Las Vegas Sun

September 26, 2023

Howard Hughes’ heirs fight for control over Summerlin property


Steve Marcus

The Shops at Summerlin Centre project sits abandoned in July 2009.

Summerlin Development

The Shops at Summerlin Centre project sits abandoned in July 2009. Launch slideshow »

Rights to 7,400 vacant acres of Summerlin are hanging in the balance of a Bankruptcy Court tug-of-war.

Heirs of billionaire Howard Hughes are fighting to regain more say over the land. They allege their interest in the acreage has been compromised by General Growth Properties Inc. The Chicago-based corporation owns Summerlin developer Howard Hughes Corp. and filed for bankruptcy protection April 16.

The issue for Hughes’ heirs is how they will be compensated under a 1996 deal in which they sold Howard Hughes Corp. and its land holdings, including the Summerlin acreage, to Rouse Co. General Growth acquired Rouse in 2004.

To understand the dispute, it helps to know the history.

Howard Hughes accumulated 25,000 acres west of Las Vegas in the 1950s. Most of that land became Summerlin, a 22,500-acre community named after his paternal grandmother.

The Hughes heirs initially were reported to include 21 cousins and an aunt, but are now thought to include hundreds of people, including the initial heirs’ descendants and attorneys with stakes in the fortune.

Under the terms of their deal with Rouse, Hughes’ heirs received an initial payment and were to receive additional payments of stock as the land was developed and sold, including a final payment to be determined by an appraisal of the remaining land this year.

Their final payment is supposed to be for half the value of the remaining land, reported at the end of 2008 as totaling 7,381 acres.

Hughes’ heirs allege General Growth has jeopardized the final payoff for the land.

One group of Hughes heirs, represented by A&K Endowment Inc., is objecting to General Growth’s use of the acreage as collateral against loans made to the company before and after the bankruptcy.

“The Rouse Co. (owned by General Growth) holds legal title to the Summerlin development but, until the purchase price is fully paid to the (sellers), does not have equitable title,” attorneys for A&K said in court papers.

Legal title refers to the duties and responsibilities of maintaining and controlling a property, while equitable title refers to the benefits and enjoyment of that property.

A&K’s objection to General Growth’s motion for approval of interim financing and use of collateral during the bankruptcy proceeding was rejected, however. A&K is appealing.

A&K attorneys could not be reached for comment. But in court papers, they said their issues on appeal are whether the Bankruptcy Court erred on several counts.

General Growth, however, believes its contract with the Hughes heirs can be rejected by the court. General Growth had been sharing profits from the development of Summerlin by issuing shares of common stock to Hughes’ heirs. By February, however, General Growth said it was not obligated to issue any stock as Summerlin’s net development and sales cash flows had dried up.

General Growth said in recent regulatory filings it expects the appraisal scheduled for this year will show that the market value or liquidation value of the land will be less than its current $1 billion carrying cost, no surprise given the depressed state of the residential and commercial real estate markets in Las Vegas.

But with its declining stock price, General Growth said before bankruptcy that if it were to make the final payment next year, it would have to issue so many shares that the Hughes heirs would end up in control of General Growth.

Whether General Growth makes the final payment — and the fate of the land in which Hughes’ heirs claim an interest — is up in the air.

It’s unknown whether General Growth will attempt to cancel the final payment to the heirs. General Growth spokesman Jim Graham on Wednesday said such contractual issues are typically not addressed until near the end of the bankruptcy proceedings, and for this case, that looks like it is a long way off. The Summerlin aspect is complicated enough, but General Growth also is the nation’s largest owner of shopping malls, so its bankruptcy case is massive.

“We still do not know how long it will take for our bankruptcy proceedings to reach a conclusion,” Graham said.

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