In short, the financing deadline for the two hotel deal has been extended to late 2009 and Morgans' interim money obligations have largely been eliminated. More specifically, Morgans will get back its $30-million deposit for the project, plus half of the $1.5 million in interest that had accrued and its $41 million in future funding obligations has been eliminated along with its obligation to provide construction loan guaranty. In addition, either party may nix the agreement at any time prior to the December 2009 financing deadline, and may also sell some of their interest in the JV to a third party. The terms of the management agreement remain the same.
"We believe that the amended agreement provides substantial flexibility and represents a sensible framework for MHG to move forward with the Echelon project on the basis of a vastly reduced capital commitment," said MHG chief executive Fred Kleisner in a prepared statement. "We will continue to evaluate the project as we move forward."
Work on Echelon officially got underway in June 2007. Boyd halted work on the $4-billion project in late July 2008, citing poor capital markets and economic conditions. The 87-acre was scheduled to open in late 2010 with 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.
By the time work stopped, Boyd had completed foundation work for its three wholly owned hotels on the property -- Hotel Echelon, The Enclave, and Shangri-La Las Vegas – and steel was being erected for the low-rise portion of the development, which encompasses much of the common area for three of the five hotels. Work was also underway for the retail component, and the overall project was on-budget and on-schedule to open in the third quarter of 2010.
Boyd's wholly owned piece of the project, Echelon Place, was slated to include 3,000 of the 5,000 rooms in two high-rise towers, Hotel Echelon and the Suites at Echelon, each with its own full-service spa, as well as the casino, two theaters (one with 4,000 seats and the other with 1,500 seats), 25 restaurants and bars and a pool area.The rest of the components, including the two Morgans' hotels, one other hotel, the retail and entertainment venues and the convention space were to be developed via joint ventures.
In addition to its JV with MHG for the Delano and Mondrian hotels, Boyd had inked a management agreement with Shangri-La Hotels and Resorts for the one other hotel on the property, Shangri-La Las Vegas. The retail was to be developed in a promenade format by a partnership of Boyd and General Growth Properties. GGP, which has $3.3 billion of maturing debt coming due next year, earlier this week said it was "pursuing a comprehensive evaluation of its alternatives, both financial and strategic" as it prepares to refinance the debt.
GGP said it would generate additional capital through the sale of both core and non-core assets, and joint venture preferred equity, among other things, while actively pursue several sources of financing. It expects to offer a long-term fixed-rate portfolio mortgage financing to lenders in November.
The slate for Echelon was wiped clean in early 2007 by LVI Services Inc., which demolished 27 structures including the main Stardust hotel tower, a 32-story, 1,500-room structure that among other things was the setting for the award-winning Hollywood movie "Casino."
Echelon was to be the first Strip resort for Boyd, which has heretofore catered to locals with nine off-Strip casinos and casino-hotels. In addition to its Vegas-area properties, Boyd owns seven other gaming entertainment properties located in New Jersey, Mississippi, Illinois, Indiana, and Louisiana.
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