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Howard Hughes Heirs Caught In Bankruptcy Tango

Posted By admin || 25-Oct-2009

According to an article in the Wall Street Journal , revenues received by heirs of the Howard Hughes estate are caught in bankruptcy limbo because land that generates profits for the heirs is entangled in the General Growth Chapter 11 bankruptcy. When Hughes died in 1976, he was childless and without a will so his estate was initially divided amongst only a few cousins.  However, now the Hughes estate has over 1,000 heirs and beneficiaries who are hoping to receive one last payout from 7,000 acres of Las Vegas land; but it's doubtful that they may receive much of anything. Right now all payments are on hold because of the General Growth bankruptcy filing . General Growth acquired the land by purchasing it from the Rouse company.

The article said:

"In the negotiations, Rouse and the Hughes group couldn't agree on a purchase price because so much of Summerlin had yet to be developed. Instead, they formulated 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. And instead of cash, the heirs decided to receive payments in stock, which helped them defer taxes."

But now that General Growth has filed bankruptcy the Hughes heirs are not receiving any payments and they do not take priority over other creditors.  Will they get any money back on their investment? It's possible that they may end up empty-handed if priority creditors are not paid in full for their claims during the bankruptcy. General Growth may even be allowed to significantly reduce the Hughes heirs' payouts or drastically change the terms of their profit-sharing contract.

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