"Now it's not the best time to be opening new projects and we'd have the full support and encouragement of our major retailers to delay these project openings," GGP chief executive John Bucksbaum told analysts.
Company president Robert Michaels says the delay is meant to enhance the likelihood that the projects will open in a more favorable general economic environment and that construction financing will be more reasonably priced.
"While we can't be certain that such construction financing will in fact be available in one year, we believe that these projects will be highly desirable financing candidates, as we anticipate that on average over 50% of the project cost will already have been expended and that the majority of the space will be pre-leased as of that time," he said. "Historically, more than 50% equity and more than 50% pre-lease, our criteria that would satisfy even the most stringent construction loan underwriting."
Speaking specifically about Shops at Summerlin, Michaels said that if it had stuck to its original opening date for the development, the center would have opened with 25% to 30% vacancy. By delaying it, based on discussions with retailers who have yet to commit to the project, he said he expects the development to open with single-digit vacancy.
"And…probably equally as important, I think the rents will be higher and I think that as we've had these discussions with the retailers that almost universally they have said we would prefer to open this in 2010 versus 2009; that's really what we took our cue from," he said. "This project will be a great project anchored by Nordstrom, Macy's, Dillard's, Crate & Barrel, all those deals are totally firm. We are well over 50% in our leasing and I just think that by giving us this extra time it will open extremely strong."
Summerlin Centre is slated to rise northeast of the intersection of the 215 Beltway and Sahara Avenue. Plans include 1.4 million sf of retail shopping and dining, 5,500 housing units, a 250-room four-star hotel and at least one million sf of office space. Additional residential development has been slated to occur on 300 adjoining acres that already includes the new Red Rock Casino, Resort and Spa.
In May 2008, GGP announced that Macy's and Dillard's would be joining the center as anchor tenants. The commitments marked the first news about Summerlin Centre since early last year, when GGP announced that Nordstrom would open a 140,000-sf store and, two months later, that Crate & Barrel would open a 34,000-sf store. At the time of the Macy's and Dillard's announcements, GGP said all four stores would open on Oct. 16, 2009 along with nearly 95 other retailers, 10 restaurants and an undisclosed amount of commercial office space. That date now appears to be closer to when construction will resume.
Along with its own project delays, GGP saw another of its Vegas projects delayed by its JV partner. Citing a lack of reasonable construction financing, Boyd Gaming halted work on Echelon, its $4-billion megaresort on the Las Vegas Strip that includes 300,000 sf of retail that GGP had committed to developing. Under construction for the past year and scheduled to open in late 2010, all work will stop until market conditions improve. The 87-acre is slated to hold approximately 5,000 rooms in five hotels, 750,000 sf of convention and meeting space, 300,000 sf of retail, two live entertainment venues, 30 dining and nightlife venues, a 140,000-sf casino and parking for 8,000 cars.
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