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Summerlin Centre mall to be delayed by one year

6 August 2008

Nevada -- The sudden halt of the $4.8 billion Echelon resort on the Strip isn't the only major Las Vegas delay facing mall developer General Growth Properties.

The company will also delay development by at least 12 months of its Summerlin Centre project, a mixed-use development that was to open in 2009 with Crate & Barrel and Nordstrom as anchor tenants.

General Growth officials refused an interview on the subject, but they did discuss it during a recent conference call with investment analysts.

"We're well over 50 percent in our leasing, and I think that by giving it this extra time, it will open extremely strong," said Bob Michaels, president and chief operating officer of the Chicago-based company.

Had the company continued with the proposed 2009 opening date, it would open with about 70 percent occupancy, about 23 percent lower than the company's overall occupancy rate for malls.

General Growth is facing billions of dollars in debt maturities later this year and in 2009, including debt on other properties it owns in Las Vegas such as Fashion Show mall and the Grand Canal Shoppes in The Venetian.

It is slowing development plans as it seeks to stay current on debt.

Company officials say they are confident in the long-term potential of land in Summerlin, including Summerlin Centre and a related master planned community project.

"We are currently in the throes of the worst U.S. housing market downturn in many decades," executive vice president and chief financial officer Bernie Freibaum said during the conference call Thursday. "We are confident, however, that in the long term, our land in Summerlin and Houston will produce very substantial cash flow."

The Summerlin Centre project is expected to include about 1.6 million square feet of shops, restaurants, offices and homes. It is located on 107 acres just south of Red Rock Resort between Pavilion Center Drive and the Las Vegas Beltway.

General Growth was also a joint venture partner in Boyd Gaming's Echelon resort and had planned to develop the retail portion, called High Street.

However, General Growth and hotel joint venture partner Morgan's Hotel Group, didn't have financing in place to meet their obligations under the original schedule. It resulted in a decision by Boyd to halt progress, even though construction had already started.

General Growth officials say retailers are worried about low consumer confidence, leading to the delay of High Street.

"We're discussing new deals with retailers and many of them are cautious about making commitments," John Bucksbaum, chairman and CEO for General Growth, told investors.