Toll Scorched in Arizona

In a warning about upcoming fourth-quarter earnings, Simon announced a $50 million charge to write down the entire value in the venture. Simon gave few details of why it was writing off the project, only saying the move coincided with the writedown of the joint venture's value by the general partner, Toll Brothers.

On its own earnings call last week, Toll Brothers mentioned that there were write-downs related to the project, but it didn't give specifics. The issue wasn't addressed in the company's earnings release, and was only discussed on the call when an analyst questioned the builder about the project.

But the fact that Simon Property wrote off its entire investment in the project is turning some heads. As the company now likely pulls its retail development, some wonder whether the project will ever get built.

"My understanding is the venture itself, the whole group, is not thinking it is going to work at this time," says RBC Capital Markets analyst Rich Moore, who covers Simon Property and other real estate investment trusts. "It is rare for a developer to write something down unless they feel pretty certain it is not going to work."

Moore says he doesn't know the precise details and hasn't spoken to Toll Brothers or Meritage.

The Simon Property source says the company's writeoff does not reflect the overall viability of the project.