Boyd partners with retail giant

by Howard Stutz

LAS VEGAS, Nevada -- The extent of Boyd Gaming Corp.'s retail experience covers just a handful of high-end shops inside the company's Borgata resort in Atlantic City.

Faced with operating a 300,000-square-foot shopping mall as part of its planned $4.4 billion Echelon project, Boyd executives decided to partner with retail giant General Growth Properties, which will soon oversee three of the Strip's largest shopping centers.

By the time Echelon opens in 2010, additional Strip retail will have been unveiled, including the large shopping component at MGM Mirage's $7.4 billion CityCenter, which opens in 2009.

But Boyd Gaming and General Growth executives believe the market has space for everyone.

"Some of the major retailers that are already here have already expressed their interest in Echelon," said Robert Boughner, the president of Echelon who is overseeing the complex's planning for Boyd Gaming. "We have also had a great expression of interest from retailers not currently in the market."

Boyd and General Growth will announce a joint venture agreement Monday in conjunction with the International Council of Shopping Centers convention and trade show, which is taking place this week in Las Vegas.

Chicago-based General Growth will co-develop the Echelon shopping center with Boyd and will operate the facility when it opens.

The Echelon retail complex is expected to cost $500 million and General Growth will contribute $100 million toward the project. Boyd Gaming will contribute the land.

General Growth Chief Executive Officer John Bucksbaum said the joint venture agreement, in which the companies will be 50-50 partners, is different than any of the mall operator's other arrangements in Las Vegas.

General Growth owns the 2 million-square-foot Fashion Show mall and the 500,000-square-foot Grand Canal Shoppes at The Venetian, which it purchased for $766 million from Las Vegas Sands Corp. in 2004. Later this year, the company will spend about $600 million to buy the 300,000-square-foot retail space inside the Palazzo, a $1.6 billion resort being built by Las Vegas Sands.

Bucksbaum said the company, which runs more than 200 regional shopping malls in 45 states, is bullish on the Las Vegas retail market.

"There is the sheer volume of visitors on a daily basis that are in Las Vegas for multiple days and might visit resort A and resort B on a Monday and shop at resort C and resort D on a Tuesday," Bucksbaum said. "We have a challenge to keep the merchandise mix interesting enough so our centers and projects don't become repetitive. Many of the retailers want to open multiple stores in multiple locations because of the size of those projects."

The Echelon retail space and the other aspects of the massive development will be interconnected, Boughner said. Echelon will have 5,000 hotel rooms, which includes the large Echelon hotel and smaller boutique hotels, the Delano, Mondrian and Shangri-La.

In addition, the complex will include a 140,000-square-foot casino, 750,000 square feet of convention space, two live entertainment venues and 30 restaurants.

Boughner said the Echelon retail center won't compete with other General Growth shopping offerings because the massive complex offers a built-in audience. He said most of the recently announced large Las Vegas development projects -- CityCenter, Palazzo, Encore at Wynn Las Vegas and the Fontainebleau -- all include some type of retail aspect.

The Las Vegas Convention and Visitors Authority's 2006 Visitor Profile Study found that the average visitor spent $140.86 on shopping last year, a figure than has increased every year since 2003.

"Las Vegas offers opportunities that don't exist in other markets," Boughner said. "We've seen some pretty significant upscaling not only in the product offered in Las Vegas, but also with the customer. For a retailer, based on our conversations, they see less risk in having a second or third (location) because they understand the city's high level of occupancy."

Boughner said General Growth was one of several of the national retail operators with whom Boyd Gaming discussed the Echelon retail component.

"We saw their experience as a major retail operator on the Strip as a benefit," Boughner said. "They understand the market. That's an important reason to partner with them."

General Growth becomes the fourth major joint venture partner for Boyd Gaming in Echelon. Morgans Hotel Group and Shangri-La are providing the hotel brands, and entertainment producer AEG Live is overseeing the entertainment venues.

Echelon is expected to break ground next month on its 87-acre Strip site that once housed the Stardust.

Bucksbaum said the Echelon partnership allows General Growth to create a retail facility that appeals to another market segment.

Off the Strip, General Growth owns two major suburban shopping malls totaling almost 2.2 million square feet, the 960,000-square-foot Meadows mall and 1.2 million-square-foot Boulevard Mall. General Growth is in the early stages of developing the 1.2 million-square-foot Shoppes at Summerlin Centre that is expected to open in 2009.

"The Fashion Show appeals to locals and visitors while The Venetian's complex appeals pretty much to visitors," Bucksbaum said. "I think the same question that has been asked for years about the hotels is holding true for retail. How can you build another one? Well, the market is there."