First, a quick bit of history. Boyd Gaming’s grand scheme for its Echelon meta-resort incorporated two properties by Morgans Hotel Group. The latter was to build Mondrian- and Delano-branded boutique hotels along the southern fringe of Echelon. However, things did not go as planned.
In May 2006, Morgans made a surprise $770 million purchase of the Hard Rock Hotel & Casino. The company soon announced a massive expansion of the property, a capital-intensive project that would become Morgans’ primary focus in Las Vegas. In the meantime, Morgans neglected to sew up financing for its portion of Echelon. Fast-forward two years and, on July 1, Morgans revealed that, credit markets having tightened up, it wasn’t having any luck obtaining the money needed to begin work on its portion of Echelon. It would need at least another two and a half months to scare up the funds. Boyd said, in effect, That’s OK, we can open Echelon in stages instead of all at once (like we planned).
By the end of July, however, it was clear to Boyd that the Echelon pieces just weren’t coming together and the company prepared to make a highly unusual announcement: It would be suspending the project for nine months to a year. But before Boyd could get its side of the story out, Morgans jumped the gun by three hours and 12 minutes. While Boyd was still preparing to make its blockbuster announcement on a conference call, Morgans put out an early morning press release revealing that Echelon was being mothballed and that the hotelier "does not intend to further extend the joint venture agreement on its current terms but expects to evaluate future proposals relating to the project."
While that language makes it sound like Morgans has given Boyd the brush-off, Boyd spokesman Rob Stillwell insists otherwise. "Morgans hasn’t bowed out," he says, adding that its agreement with Boyd runs through the end of September. "We’re still in discussions with both joint-venture parties," he added, referring to General Growth Properties, whose 18-month delay in fulfilling its retail commitment was the straw that broke Echelon’s back.
"The delay has everything to do with the state of the capital markets and the economy," Stillwell continued. "We remain committed to Echelon. The Morgans piece is not the entire project by any stretch of the imagination." Looking to the bigger picture, he queried, "When is the economy going to come back? That’s the first question that has to be answered."
While Stillwell and the rest of us wait for that answer, Morgans has already found greener pastures. On Sept. 5, it announced that it was entering a joint venture to build and manage Delano Dubai, with "a leading real estate development firm." The Dubai project is expected to open in 2012, at an as-yet-undisclosed cost.
