Whether the still unopened Harmon Hotel inside the CityCenter resort in Las Vegas is demolished or remains an expensive billboard is now part of yet one more legal battle stemming from the struggling mega-resort’s many financial woes.
On Nov. 13, according to news reports, owner MGM Resorts International announced plans to raze the 27-story high-rise designed by U.K. “starchitect” Sir Norman Foster. MGM later backpedaled from that statement and claims no final decision has been made, says a spokesman. The company took a $279-million write-down in the third quarter on the 400-room building, which sits dormant with a sign for the “Viva Elvis” show wrapped around its curved blue-glass façade. Sir Norman’s office did not return calls for comment.
Demolition talk comes as MGM goes to court against Harmon general contractor Perini Building Co., a Las Vegas-based unit of Tutor Perini Corp., over alleged construction defects and other non-conforming work. “Talk of demolition is nothing more than a pure publicity stunt,” says Perini CEO Craig W. Shaw. “We stand ready and willing to fix it, but MGM stopped us from doing so. It’s an insurable claim, but the building is worth more to them dead than alive.”
Harmon has “substantial defective construction” resulting in “hundreds of millions of dollars in estimated damages,” MGM’s lawsuit claims. “There are no plans to open Harmon in any form whatsoever,” says MGM spokesman Alan M. Feldman. He claims the hotel “cannot be used for the purpose originally intended” due to extensive non-conforming work.
Talks between MGM and Perini deteriorated in February over closeout costs. The 67-acre resort, which includes the Harmon and other hotels (see map), has accumulated hundreds of millions in mechanics’ liens. Perini filed a lawsuit in March for $490 million in unpaid work on the Harmon; 80% of that total was due to subcontractors. MGM responded by using armed guards to eject Perini from the site and filing a countersuit.
According to a Nov. 12 court document, CityCenter has reached payment pacts with 205 of 221 subs on the whole project, resolving about $186 million of $218 million in outstanding claims.
The Harmon trial, set for October 2011 in Clark County District Court, is expected to last seven months. A decision on the hotel’s future won’t come until late 2012, pending the trial outcome, MGM says.
The $8.5-billion CityCenter, the priciest private project in U.S. history, lost nearly $1 billion during the first nine months of 2010, including $600 million in write-downs. CityCenter broke ground during the real estate boom but finished amid a deep recession. As the economy went south, MGM responded with cutbacks, including lopping the Harmon in half in January 2009 by reducing its height by 20 floors. The move saved $600 million in construction and deferred another $200 million in interior fit-out costs.
MGM once had high hopes for the Harmon, Sir Norman’s first Las Vegas building, giving it a prominent position on the city’s famous Strip. An implosion would blow a gaping hole in CityCenter’s urban plan and potentially dampen plans for the adjacent $3.9-billion Cosmopolitan resort, which is set to open Dec. 15, says one local architecture critic.