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Shopping Centers Today -> March 2002
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TRIZECHAHN DEFENDS PROJECTS
By Dave Bodamer and Donna Mitchell
TrizecHahn’s $285 million write-down against several assets, including Hollywood & Highland (Calif.) and the Desert Passage mall in Las Vegas, is no reflection on those properties’ operating performance, the company says, reaffirming its confidence in both projects.
Instead, the write-down is a response to cost overruns at Hollywood & Highland and a tourism market hurt by the Sept. 11 terrorist attacks.
Problems associated with those projects are also expected to delay for a couple of years TrizecHahn’s efforts to sell them, observers said. The company had planned to operate the properties for two or three years and then sell them.
“The cost overruns were well documented, and we expected that there would be write-downs,” TrizecHahn spokesman Rick Matthews said. “The issue was separate and apart from the operating aspect of the properties, which so far has exceeded expectations.”
Most of the write-down, $217 million, which the Toronto-based developer announced in early February, is associated with Hollywood & Highland, the retail, hotel and theater complex in Los Angeles that opened in November. The company experienced budget overruns that pushed the cost to $560 million. The restatement of value was TrizecHahn’s “final acknowledgement that the asset was worth less than was spent on it,” Morgan Stanley Dean Witter analyst Gregory J. Whyte said.
Matthews, however, said that the company has been pleased with sales at the center so far.
“The foot traffic we’ve experienced has been great,” he said. “As tourism rebounds and the economy improves, our numbers should grow. But our performance in light of [Sept. 11] has exceeded our expectations.”
The write-down’s remaining $68 million relates to other investments, including Desert Passage, which opened in August 2000. The project was hurt primarily by declines in domestic and international tourism, most notably since Sept. 11, said Whyte, and by the bankruptcy filing of the adjacent Aladdin Hotel and Casino.
TrizecHahn should try to maximize the value of the assets, Whyte said, including participating in discussions to select new management for the hotel/casino.
TrizecHahn also wrote down assets in Canada and Europe, as well as an investment in Westford, Mass.-based Captivate Network, which handles advertising in office elevators.
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