More bad news for Vegas
Echelon Place Complex, a $4.8 Billion Boyd Gaming Construction Project, initially scheduled to open in the third quarter of 2010, was put on a nine to 12-month delay this last Friday.
The new casino development was designed to include five hotels, including two built and operated under a joint venture with Morgans Hotel Group Co. It was also to have two theatres, a convention center and a retail ``high street,'' -- which is a joint venture with General Growth Properties Inc., the second- largest U.S. owner of shopping malls.
Las Vegas-based Boyd said it won't resume the project for three or four quarters while the U.S. economy slows and banks remain reluctant to lend.
``This is a very prudent, tough decision by management in light of the capital markets, the slowdown in Las Vegas and significant shareholder opposition,'' Joel Simkins, an analyst at Macquarie Securities USA Inc. in New York, said today.
``The delay of Echelon indicates the unprecedented downturn that Las Vegas is currently undergoing and the extreme difficulty in securing capital,'' Steven Kent, an analyst at Goldman Sachs Group Inc. in New York, said today in a note to clients.
~ 800 ironworkers, carpenters, electricians, laborers and just about everyone else working on Boyd Gaming's partially finished resort left the job Friday, not knowing when or if they'd return.
Rapp, an ironworker, said he was hopeful there would be jobs at other projects. But he was also afraid the shutdown marked the end of a Las Vegas boom where jobs at decent wages were plentiful.
"It is kind of a scary thought, you know," Rapp said. "I don't think work will ever be as good as it was for the last 10 years, not for the middle class."
Rapp said he has a wife and five kids, three of whom are in college.
"They are going to have to start paying their own rent," he said.
My Note: In addition to the 800 jobs lost, Echelon was projected to add 10,000 new Las Vegas jobs when it opened in 2010 - Guess they will have to wait...
Though LV unemployment (currently at 6.5%) is already higher than the national average, If this trend continues (which I expect it will), we may have a 7.5% or better unemployment rate by the end of this year. Heck, we're already in a Recession: Las Vegas Economic Recession is here
The economic troubles could be a financial red flag at a time when other projects are facing financial woes. As Wall Street rethinks Las Vegas, jobs and housing could be hit hard.
That seems to be the perception on Wall Street. And when the projects do poorly, that means fewer jobs and houses that were expected to come online. Everything is tied together.
UNLV Professor Keith Schwer says when a project is delayed or cancelled suddenly, the impacts are felt beyond the Strip, "That's the nature of economics. It's like a cloth and each fiber is tied to the next."
Allow me to switch gears a bit -- LV Banking:
If you recall,, I warned you about SilverState Bank last weekend (excerpts below):
"Andrew McCain, son of Republican nominee John McCain, has resigned from Silver State Bank's board of directors this weekend. "
"Would a banking failure under son McCain's leadership look bad for dear old dad's election prospects? Hmmm... Well, I suggest you keep an eye on Silver State Bank -- word on the street is: they are not doing well."
"Take a look at the Bankrate and Safe and Sound ratings for Silver State Bank, Henderson Nevada: One Star (The Lowest Possible Rating) and 5G (Lowest Possible Rating)."
"I can only imagine the FDIC is working disaster/cleanup plans and decided it's probably time for Andrew to get out of the picture before the bomb goes off. "
Well, based on news reports today, it looks as if we're getting closer to the implosion:
Silver State Bancorp, the $2 billion-asset holding company for the similarly named Henderson bank, lost $62.7 million in the second quarter and replaced its CEO as the number of bad loans grew huge.
Michael Thorell, 42, former president of an Arizona bank that Silver State acquired, was named acting CEO, replacing Corey Johnson, 50, who resigned.
The board named Phillip Peckman, 59, acting board chairman to replace Bryan Norby, 51, of Boise, Idaho.
Thorell declined to comment on Johnson's resignation. Attempts to reach Johnson were unsuccessful.
Silver State shares dropped 30 percent, or 38 cents, to 90 cents in heavy trading on Nasdaq following the announcements. Its shares hit a 52-week high of $24.10 last summer
Michael Threet, chief operating officer and chief financial officer, said the quarter's financial numbers stem from "the severe economic downturn in our nation, in our region and in the real estate values in the markets we serve."
Silver State's nonperforming assets, which include bad loans, were 83 percent larger than the total of reserves it set aside for problem loans plus its tangible equity or ownership interest in the company.
The company has been trying to raise $40 million in additional capital since June 5. It has been difficult to raise capital, because "all of the capital raised in the first quarter (for commercial and investment banks) is under water," Threet said. -- to increase deposits, the bank recently offered 4.25 percent on some certificates of deposit.
Moving on to LV Housing:
HousingTracker.net is reporting some rather awe inspiring numbers for Las Vegas today:
Inventory (28,581) continues to grow while Median prices plunged a dramatic - 30% YoY.
Additionally, RealtyTrac is showing that 36,161 homes are in some state of foreclosure for Clark County -- about 1/2 of the numbers are in preforeclosure, 1/4 in auction and another 1/4 Bank Owned.
LV Industrial Market:
LAS VEGAS-An industrial building boom than began in better economic times has been overwhelming the now tepid market over the past year or so, elevating vacancy to 7.7% from 4.5% one year ago, according to the latest report from Applied Analysis, a locally based business advisory that tracks the commercial market. Company principal Jeremy Aguero predicts the rate will rise to approximately 9% in coming quarters before demand rebounds and vacancy begins falling again.
The Las Vegas industrial market continues to be impacted by a declining economic climate, elevated fuel pricing for regional distributors, and increased caution on the part of business decision makers,” he says. “Company expansions and relocations are much more limited today than any point during the past five years.
Other LV News:
LVSands Corp. Trimming Las Vegas headcount by 1,500 --“through attrition, not layoffs”-- as part of a plan to find between $70 and $90-million in annual savings in the market. “It’s a challenging market that could continue for some time,” he said.
Businessman drops out of Tropicana bidding -- A New York developer whose group had offered $950 million to buy the Tropicana Casino and Resort says they're no longer interested. Joseph Palladino tells The Press of Atlantic City his group is looking at other casino properties in Atlantic City and Las Vegas, but no longer wants the Tropicana. The Tropicana has been for sale since last December
Airlines sound alarm for Vegas tourism -- Airlines serving McCarran International Airport have issued the bleakest economic forecast yet for Las Vegas, recommending that officials reconsider the need for a terminal that is under construction because there may not be sufficient tourism traffic to justify it. The airlines’ message to Las Vegas: The industry will not quickly recover from the tourism decline wrought by a combination of higher fuel prices and a sputtering economy.
McCarran Flier Count Dips 7 Percent in June -- Passenger counts at McCarran International Airport fell 7 percent in June, another indication that the nation's shaky economy is undermining the leisure travel industry. McCarran's top five carriers all posted declines in June, including Southwest, the No. 1 airline in Las Vegas and the only major domestic carrier making more money than it spends.
Casino bankruptcies making gaming sector a real gamble -- Already, casino owners such as Tropicana Entertainment LLC, Legends Gaming LLC and Greektown Holdings LLC have all gone bankrupt this year, but more are teetering on the brink, too... Herbst Gaming Inc. popped up on Bankruptcy Insider's Zombie Watch list three months ago... Even gaming giants Harrah's Entertainment Inc. and Station Casinos Inc. aren't immune. Moody's slashed the ratings for both on July 17 to B3, citing a deterioration in the Las Vegas gaming markets.
LAKE LAS VEGAS: Bankrupt project still alive -- tries to borrow $127 million. So what does one of the largest bankruptcies in Nevada history look like from street level?
On Monday, a Las Vegas bankruptcy judge will hold a hearing to determine whether Lake Las Vegas should be allowed to borrow $127 million from a Wall Street investment banking firm.
Company officials say they need the money to pay for repairs to the 2-mile-long man-made lake and maintain payroll, employee benefits and day-to-day operations. The company employs 260 workers, mostly for its golf courses.Rapoport said this bankruptcy "might well be" the largest Nevada has ever seen... Already it's large enough to prompt wild speculation about the city of Henderson getting dragged into bankruptcy, too. But city officials literally laugh that off.
It looked like business as usual Thursday morning at Lake Las Vegas. Golfers golfed. Mowers mowed. Waterfalls fell... But there wasn't much business.
At 10 a.m., a single player had the tables to himself at Casino MonteLago. The nine other people in the 40,000-square-foot casino confined themselves to the slots.
Outside, MonteLago Village was a ghost town of boutiques, coffee shops and high-end eateries...
I feel the last few sentences above capture the Las Vegas condition/situation quite nicely, and believe we're much closer to the beginning of this unprecedented LV economic downturn than we are to the end.
You may want to hold on to your hat, because this wild downturn will likely get quite ugly in the not too distant future... As you'll see when the significant casino layoffs begin - and soon.
Again, going back to 1970, there has only been ONE OTHER time (since this recent economic downturn) where gambling revenues actually fell -- in the aftermath of the Sept. 11 terror attacks. During that timeframe (2001-2002) gaming revenue fell 1 percent. Today, LV gaming revenue is down ~ 6% for the year (16% just last month), but we've yet to see massive layoffs experienced after 9/11.
Are things different this time around? I wouldn't bet on it, as you 'd probably lose to the house - the layoffs are coming... and probably just in time for Christmas 2008.
With that, I hope you have a great weekend!