Friday, August 1, 2008

Boyd Halts Echelon Construction

In more depressing signs that this economic downturn is hitting Vegas harder than pretty much any other in more devastating and tangible ways that will take ever longer to recover from, Boyd Gaming today halted construction on its planned $4.8 billion resort on the old Stardust property because of, of course, financing problems. In the process, they seem to have lost their joint-venture partner, Morgan Hotel Group.

Here's the company's statement: "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."

That, they said, could take nine months to a year. It was originally due to open summer of 2010.

These photos below come from an email sent out by Deutsche Bank gaming stock analyst Bill Lerner. They were taken early this morning to show how far the project had come so far. The company had already invested $500 million, but Wall Street greeted the news that Boyd had realized its limits by running up the stock by more than 20 percent, its largest gain in eight years.

Unlike the shadenfraude of taking note of the struggles of the arrogant and misleading Trump folks, this really makes me sad. The Boyd folks are from top to bottom nice, helpful and humble people and I've been excited to see what they come up with over there.


rob said...

clearly boyd was way over their heads with this one. they are not really known for running a high end casino. The borgata was a joint venture deal. A few years ago I predicted that there was no way Boyd would complete that project under their company name. If things were much better they would sell out. Now I would really wonder when they get the funds to restart that project. how long can it sit without any issues?

Anonymous said...

i disagree with rob. first, boyd is the operator of borgata so he's wrong about that. second a lot of people said station couldn't do high-end either and look at green valley ranch and red rock, a far cry from palace and boulder. it seems unfair to beat up on boyd for credit-crunch problems when everyone is having the same problems in this unprecedented environment.

Anonymous said...

Boyd was a downtown/locals kind of company wanting to play on the Strip. BURNED.

Don't give me that Borgata nonsense, AC is basically the LV locals market and Borgata it's GVR.

Anonymous said...

Let me get this straight. Morgan, one of the "Great Hotel Operators" in the world, can't get their money lined up, backs out of the deal, and claims they didn't. General Growth, one of the biggest shopping mall developers, can't get their money lined up, and backs out of the deal. Yet Boyd, who appears to have their money lined up, is supposed to take the blame for this? Not likely.
I can't remember EVER reading a quote from any Casino executive in Las Vegas who said they thought Boyd was incapable or incompetent on this project.
Jeff Leatherock


I am going to agree strongly with the anonymous poster here. The stalling of this project has absolutely nothing to do with Boyd's ability as an operator. That is an illogical connection being made in an unnecessarily mean-spirited manner. The situation right now has to do with an incredibly demented capital market and a very difficult, unusual situation out there.

Furthermore, Borgata is known as the creme de la creme of AC and Boyd has been widely praised by Vegas customers, gaming analysts and everybody else for running it as well as any Vegas Strip resort. To discount it is intellectually dishonest. MGM Mirage, too, is having credit problems, as is Station, Harrah's the Plaza NY folks and pretty much everyone except Wynn and LVS. To point to this as a deficiency in Boyd's ability or inability to actually operate a project is simply ridiculous. Their ability to operate on the Strip has yet to be proven. I'm not sure why there's such a rush to attack and insult this company when its decision was the fiscally responsible one.

robertw4771 said...

Borgata was a joint venture with Mirage Under Steve Wynn. Why did they not do it on their own if they had the knowledge. Why cut in Steve?

Atlantic City is a totally different game than LV. Many if not most of the AC casinos are either worn out or could not match up to vegas. When Borgata was built in AC there was nowhere the calibur of high end properties like what currently exists in VEGAS. For the most park AC is way misunderstood by people in vegas and elsewhere. People go to AC to gamble. Thats it. Gamble. In AC there is no wynn, bellagio, mandalay, paris, venetian, or palazzo.

More people gamble there than stay overnight by a wide margin. Who day trips to vegas? In the summer AC is at its peak. In the winter it dies out except for weekends.

Many other operators have had issues in AC including Trump, merv griffin with resorts international etc. The tremendous strip competition from the marketing and room power or mgm, harrahs, combined with the business savvy of wynn and possibly venetian leaves a company like boyd in a tough spot to say the least. Boyd has a mailing/marketing list of low rollers who play at sam's town. Is that going to work when you need gamblers at $100 tables?

GVR is not a strip casino in the heat of action and lets not compare GVR/Station to any top ed strip property. The people that go to GVR, go there to escape the strip.


Robert: The point is, none of this has anything at all to do with getting caught in an unprecedented and largely unforeseen credit crunch. Nothing. It's a lousy credit market. The list of projects being screwed by it is endless.

I disagree with what you're saying and think it's convenient for your argument for you to dismiss Atlantic City and the success of Station Casinos out of hand as you do. But neither really is relevant to the broader piece of this which is that Boyd's abilities as an operator may yet be proved but it's not relevant to why they're having credit problems right now. Everyone is having these sorts of challenges except, maybe, Wynn.

Nobody foresaw the credit market collapse to this magnitude two or three years ago when these projects were being planned. As recently as six to eight months ago, every gaming-stock analyst was predicting surging stock prices. Anyone who claims knew this credit disaster would happen and would be as severe as it is is being dis honest. The biggest and brightest in the Vegas market are running into problems because of it, not just Boyd. Whether they're experienced high-end operators or not is completely irrelevant to the discussion. It's just a cheap shot.