It has been less than two years since the Stardust was taken down by Boyd Gaming to make way for the future: Echelon, a multi-billion-dollar resort with boutique hotels, exclusive retail, more dining options and hipster nightclubs. But now, instead of a new resort with all the latest amenities going up, there is only an empty construction skeleton on the Strip where the legendary Stardust casino once was located.

I say skeleton because back in August construction on the project was suddenly suspended, according to Boyd, for "three or four quarters" depending on credit markets. Now, Echelon seems to be suffering even further setbacks in moving toward completion. One of Boyd's major partners in Echelon seems unwilling to wait out the credit markets and instead is looking for the exit. That would in theory leave Boyd Gaming with even more money to raise in order to finish the project.

Morgans Hotel Group announced today that they are getting back deposits amounting to $30 million (plus interest) from Boyd Gaming that was meant to develop two boutique hotels (Mondrian and Delano) at Echelon. Morgans is also no longer obligated for $41 million in future funding for Echelon, or for any other construction guarantees on site. A clause gives Morgans (for hundreds of thousands now rather than millions) the ability to come back to the deal. But mostly this revised agreement seems designed to allow Morgans the ability to easily escape any future commitment to Echelon. The statement notes: 

"The amended agreement also limits the amounts that MHG and Boyd are required to continue to fund for pre-development and related costs to approximately $420,000 each. The deadline to obtain construction financing has been extended to December 31, 2009. Each party has the right to terminate the joint venture for any reason prior to December 31, 2009."

It is interesting to note that Boyd Gaming has been in Vegas for generations, run by the Boyd family, and no one expected that company to have these problems completing Echelon. Workers leaving the site the day construction was suspended were even surprised.

Meanwhile, Morgans Hotel Group is an out of market company that swooped in and bought the Hard Rock at the top of the real estate bubble to much local laughter. After some initial stumbles, renovations and expansion at the Hard Rock are now well underway and, according to a representative of Morgans I spoke to this morning as well as Hard Rock's local management, all the construction work being done at Hard Rock is fully funded. Morgans seems to be learning Vegas quickly. Or, maybe the out of town company turned out better able to understand and adapt to a significant drop in business -- an idea alien to the entire history of Las Vegas.

Photo: The Stardust in 2006. Credit: Sarah Gerke