In a surprise decision last month, Boyd Gaming announced that it would halt construction on its billion Echelon project on the Las Vegas Strip across from Wynn Las Vegas and its companion hotel, the new Encore, slated to open at the end of this year. Boyd officials blamed the slumping credit markets for the decision.
Echelon is being built on the site of the old Stardust. It will contain several independent hotels, including the Delano and the Mondrian, as well as shopping and extensive meeting space.
Boyd had insisted for over a year, since the implosion of the Stardust in the spring of 2007, that it had sources for the funding of Echelon. But as credit becomes tighter and interest rates soar even higher, company officials had no choice.
“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,” the company said in a press release accompanying its second-quarter earnings report. “We expect to resume construction when credit market conditions and the overall outlook for the economy improve.”
Boyd Gaming CEO Keith Smith said the company hoped to resume construction in 2009, with the official debut of the property pushed back a year to 2011.
Smith said Boyd and two of its joint-venture partners-General Growth Properties, which was building and will operate Echelon’s retail space; and Morgan’s Hotel Group, which was planning to build two boutique hotels-were unable to secure financing to complete the project, spurring the decision to suspend construction.
The investment community cheered the decision, sending Boyd shares up more than 20 percent in trading on the day of the announcement. BYD closed at $12.10 on the day, up more than $2.
Meanwhile, MGM Mirage downplayed reports that it was having trouble finalizing funding for its CityCenter project in Las Vegas. While admitting that financing has not been finalized, MGM Mirage CFO Dan D’Arrigo expects no delays in construction and the expected late 2009 opening of CityCenter.
“I don’t think it’s any surprise to anyone that the financial markets are not what they once were,” D’Arrigo said. “The credit crunch is real and it’s one that we-like any other company out there looking to raise capital-have to deal with.”
He said the company has approached about a dozen banks to participate in the financing and over half of them have agreed to sign up.
Though MGM Mirage posted a loss, the news about CityCenter and changes in its slumping Macau operation were seen as a positive, sending company stock upward after the call.