Facebook
Fark
Digg
Reddit
StumbleFlailing economy cited in Boyd’s decision to postpone further construction of Echelon project
Published Friday, Aug. 1, 2008 | 10:23 a.m.
Updated Friday, Aug. 1, 2008 | 1 p.m.
INTERNET ENHANCED
Beyond the Sun
- News release: Boyd Gaming Reports Second Quarter Results
- Morgans Hotel Group statement
- General Growth Properties' second quarter earnings release
- Live Web cam: Echelon
Related blog
Expanded coverage
Statement
- Statement from Southern Nevada Building and Construction Trades Council secretary/treasurer Steve Ross, on the financial reorganization of Boyd Gaming’s Echelon project: Las Vegas, Nevada - Today, Boyd Gaming announced a financial reorganization of Echelon which will have the effect of delaying the construction timeline of the project by about a year. Boyd contacted me to inform me that due to the difficult environment in today's capital markets, as well as weak economic conditions, that they have decided to delay their Echelon project on the Las Vegas Strip. They relayed to me an expectation to resume construction in three to four quarters, assuming credit market conditions and the economic outlook improves. The credit crisis on Wall Street continues to have devastating ramifications on Main Street. Working families in Southern Nevada are facing the biggest housing crisis in a generation, at the same time that energy and food costs are skyrocketing, and now, thousands of good paying jobs with benefits are in jeopardy. We will be spending the next couple of weeks looking to find new jobs for displaced workers in Southern Nevada. If any displaced worker has any questions, I urge them to contact their union halls directly, or to call the Southern Nevada Building and Construction Trades Council at (702) 452-8799.
Boyd Gaming announced this morning it would delay its $4.8 billion Echelon resort on the Strip until the capital markets and the broader economy improves. The announcement triggered a 20 percent increase in the company’s shares.
Boyd's stock has been clobbered by investors who, beyond their concern over the general economy, didn't believe Boyd could pull off the resort, which would be the largest and most luxurious in Boyd's portfolio. Shares had tumbled below $10 this month.
Wall Street analysts had speculated that Boyd would either delay the project or seek another joint venture partner to replace Morgans Hotel Group, which was having trouble raising cash.
Boyd, which disclosed the news in its second quarter earnings release, said it is bullish on Las Vegas' long-term future and expects to resume construction on the project next year.
"We have a strong core business and while our results are lower year over year ... we still have a strong balance sheet," Boyd Chief Executive Keith Smith told investors today. Yet the capital markets, he said, are "effectively closed."
Boyd had secured relatively cheap financing for the company's $3.3 billion, wholly owned portion of Echelon, including two hotels and a main casino resort, before the economy soured.
But two joint ventures formed to build key components of the project were unable to lock up financing. One is a $1 billion, 50-50 partnership between Boyd and Morgans Hotel Group, which planned to build two boutique hotels.
Another is a $500 million partnership with mall developer General Growth Properties, the builder of a retail promenade at the Echelon site.
Boyd had planned to open all of Echelon in 2010.
The New York hotelier, which planned to build a Mondrian and Delano on the site, said today it was unlikely that the company would have been able to secure construction financing with "favorable rates and conditions" by an extended deadline of September 15.
Smith said the company wants to work with Morgans when Echelon resumes but said the company would look elsewhere for other boutique hotel brands if Morgans is unable to deliver.
The company notified contractors this morning at the site. About 800 workers have been working at the resort, which began construction several months ago.
Executives said they didn't know how many workers would be furloughed. To save construction costs, Boyd had pre-purchased raw materials including steel that will be stored until the project can resume, they said.
Revenue at the company fell 10 percent in the second quarter versus a year ago and operating earnings, excluding certain items, fell 12 percent.
Boyd's locals casino business in Las Vegas fell 7 percent on that measure, as executives said they were able to cut costs with less profit. Boyd's downtown casinos reported a 22 percent decline in operating earnings as higher fuel costs cut into the company's charter business ferrying gamblers from Hawaii.
Discussion: comments so far…
Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.
Only trusted comments are displayed on this page. Untrusted comments have expired from this story.
No trusted comments have been posted.
Post a comment
Most Popular
- Viewed
- Discussed
- E-mailed
- Coolican: Henderson officials out of loop on police brutality case, raising red flags
- See mug shots of 16 arrested in stolen-property police sting
- Lumberjacks — ‘Where the Big Boys Eat’ — hiring for North Las Vegas location
- Berkley draws stark contrasts with Heller over immigration
- Howard Miller, prominent lawyer and ‘true Las Vegas native,’ dies at 68
- Short memories may serve president
- Police looking for man in white Ford Explorer
- Saying ‘No mas’ to government
- Two dead after accident in downtown Las Vegas
- Instant Analysis: Debating whether UNLV should continue series with San Diego State
Blogs
The Kats Report
Live color from the scene at Thomas & Mack Center: We have a wire job! Rebels win, and Louie Armstrong sings!
South Point owner Michael Gaughan's take on 'Vegas Stripped': 'I'll give it an 8' (4 Comments)
Author relishes writing the life story of ‘larger-than-life’ Oscar Goodman (3 Comments)
Elsewhere
Landowner: All roads could lead to Uxbridge casino
Revel reveals smoke-free casino opening
Cirque du Soleil show in Sands China casino to close this month
Meet the woman behind Sheldon Adelson
The Sun
Locally owned and independent for more than 50 years.
Drill for oil. This downturn is directly related to the cost of air travel and the empty wallets around the country spent at the gas pumps. You can't come to Las Vegas when the gas pump took your dollars and never give out a jackpot.
Those who stubbornly say "drill for oil" sound a lot like the flat-earthers stubbornly claiming the "world is flat." How many times do these knuckledraggers need to be told that America cannot drill its way out of our dilemma? Oil well drilling in the U.S. went up nearly FOUR FOLD during President Bush's time in the White House, and look where we are. My suggestion is
BUILD THE HIGH SPEED MONORAIL BETWEEN 'VEGAS AND LA! Now there's something real!
If the past 232 years are any indication to American behaviors then I would say about this time next year 70% of all the cars on the road (it's like 52% today which get 20MPG or better combined highway and city driving) will be smaller more fuel efficient cars which make the gas cost a non-issue. We already have seen our conumption of fuel drop 7% year over year.
There will be technology developed to allow our energy needs to be met cheaply long term (free enterprise at it's best), this is just a hiccup in modern history signaling a need for change in direction.
My gas costs today are about $100 a month less than they were last year and are about as much as they were in 1998. Most the people I work with are saying the same thing, move closer to work and getter a better fuel effecient car so you CAN take those trips and do the things you want to do.
This is nearing absurd comedy.
What's the answer to every problem? Drill for oil!
Are feeling blue? Drill for oil!
Upset stomach? Drill for oil!
Have you been in a car wreck? Drill for oil!
The funny thing is, the Sun gets frequent comments from actual visitors to our fair valley and they almost unanimously say the same thing: Vegas is too expensive. In our quest to lure faux riche twentysomethings with a billion and one ultralounges, bottle service and "luxury" hotels, we've outpriced the everyday Joe and Jane who want to come here for a few days.
There are precious few "deals" available on the strip, and most visitors don't want to pay $100 a night for a closet-sized room at the Imperial Palace.
So it's tragic that such a large development will be put on hold, as it could help the unemployment problem that has been plaguing the valley recently... but I just can't feel any pity for the loss or delay of another luxury palace.
Thebs - I agree. The greedy strip casinos changed everything around to cater to the rich and famous. Now, even the rich and famous are running out of money. The price you pay for a night out on the strip is so inflated. Food and drink rival that of New York and San francisco. Vegas had always been a place where you got more bang for your buck. Now a buck can't even get you a snickers bar.
On top of that they dogged their local customers and treated them like tourist. How could they do that when locals make up 50% of their action? I guess when things are going great its hard to believe it could ever end. Well, now their begging for our locals dollars and I aint giving them mine. I dont care how many discounts they entice me with. I'm going to wait at least 2 years before I go back to the strip. I want to see them suffer a little so just maybe they'll learn to not bite the hand that feeds them.
I have no simpaty either for these casino owners. The chicken have come home to roost!
Thank you thebs. Took some of the words right out of my mouth.
While the price of gas, and the larger picture of oil supply, is a factor, it's certainly not THE reason for the economic downturn. Drilling for oil is a placebo... it will only serve to delay the inevitable. This country, and the world for that matter, needs to reduce it's dependence on fossil fuels. I think the larger issue is the general state of the economy. The average consumer can no longer keep up with the cost of living increases nowadays. You're right that some of those increases are directly related to higher transport costs, but for the most part it's a very simple problem. Too many people. Our economic structure can only support so many people. Most states infrastructures are way over stressed, and that leads to all kinds of trickle-down effects. You couple the sheer number of people to support, with that fact that society becomes less and less willing and able to work hard for their living, along with a government that is spending more money on foreign affairs than issues here at home, and there you are! A country in distress. But enough of that. The topic is tough enough without introducing politics.
Thebs is spot on. The real problem with Las Vegas is it has started to turn its back on what made the town great; the average Joe. When you do away with your hotels theme, and remove relatively low cost restaurants and bars to make way for high-end, hip and trendy nightclubs, and you start charging people outrageous prices for standard attractions, you limit your customer base and ultimately every number will go down.
I've said this before in some of these posts, and I'll say it again. Las Vegas started out as a regional destination, and it's teetering on going back to that again. You can blame gas prices for some of that, but when you take into consideration everything that an average couple has to go through to get here; limited time off because every days-pay counts, the hassle of the entire airport experience, the length of time it takes to get here from anywhere else, and the cost to stay here... just to stay in a run-of-the-mill joint being half of the trip cost, then it's no wonder more people are choosing to go elsewhere closer to home.
Vegas needs to get back to giving the average vacationer an above average experience at a decent price, and that doesn't come without some pain. Until that happens, all bets are off. Pun intended.
High gas prices is killing Las Vegas and it will kill in the future.
Reid, if you want to serve again then get your butt moving.
Harry Reid tried to help but the republicans said NO!
They refused to vote on Harry Reid's three bills to help us with oil prices.
They even refused to vote on troop raises and armor and health care for veterans! This was TODAY!
They are acting like babies. Harry Reid tried to compromise but they wouldn't! They wanted everything, but Harry stood his ground and wouldn't let them add pork and special interests to the bills. THe republicans got mad and refused to vote.
Now they are running around the floor of the house, screaming and hollering like children. Whining because they did not get their way!
We will remember this in November. The republicans had three chances to help us with the cost of energy, but they said NO!
They only want to drill. That is all we hear. Drill! Drill! Drilling will not help us today. That is not the answer for right now!
I guess they want to see us lose jobs and the economy fail because it will before more drilling will ever help.
I'm glad Harry Reid stood up to them and wouldn't let the add pork to the bills.
Give em hell Harry!
thebs was right, the casinos are too expensive now. I don't want to go to a club, I want to gamble and have a cocktail.
Thank you, Mr Reid, Obama and Pelosi.
Your have successfully locked up trillions of dollars of oil and gas for the last decades.
The Las Vegas citizens who have lost jobs, are losing their jobs and will lose their jobs due to high gas prices will return their thanks in November.
It is too bad the republicans sat on their rear ends for so long and never voted for more oil. They had free reign and could do whatever they wanted. Instead they sat around and took lobbyist money from the oil companies. I think they were told that if we drilled more, the oil companies would make less money, so they did not give us more drilling.
Now they want to blame the democrats. The voters are not that dumb. They saw how the republicans voted against the troops today, all in a selfish way so that the oil companies could keep their profits.
The voters are not going to vote for the republicans. I will bet 100 dollars that more democrats are elected in November.
Voters know the republicans did nothing to help us when they had the chance.
The republicans should be ashamed!
The democratic congress has a 9% approval rating. The lowest in the nations history and Harry Reed is near the top of that worthless bunch. How could you possibly praise him or Pelosi? I think you and the democrats should be ashamed.
You are implying that the 9% approval rating is of the democrats. It is not. It is of the congress. The entire bunch. Democrats and republicans.
Yes, I will praise Reid because he is not willing to compromise his legislation so that the oil companies can get EVEN MORE LAND to do nothing with.
I am tired of the republicans standing in the way of progress and then pointing the finger of blame at the Democrats.
I am tired of the lies and the games they play, and I'm tired of paying $4 for gasoline because the republicans are in bed with the oil companies.
And when the chips are on the table, what do they do? They whine and cry and hold up real legislation that will help.
Why did they block a bill to crack down on oil speculators?
Why did they block a bill to divert oil from the strategic reserves?
Why did they block a bill to give tax credits for more renewable energy?
Why did they block a bill to give a pay raise to our troops?
Why did they block a bill to give more health care to veterans?
Why did they block a bill to give more armored Hummers to troops in Iraq?
What does drilling for more oil do to help injured troops?
They always talk a big game and then DO NOTHING and the American public deserves to know.
"How could anyone defend the republicans?" is the question that needs to be asked!
So much for not bringing politics into the conversation...
love the comment from ksand99. A list of things the government should have GIVEN. The government has no money. It has to take more from us to GIVE anything. Each item sounds wonderful until you have to pay for it. They borrowed 160 Billion from CHINA to give you a tax stimulus. Quit giving and making us pay more. No job in Las Vegas is secure when those greedy casino's start laying off, and the value of your home will keep going down.
The Democrats have majorities in both in the House and the Senate so they can pass anything they want to.
All the Republicans wanted was a full and free debate where they could offer amendments that the Democrats can easily vote down if they wanted.
The Democrats did not want to vote on some things because it would embarrass them to vote no or they would voted "yes" and things would have passed that Pelosi and Reid did not want to pass.
I agree, the republicans were selfish and refused to help us!
Hello neiman1. I guess you do not think we should crack down on oil speculators or help wounded veterans?
I think that is awful. They have worked hard to protect us! They deserve the best health care we can give them. We should never see another Walter Reed!
The republicans put politics ahead of helping us and helping the troops. Then they had a party! They should be ashamed!
"Hello neiman1. I guess you do not think we should crack down on oil speculators or help wounded veterans?"
You mean those wounded veterans Obama blew off during his europe tour to run on the treadmill instead???
You mean those wounded veterans that would be neither wounded nor vteterans if we had followed Obama's lead six years ago and not invaded Iraq?
The republicans had a chance to show how much they supported the troops by giving them a pay raise, more health care benefits and armored Hummers.
They voted NO!
And firedawg2000: you criticize others for spin? That is exactly what you did here. I think that is hypocritical.
But that is ok. I am still waiting for your proof that George Bush waved a magic wand and lowered gas prices. I see you still don't have any proof. That is ok, I am not surprised.
Well, the horse is already dead, but since this seems to have become the usual political issue, I thought I'd toss this out there.
From an article posted on CNN.com, but I saw this quote elsewhere as well.
Thomas Mann, a senior fellow at the Brookings Institution in Washington, says the parties are crafting strategies to curry favor with the public to gain a political advantage. Mann says neither party is willing to budge from their positions, despite having to face the voters in a little over three months, "because there is nothing they can do for immediate energy prices, and they have profound differences for the long term that are not easily reconcilable."
"Allowing offshore drilling will have no impact on gas prices... it's a drop in the bucket," Mann said. "[But] the idea that this is a conspiracy by the big oil companies is wrong as well."
This is a guy who's paid pretty well to stay as neutral as possible. And he makes two really good points: there is no quick fix on the oil/gasoline issue, and both parties have fairly well founded reasons for their stance. The shame is that it's a test of wills, with us caught in the middle while nothing progresses.
Mann is correct about all the political moves for this is....duh...an election year.
He has no expertise on energy or energy prices. His expertise is DC politics.
But the Democrats are the ones that are being very stubborn.
The Republicans are for a long term strategy that includes solar, wind, and R&D money for an electric car or alernative fuel car.
Republicans just want to free up the trillions of oil and gas that are locked up to help us over the next 20 years to get to the next step.
It is foolish to pay foreign countries trillions of dollars for assets that we have here.
I am willing to bet that Democrats will crack under the pressure of 75% of Americans wanting new offshore drilling.
There will be an energy compromise that includes new offshore drilling. It will happen in September.
The Democrats and Obama are not that dumb or perhaps they are.
I don't think that's teh case, jfnance32.
When the republicans had a chance to act, they chose not to.
For twelve years they were in control of congress. For eight years they controlled the white house. And they fought long-term strategies like solar and wind and increased CAFE standards for cars.
For years they screamed "LET THE MARKET DECIDE! DON'T MAKE US DO ANYTHING! THE MARKET WILL DECIDE!" but that has failed.
Now with energy costs out of control, both parties have to scramble to fix this gigantic mess.
There will be an energy compromise, that will feature the three bills that the republicans chose not to vote on. So instead of those going into effect now, we have to wait.
And we aren't waiting because of the Democrats. We're waiting because of the republicans.
Rather than take real action, they sat around and whined and did nothing. Then they threw a publicity stunt to celebrate their inaction. This is ALL politics playing with the price of oil, and it is shameful, and the American people deserve better.
We aren't waiting for real energy reform because of the Democrats. We're waiting because of the republicans.
Real energy reform could have been signed into law today.
We're waiting because of the republicans.
The American people deserve better.
The market hasn't failed, ksand99. The market is doing exactly what it should be doing: curbing oil consumption through natural price processes. More has been achieved by the market in terms of oil consumption restrictions in just the past few months than world leaders could manage in decades.
What has turned out to be false is any assertion that this process would be easy or painless. It will be very, very difficult and painful for a lot of people. No way to prevent this, unfortunately. We had the chance around 30 years ago. Jimmy Carter told us to wear a sweater and we told him to FO.
"The Republicans are for a long term strategy that includes solar, wind, and R&D money for an electric car or alernative fuel car."
LOL! Talk about flip-flopping! Gas is still only $4 and all of a sudden the conservatives are regular tree-huggers! Imagine what they'll sound like when it's $20. I can just see a bunch of them sitting in a circle wearing hemp necklaces and praying to Gaia for more oil!
"Republicans just want to free up the trillions of oil and gas that are locked up to help us over the next 20 years to get to the next step."
What is the next step, Nance? Antigravity drive? Cold fusion? Magic? Something for nothing works in Vegas but it doesn't work in physics.
McCain has been for solar, wind, nuclear, coal and an electric car for a long time.
He is also for offshore drilling.
Obama has been very stubborn about new offshore drilling.
He might be changing his mind.
Nance, your ill-informed schtick is getting tiring. You are not looking at the big picture. Who is going to buy all these electric cars and pay for all these nuclear plants? With what money? You are expecting the same people who can't afford a tank of gas to go out and buy a new electric car. What do you think the trade-in value on their current gas hog is going to be? How are they going to secure a loan for the difference with no job, or some crap service job with crap wages, as most jobs in today's economy tend to be?
How will they pay for the electricity for their new electric car? Do you think it will be free? Do you think it will come from the charity of Nevada Power?
The U.S. sold off its gold reserves in the 1970s and the USD is now backed by faith, i.e. the expectation of future tax revenues. Where are these tax revenues going to come from with taxable income falling in what is most assuredly the EARLY STAGES of a deflationary credit collapse?
Here is some more big-picture stuff to think about, deep thinker. How are you going to maintain trillions in auto infrastructure with a $10+ trillion debt that is rising by another trillion every year and a half? Borrow some more? What will China & Russia think about that, and what will you do once they start dumping their dollar reserves? How will you feel when the government confiscates your 401(k) to pay its debt service? Did you know that thanks to this recent "housing" bill - which included, among other things, a raising of the federal debt ceiling - Hank Paulson now has unchecked access to use your tax money to bail out Wall Street pigmen? What do you think that is going to do for the dollar?
Did you know that the Fed has been swapping treasuries for worthless toxic MBS which are primed to blow up, and that when they do, they are most assuredly going to hit up the taxpayer for another bailout? What do you think THAT will do for the dollar and the price of oil?
The housing/credit ponzi scheme is over. The flippers are done. The "ownership society" is finished as the rich now own society. Not only is all of this fake wealth seeping away, but we've destroyed our ability to produce the real kind. We've recentered our formerly productive economy around BS. Fast food, entertainment, Home Flipper Depot, nail salons, Bed Bath and Beyond. We have opened up a huge wealth transfer conduit to China which has allowed us to exchange our once-valuable dollars for worthless crap. Now, they own the dollars and we own the crap.
You wanted it - you wanted every bit of it. Now, you're going to get everything you asked for and more. So, stay focused on offshore drilling. it makes you easier to fleece.