WORLD PROPERTY CHANNEL ®

Howard Hughes

(LAS VEGAS, NV) -- Howard Hughes -- an enigma alive and a perplexing puzzle in death as well.  At least to about 1,000 of his direct and indirect heirs.

They could lose sharing up to $100 million in a devalued, 7,000 acre land development in Las Vegas, according to The Wall Street Journal.

Not that the heirs are hurting for cash.  They have collected more than $1.5 billion from the liquidation of the late billionaire's estate to date, according to figures provided by the group itself, the WSJ states. Hughes died in 1976.

The development, called Summerlin, is at the crux of the heirs' dilemma. Once valued at $2 billion, appraisers now tell the WSJ the dirt might not even generate an offer for $100 million.

The WSJ states Hughes bought the Las Vegas land because he was concerned that the Japanese attack on Pearl Harbor in 1941 had exposed the vulnerability of the aircraft industry along coastal California. The heirs named the development after Hughes's grandmother.

By the mid-1990s, Las Vegas was hot real estate. In 1996, the Hughes group agreed to sell the property to Rouse Co., a major shopping center developer based in Columbia, MD.

However, Rouse and the Hughes group couldn't agree on a purchase price because so much of Summerlin had yet to be developed. Instead, they drew up a profit-sharing agreement, in which the heirs would receive half of each year's profits from sales of Summerlin land to home builders over 14 years.

Instead of cash, the heirs decided to receive payments in stock, which helped them defer taxes, according to the WSJ.

Kevin Starke

Those payments amounted to roughly $570 million in stock as Summerlin was developed. Roughly 95,000 people live there now.

But land values have fallen so drastically in Las Vegas that the Summerlin claim might now be worth less than $100 million, says analyst Kevin Starke of CRT Group LLC.

One other problem facing the Hughes group: General Growth bought Rouse in 2004, inheriting the pact with the heirs.

In April, the mall owner, struggling under $27 billion of debt, sought Chapter 11 bankruptcy protection, as Real Estate Channel previously reported.

Heirs who held on to General Growth stock from earlier payments saw its value fall 92% from its high of $67 in March 2007.

Now that General Growth is in bankruptcy, the Hughes group must get in line with the hundreds of other creditors, submitting a claim to U.S. Bankruptcy Judge Allan Gropper in November.

"Stuck in the pecking order with shareholders, Mr. Hughes's heirs and beneficiaries get nothing unless General Growth's lenders and debt holders recoup the full amounts of their claims," according to the WSJ.

Tom Nolan

General Growth, owner of more than 200 U.S. shopping malls, says it wants to resolve the Hughes claim.

"The company is optimistic that a fair resolution will be reached with the Hughes heirs, as with all of our stakeholders, as we proceed through the process of emergence from bankruptcy,"  General Growth president and chief operating officer Tom Nolan tells the WSJ.

As part of the process, General Growth and the Hughes group will need to decide whether to keep the old deal, revise it or strike a new one subject to the judge's approval.

David Lummis

When Hughes died, his holdings included 26 disparate companies that included seven Las Vegas casinos, a struggling helicopter maker, several aircraft, a television station, private airport, regional airline, mining claims and a bag of casino chips he neglected to redeem, the WSJ states.

David Elkins

Summerlin was then 22,500 undeveloped acres of desert and scrub.

Gemeral Growth Properties controls the land and was supposed to make a final payment to the Hughes group early next year. The 2010 payment is supposed to be equal to half the appraised value of the remaining land at the end of this year.

Katharine Hepburn

Platt Davis, a retired lawyer in Houston and second cousin of Hughes, tells the WSJ the devaluation of Summerlin is "a terrible disappointment."  Davis leads the group of heirs along with two other beneficiaries.  They are second cousin David Lummis and former lawyer David Elkins.

The WSJ states Summerlin "represents the last chapter of the Hughes-estate saga, which is almost as extraordinary as the life of the aviator, film director and entrepreneur who set world speed records for flight, romanced Katharine Hepburn and founded Hughes Aircraft Co."  

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