They’ll make Manhattan

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The private ownership group buying the New Frontier plans to spend $5 billion to turn the Western-themed hotel-casino — best known for $44 a night rooms, bikini bull riding and the Strip’s last bingo hall — into an ultraluxury mixed-use development.

The New York-based Elad Group, which is controlled by Israeli billionaire Yitzhak Tshuva, on Wednesday formally announced the purchase of the New Frontier’s 34.5-acre Strip location for $1.2 billion.

The 984-room New Frontier will close in 60 days so it can be demolished and replaced by what Elad executives described as a high-end project with a hotel-casino, condominiums, a convention center and retail space.

The complex is expected to include 3,500 hotel rooms and 300 private residences.

The project’s centerpiece is a version of New York’s landmark Plaza Hotel, which Elad bought for $675 million in 2005 and is spending $400 million to remodel. Some of the revamped Plaza’s units are being converted into Manhattan’s most expensive condominiums.

“We are delighted to enter the Las Vegas market and introduce the highest level of luxury and sophistication as defined by the Plaza worldwide,” Elad President Miki Naftali said in a statement. “Though planning is in the early stages, the Plaza in Las Vegas will introduce the classical elegance and grandeur of the storied New York landmark to the Strip.”

Through a spokesman, Naftali said the company had been interested in a Las Vegas investment for several months.

Elad operates a commercial development real estate division with properties throughout the United States and Canada. In New York City, Elad estimates its holdings, which includes the Plaza, 21 Astor Place, The Grand Madison and the O’Neill Building, at more than $2.5 billion.

The New Frontier site is the company’s first Las Vegas venture, and company spokesman Lloyd Kaplan said Elad executives would seek a Nevada gaming license.

“I know (the Elad executives) and they are very capable people. They will build a beautiful and phenomenal project,” billionaire developer Donald Trump said Wednesday.

Trump and current New Frontier owner Phil Ruffin are retaining seven acres where twin 1,282-unit Trump International Hotel & Tower buildings are being constructed. The first 64-story tower in the $1.2 billion project is expected to be topped off next week and open in 2008. Sales have begun for the second Trump tower.

“I’m really happy for Phil because he’s a spectacular person,” Trump said of the pending sale. “(Elad) will do a great job, and whatever they build will make my building even more spectacular. Phil kept his word that the Frontier would be replaced by something that will be really good for both the community and the people who have invested in our building.”

Elad expects to begin demolishing the New Frontier next year with construction on the project to take at least three years. An opening is being planned for 2011. Naftali said Elad is looking to bring the Plaza brand into other markets worldwide.

The announced $5 billion price includes the $1.2 billion purchase agreement for the New Frontier. The price for the Plaza makes the project the second most expensive venture on the Strip, behind the $7.4 billion CityCenter being built by MGM Mirage and just ahead of Boyd Gaming Corp.’s $4.4 billion Echelon, planned for across from the Plaza site on the north side of the Desert Inn superarterial.

Echelon Chief Executive Officer Bob Boughner said Elad’s purchase helped increase the value of Boyd’s 87-acre site, on which the Stardust once stood.

“We’re thrilled because this is bringing another premium hotel product into the vicinity of our Echelon project,” Boughner said.

Ruffin, a Kansas businessman, bought the casino in 1998 for $167 million but was never able to find an equity partner to help redevelop the site. He said the New Frontier will close by mid-July. Ruffin will have another 30 days to remove the gaming equipment, some of which he plans to ship to racinos he operates near Wichita, Kan.

Ruffin said Wednesday he had already been contacted by collectors and historians who want to own items from the New Frontier.

The casino opened in 1942 as the Hotel Last Frontier and was owned during the late 1960s by billionaire Howard Hughes.

News of the transaction brought comments from Wall Street analysts about how to evaluate the increasing price of Strip land. The most recent deals — MGM Mirage’s acquisition of more than 36 acres on the north end of the Strip and the sale of the Sahara — were estimated at between $17 million and $23 million an acre.

Elad’s purchase of the New Frontier computes to roughly $33 million an acre.

“We believe this transaction further points to the surging land values in and around the Las Vegas Strip,” Wachovia Capital Markets gaming analyst Brian McGill said in a note to investors. “The sale could have a positive impact on the valuation of operators with significant land holdings on the Strip.”

Deutsche Bank gaming analyst Bill Lerner said the New Frontier site, across from Wynn Las Vegas, was one of the most valuable remaining Strip land parcels still on the market.

“We believe Las Vegas remains attractive to developers due to its iconic destination status and strong demand for new projects,” Lerner said.

John Knott, executive vice president of the Global Gaming Group for CB Richard Ellis, said Elad has a unique project for the New Frontier site which helped drive up the land’s value.

“Under normal market conditions or normal buyers, I don’t think the Frontier would have traded as high as Elad paid for it,” Knott said.