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You know the saying: What happens in Vegas, stays in Vegas. One major real estate developer is hoping executives at some of the largest companies in the U.S. will literally choose to stay in Vegas but to conduct business, not to play the slots. And his journey has followed the constantly evolving real estate market in recent years.
Lorenzo Doumani comes from a family that ranks as Las Vegas royalty. They’re the developers of the iconic El Morocco and La Concha Motels. A new piece by my colleague Shawn Tully details Doumani’s pursuit to build Majestic Las Vegas—a destination for Fortune 500 execs.
“Companies of all kinds want a big, permanent presence in Vegas, and this is a condo-style solution for them,” he told Tully. “The suites could serve as corporate headquarters, or as a venue where the NFL holds meetings for team owners, or as display space for clothing companies that spend many millions every year on displays during Las Vegas Fashion Week that they tear down after four or five days.”
And the vibe he’s seeking to summon is “the super-loose élan that ruled in the heyday of Frank, Dean, and Sammy,” Tully writes. A premium spot, of course, will only be available to companies with a champagne budget. “Expected price on the penthouse that would occupy the entire top floor and cover the square footage of a pro football field to the 50-yard line: $100 million, or $12 million for the 6,500-square-foot, four-to-a-floor versions below. We’re talking Manhattan prices,” Tully writes.
But the headwinds from COVID, high interest rates, construction costs, and inflation, have all been factors that have slowed down the development process.
“Before COVID struck, the project’s numbers looked excellent,” Tully writes. “Doumani priced out the tower’s total construction costs at just over $600 million, including interest. He expected to raise around $450 million from preselling the Sky Suites, and finance the balance via a modest $150 million in borrowings. But after the outbreak delayed construction for 18 months, a second cyclone hit: a historic surge in construction costs. Doumani now puts his all-in expense at well over $900 million, representing a nearly 50% increase over three-and-a-half years, or 12% annually.”
“It’s the prices of concrete, steel, and labor, if you can find enough workers at all,” Doumani told Tully. “We’re also seeing long delays in getting materials, and interest costs have doubled since we assembled the original plan.”
Commercial real estate (CRE) has been a hot topic, especially following stress in the financial sector. The failure of SVB will most likely result in stricter lending standards on top of already tightened credit. But there’s a difference in opinion on how things will play out.
Morgan Stanley analysts have forecasted a “peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis,” Fortune reported. Meanwhile, Bank of America analysts suggested in a note that commercial real estate will hold steady, while echoing the office sector’s diminishing value.
Will corporations pony up for this property? You can read more about Doumani’s plans here.
Enjoy the long Memorial Day weekend. See you on Tuesday.
Sheryl Estrada
sheryl.estrada@fortune.com
Big deal
The latest S&P Global Market Intelligence data finds that, in 2022, public companies worldwide bought back $1.661 trillion of their own shares, up from 2020 when companies bought back $825 billion in stock. “Companies tend to repurchase shares when they have extra cash on hand and when management considers the stock undervalued,” according to the report. Equities broadly fell in 2022, with the S&P 500 dipping nearly 20%. In 2022, nearly $1.173 trillion, or 71% of all buybacks, occurred in the U.S. and Canada.
Courtesy of S&P Global Market Intelligence
Going deeper
Here are a few Fortune weekend reads:
“The $500 billion ‘Office real estate apocalypse’: Researchers find remote work’s effect even worse than expected” by Alena Botros
“One of the world’s best market watchers says there’s ‘zero chance’ the debt crisis isn’t resolved” by Will Daniel
“Airbnb CEO says the best advice he was ever given was ‘counterintuitive’ to what most people would tell you” by Chloe Taylor
“Here’s the exact time you need to go to bed for a good night’s sleep, according to science” by L’Oreal Thompson Payton
Leaderboard
Zane Rowe was named CFO at Workday, Inc. (Nasdaq: WDAY), a provider of enterprise cloud applications for finance and human resources, effective June 12. (Workday is a CFO Daily sponsor.) Rowe will oversee the company’s overall finance and accounting functions, internal audit and investor relations, and advise on Workday’s business strategy and product development. Workday’s current CFO, Barbara Larson, will be stepping back to spend more time with her family after a transition period. Rowe brings more than 20 of experience. He most recently served as CFO of VMware for seven years. Rowe also served as interim CEO of VMware from February 2021 to May 2021. Before his time at VMware, Rowe served as CFO at EMC, CFO at United Airlines, and led North America sales for Apple.
“Zane’s experience with scaling high-growth organizations, coupled with his deep financial expertise, make him the perfect leader to support Workday’s continued momentum as more and more organizations turn to us to help them navigate the changing world of work,” Carl Eschenbach, co-CEO, Workday, said in a statement. “As we look forward, we also extend our deepest gratitude to Barbara for her many contributions, which are felt across the company. We thank her and wish her well in her next chapter.”
More notable moves:
Terry Coelho was named CFO at Gamida Cell Ltd. (Nasdaq: GMDA), a cell therapy company, effective immediately. Shai Lankry, who has served as the company’s CFO for the past five years, stepped down on May 22 and will leave the company on June 2. Coelho most recently served as EVP, CFO, and chief business development officer at CinCor Pharma, Inc. Her experience also includes serving as EVP and CFO at BioDelivery Sciences International, Inc., and as CFO at Balchem Corporation and Diversey, Inc. She held a series of senior financial and executive roles at Sealed Air Corporation, Mars, Inc., and Novartis Pharmaceuticals.
Andre Fernandez, CFO at WeWork Inc., notified the company of his intention to resign from his position, effective June 1, Reuters reported. Chief Accounting Officer Kurt Wehner will take over as CFO. Wehner joined WeWork in October 2020. He previously served as the accounting chief at media firm Discovery Inc. Fernandez took on the role of CFO in June 2022. His resignation was not a result of any disagreement, the company said.
Jesse Deutsch was named CFO at American Battery Technology Company (ABTC) (OTCQX: ABML), a critical battery materials company. Deutsch joins ABTC after nearly 20 years of serving in the role of CFO with global brands such as Kraft Foods and Aramark Inc., and during his career has served in executive financial leadership roles at companies such as Visa, Philip Morris, and Altria.
Prashanth Mahendra-Rajah, EVP and CFO at Analog Devices, Inc.(Nasdaq: ADI), will step down from his position to explore other opportunities. Mahendra-Rajah joined the company as CFO in 2017. He will remain with ADI through the end of the fiscal year for a transition period. ADI has commenced a search to identify the company’s next CFO.
Tim Redfern was named CFO at Drift, a technology company that provides a conversational marketing and sales platform. Before Drift, Redfern held progressive finance roles as SVP, EVP, and CFO for records and information management provider, Access. Before Access, he held senior finance and management roles with Skillsoft over his 15-year tenure.
Overheard
“Obviously, there’s a wide range—from journalism, law, medicine, engineering, research analysis, investing—these activities will have essentially a personal A.I. assistant or a copilot within two to five years.”
—Reid Hoffman is a cofounder of LinkedIn, partner at the VC firm Greylock, and was an early investor in OpenAI. On this week’s episode of Fortune‘s Leadership Next podcast, Hoffman talks with cohosts Alan Murray and Michal Lev-Ram about the proliferation of generative A.I.
