News Archive
Sin City developers jittery about the flop
Released on 14/08/2008
Casino operator Boyd Gaming Corp will stop work for at least three quarters on Echelon (pictured), a US$4.8 billion development in Las Vegas, because of the tightening capital market and weakening demand for gambling.
The temporarily shelved development was slated to include a 140,000-square-foot casino, nearly 5000 guest rooms in five hotels, two theatres and about 750,000 square feet of meeting and exhibition space over 87 acres.
Boyd blamed current market conditions for slowing the flow of tourists and gamblers into Vegas, also known as 'Sin City'.
Boyd said in its quarterly earnings press release: “We have decided to delay construction of our Echelon project on the Las Vegas Strip due to the difficult environment surrounding today’s capital markets and the challenging economic conditions that currently exist. We expect to resume construction when credit market conditions and the overall outlook for the economy improve.”
It hopes that will be in three or four quarters.
Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: “The current economic climate is unprecedented in recent years. While we remain enthusiastic about the long-term prospects for the Las Vegas market and Echelon, this is the right decision for our Company at this time. This decision is not a reflection of the merits of the project, nor the accomplishments of our professional development team, but rather the challenges we, and many other businesses, face in today's uncertain business climate.”
As of the June 30, 2008, Boyd had incurred approximately US$500 million of capitalized costs related to the overall project, of which Tishman Construction had been appointed construction and project manager.
Boyd’s separate $500 million joint venture with General Growth Properties to develop 300,000 square feet of the retail space was also on hold.
The Echelon joins several other suspended projects serving as reminders of the troubles facing Sin City.
In June, Australian gambling firm Crown Ltd withdrew from a $5 billion project to build Las Vegas’ tallest tower, blaming the credit crunch. The company held a 38 per cent stake in the joint venture with Texas developer Christopher Milam and private-equity firm York Capital Management.
Earlier, Deutsche Bank started foreclosure proceedings against developer Ian Bruce Eichner and his company after they defaulted on a $760 million construction loan for the $3 billion Cosmopolitan Resort and Casino.
Boyd said its decision “will also give us time to focus on restoring momentum in our core business and for consumers in general to regain their footing and confidence”.
Thomas Weisel Partners analyst Jake Fuller said the delay could help reduce some of the glut of supply in Las Vegas.
“While this delay could be a positive for Boyd’s equity value the underlying problem of a strained consumer and tight capital markets remain,” Goldman Sachs analyst Steven Kent told Arizona News. “We continue to believe that the downturn should continue throughout the remainder of 2008 and into 2009.”
