Defective construction resulting in costly repairs has caused cash-strapped MGM Mirage Inc. to slash condo plans at its $9.2-billion CityCenter development on the Las Vegas Strip, says CityCenter President and CEO Robert “Bobby” Baldwin.
On Jan. 7, the casino giant said it is cutting the Harmon Hotel & Spa in half by eliminating 200 high-end residences, of which only 44% have been sold. The curving cast-in-place concrete tower is designed by London-based Foster + Partners. Halcrow Yolles Structural Engineers is the structural engineer. Perini Building Co. is general contractor.
In July, Clark County building inspectors said Perini, which is self-performing CityCenter’s concrete work, had moved reinforcing rebar floor links that transfer horizontal loading to the shear walls without approval from the project’s structural engineer or county building officials. Work was stopped until repairs were made. Century Steel Inc., Las Vegas, is the rebar subcontractor. “Congestion” was to blame for the decision, says a project source who requested anonymity. “Too much rebar knotted together prevented the proper amount of concrete coverage,” the source says. “It’s a common dilemma.”
But Clark County officials disagree. “We do not see this very often,” says Ron Lynn, Clark County’s building official. “They installed it wrong. That’s the bottom line.”
Perini and Halcrow declined to comment on repair details.
Under the scaled-back plan, the building will now be 24 stories tall instead of 49. The Harmon will still feature 400 hotel rooms, but it will open in late 2010 instead of December 2009, when the rest of CityCenter is scheduled to finish.
Scaling back the tower is expected to save $600 million, plus another $200 million in deferred costs for completing interiors, MGM Mirage says. Had it stuck to the original plan, the company would have faced additional unspecified expenses due to the faulty rebar installation for structural retrofits required from the fifth floor up in order to reach the 49-story height, the company says.
“By canceling the Harmon condominium component, we will be able to avoid the need for substantial redesign of the Harmon resulting from contractor construction errors,” MGM Mirage’s Baldwin said in a statement. It additionally keeps the project focused on “maximizing” sales at CityCenter’s other condo towers, he added.
The Harmon is one of six towers under construction at CityCenter. The cancelation leaves the project with 2,450 residences, of which 60% have been reserved. The 76-acre, 18-million-sq-ft development is the largest privately financed project in U.S. history.
The project reduction may help MGM Mirage’s ailing stock (NYSE: MGM), down 83.5% from a year ago, while the company continues to seek $1.2 billion in CityCenter funding. Las Vegas casino operators have been hobbled by reduced gaming revenue and fewer visitors. MGM Mirage recently announced a $1.2-billion fourth-quarter write-down related to its 2005 purchase of gaming rival Mandalay Resort Group.
In a statement, Perini Chairman and CEO Craig Shaw said, “Perini is near completion of all required remediation work on the Harmon Hotel. We continue to work on completing the project under the revised scope and schedule recently announced by MGM Mirage.”
A source who requested anonymity says Perini will pay for the retrofit work but will likely seek reimbursement from the designer and/or subcontractor.
Clark County, meanwhile, is investigating the project’s third-party, independent quality-control inspector, Converse Consultants, Monrovia, Calif., which it says filed multiple reports without noting the problem. CityCenter has about 60 inspectors on-site most of the time. Results of the county’s investigation are expected in a few weeks.
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