CHICAGO — General Growth Properties Inc. will pay $230 million to some of the heirs of moviemaker and aviation mogul Howard Hughes to settle a dispute over a Las Vegas development.
The nation’s second-largest shopping mall operator, which is trying to emerge from under Chapter 11 bankruptcy protection, said Monday that it will pay at least $10 million in cash, with the remainder to be paid in either cash or stock. All amounts will be paid after General Growth leaves bankruptcy protection, anticipated for sometime later this year.
The dispute centered on the Summerlin community, which houses almost 100,000 residents. Summerlin contains hundreds of neighborhoods and dozens of villages, nine golf courses, 26 public and private schools, business parks and shopping centers.
General Growth owns The Howard Hughes Corp., developers of Summerlin. It also owns Howard Hughes Properties Inc.
Heirs to Hughes, who died in 1976, argued they were owed half of the value of the development rights in the community. There are an estimated 7,500 undeveloped acres within the 22,500-acre development.
General Growth’s predecessor, Rouse Co., agreed in 1996 to buy Summerlin from the Hughes estate, according to a blog on the Wall Street Journal website. In doing so, it established a 14-year payment schedule that would culminate in 2009 with a final payment for any Summerlin land remaining unsold to residential developers, the blog noted.
But Chicago-based General Growth filed the largest real estate bankruptcy case in U.S. history in April 2009 under the burden of nearly $28 billion in liabilities. It has since restructured billions in debt and put together a plan to emerge from bankruptcy later this year and pay off creditors in full.
According to the Journal website’s blog, there are more than 1,000 heirs and beneficiaries, including more than 200 people related to Hughes through aunts, uncles and cousins. So far, an estimated $1.5 billion has been paid to the heirs through liquidating the estate.
Hughes bought the land that is now Summerlin in the 1940s. Some sources say he wanted the land for an inland base for his aerospace operations; others suggested he wanted to fly experimental aircraft there.
When General Growth leaves bankruptcy protection, shareholders will own stock in two separate companies — General Growth and a newly formed company, initially called Spinco, which will manage a diverse group of properties with little debt that have development potential.
“With this agreement, General Growth settles one of the last remaining material issues impacting the capital structure of the new General Growth and Spinco as we continue our steady march toward emergence from bankruptcy,” President and Chief Operating Officer Thomas H. Nolan Jr. said in a statement.
The settlement is subject to bankruptcy court approval.
General Growth currently owns and manages interest in more than 200 regional shopping malls in 43 states. In Las Vegas, General Growth owns the Boulevard and Meadows malls off the Strip. Along the resort corridor, the company owns the Fashion Show mall, the Grand Canal Shoppes at The Venetian and the Shoppes at Palazzo.
A major regional mall the company was building at Summerlin Centre is on indefinite hiatus.