property and Building's results show the pair down some $500 million on the Plaza project.

The financial report for the third quarter published by IDB Holding Corp. Ltd. (TASE:IDBH) unit Property and Building Ltd. (TASE: PTBL) today discloses the serious condition of the Las Vegas property market and of Nochi Dankner and Yitzhak Tshuva's Plaza casino and hotel project in the city. Property and Building swung to a net loss attributable to majority shareholders of NIS 427 million for the third quarter, from a net profit of NIS 46 million for the corresponding quarter of 2010, due to a NIS 390 million write-off on properties in the US, specifically, the Plaza project.

Property and Building's rental revenue rose 9% to NIS 161 million for the third quarter from NIS 147 million for the corresponding quarter, but revenue from property sales fell to NIS 44 million from NIS 131 million. Revenue from agricultural produce rose to NIS 64 million from NIS 44 million.

The company wrote NIS 279 million off the value of its 25% stake in the Las Vegas property for the third quarter, which means that the total write-off is NIS 1.11 billion. Property and Building attached an appraisal of the Plaza project made by Marquette Advisors, which valued the property at $700-800 million, against which there is a $620 million loan.

The reason for the write-off is the collapse of the Las Vegas real estate market, one of the worst-hit markets in the US. In effect, Dankner and Tshuva have written off $500 million on their $1.2 billion purchase of the land for the Plaza project in 2007.

IBI Investment House analyst Shay Lipman said, "The partners (Dankner's IDB Development Corp. Ltd. and its subsidiary Property and Building, which together own half the Plaza project, and Tshuva's Elad Properties, which owns the other half), have effectively written off nearly all their shareholders' equity. It can be clearly said that the Plaza project will not go ahead. Obviously, it is now the problem of the banks, which are left with land, and with borrowers who we would be not surprised to see them give back the land when the loans come up for renewal in six months."

Property and Building chairman Rafi Bisker said, "Property and Building continues to expand its income-producing property portfolio in Israel and overseas, and reported substantial revenue growth from its core business. However, the financial report for the third quarter of 2011 was strongly affected by the write-off on projects in Las Vegas. 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."

Property and Building's share price fell 1.1% in morning trading to NIS 160, giving a market cap of NIS 1 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on November 28, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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