Citing current economic conditions, owner pulled plug on project on former Stardust Hotel site.
Las Vegas, a city known for its grand gestures, prides itself on thinking big – maybe too big, given the slumping economy. On Aug. 1, one of the city's longtime casino operators, Boyd Gaming, suspended construction on its $4.8-billion, 5,000-room Echelon mega-resort project citing "challenging economic conditions" and "the difficult environment surrounding today's capital markets." The company will delay work by at least a year, immediately placing 800 construction trades out of work. The move caused Boyd stock (NYSE: BYD) to jump 20%, to $12.01, for its steepest gain since April 2000. Boyd has already spent $500 million on the 12-million-sq-ft. project. The development, which is 12 stories out of the ground, was originally scheduled to finish by the third quarter of 2010. The eight-building complex broke ground June 19, 2007, at the 87-acre site of the former Stardust hotel-casino. Tishman Construction Corp., New York City, is the construction manager, with Marnell Corrao Associates, Las Vegas, as the main concrete subcontractor.
"Las Vegas is definitely more schedule driven than other markets," Daniel P. McQuade, president of Tishman Construction Corp. of Nevada, told ENR earlier this year. "It's geared toward getting projects done quickly. There is more equipment on a Las Vegas project running more hours a week."
Echelon calls for five hotels, a 650,000-sq-ft convention center, a 300,000-sq-ft retail mall and a 140,000-sq-ft casino. Other amenities include 30 dining and nightlife venues, 200,000-sq-ft. of pools and gardens, 9,000 parking spaces and two theaters combining for 5,500 seats. Echelon was anticipated to hire up to 5,000 craft-workers during the peak of construction activity. The project had a June 17 jobsite fatality when Lyndall Bates, 49-year-old Arizona carpenter, fell while dismantling scaffolding.
Three of Echelon's hotels share the same 4-million-sq.-ft, 600-ft-long cast-in-place superstructure but each has separate exterior facades, interiors, elevators and entrances. The 640-ft-tall Hotel Echelon, 540-ft Enclave and 430-ft Shangri-La were being built simultaneously. Nevada Ready Mix Inc., Las Vegas, has a 300-cu-yd.-per-hr. batch plant onsite in order to place the project's 700,000-cu. yards worth of concrete. The complex was also expected to use 80,000 tons of steel.
But many of the project components are joint-venture developments – a fact that has tested its partners' economic strength. Rising inflation and tightening credit led New York-based Moody's Investors Service earlier this year to warn of a construction and building industry default rate of up to 12% in 2008.
"The decision to delay is not a reflection of the merits of this project," said Boyd Chief Executive Keith Smith during the company's regularly scheduled Aug. 1 earnings call. He added that said Boyd is still committed to completing the project. But there is no word yet on how the 12-month delay will impact the project budget and schedule.
Morgans Hotel Group (NASDAQ: MHGC), for instance, a partner on two Echelon boutique hotels, couldn't secure $950 million in financing for the project, said Boyd. Separately, Boyd has already committed to funding $3.3 billion of the project through a credit facility. Morgans said it will evaluate future proposals to revive the joint venture.