General Growth to pay Howard Hughes heirs; Summerlin’s value tumbles

By Steve Green

Published Monday, Sept. 20, 2010 | 8:12 a.m.

Updated Monday, Sept. 20, 2010 | 12:07 p.m.

The value of the undeveloped 7,500 acres of Summerlin in Las Vegas is probably about $460 million -- at least according to a settlement of a legal dispute announced today.

General Growth Properties Inc. of Chicago, the bankrupt parent company of the developer of Summerlin, announced a $230 million settlement today with the heirs of the late billionaire Howard Hughes.

They were owed half of the value of the development rights in the community and had been agitating in court for payment.

The settlement, resulting in an implied value of $460 million, is in line with the land's taxable value of $430 million.

With the recession eroding land values around Las Vegas, all the numbers are down sharply from the land's book value at the end of 2009 of $1.115 billion.

The $230 million was not based on an appraisal that was under way and the settlement was reached independently of the appraisal process, a spokesman for the Hughes heirs said, adding the heirs will now support General Growth’s reorganization plan.

Under the terms of the agreement, which is subject to court approval, General Growth will pay the heirs $10 million in cash. The remaining $220 million may be paid either in cash or in shares of new General Growth common stock at the election of the company.

"We are very pleased to reach a mutually beneficial settlement agreement with the heirs of Howard Hughes regarding Summerlin," Thomas Nolan Jr., president and COO of General Growth, said in a statement. "With this agreement, GGP settles one of the last remaining material issues impacting the capital structure of the new GGP and 'Spinco' (a proposed spinoff company) as we continue our steady march toward emergence from bankruptcy. It has always been our preference to reach an agreement with the Hughes heirs, with whom we have had a very successful venture for many years. The Summerlin master planned community is one of the premier communities in the nation and has a long track record of strong and consistent financial performance. It is indicative of the type and quality of assets that will comprise 'Spinco', the GGP spin-off company that will consist of our portfolio of master planned communities and other real estate assets with long-term value creation potential."

The Summerlin area is composed of 22,500 acres and currently is home to about 100,000 residents living in approximately 40,000 residences.

Plans for development of Summerlin have continued during the bankruptcy, with the bankruptcy court most recently approving sales to homebuilders of hundreds of lots.

The approvals, on Aug. 30, were for the sale of:

--117 55-foot by 100-foot lots in the Mesa Village to Richmond American Homes of Nevada Inc. for $12.477 million.

--115 45-foot by 90-foot lots in the Mesa Village to Richmond American for $9.76 million.

--109 40-foot by 90-foot lots in the Mesa Village to Pulte Homes of Nevada for $8.989 million.

--162 45-foot by 100-foot lots in the Mesa Village to Pulte Homes of Nevada for $13.981 million.

The lots were auctioned Aug. 23 by General Growth subsidiaries Howard Hughes Properties Inc. and the Howard Hughes Co., with Richmond American and Pulte outbidding competitors KB Home, Lennar and Toll Brothers, court records show.

The land sales and other development plans were proposed by General Growth in early July http://www.lasvegassun.com/news/2010/jul/05/land-plans-signal-growth/.

Besides its Summerlin holdings, General Growth is a big player in the Las Vegas retail industry with five local shopping malls: Fashion Show, Shoppes at the Palazzo, the Grand Canal Shoppes at the Venetian, Boulevard and Meadows. It also owns the unfinished and mothballed Shops at Summerlin Centre.