Wednesday, April 8, 2009

Las Vegas CityCenter: Colossal Debacle?

Las Vegas City Center
Las Vegas’ MGM Mirage CityCenter, one of the most expensive construction projects in the world, may be the AIG of real estate – teetering on the brink of insolvency, but too big to fail.

The stakes are enormous – the $9 billion project – a 67-acre “mini-metropolis” with condominiums, hotels, retail and casinos – would remake the landscape of Las Vegas. The project currently employs 8,500 in construction and would result in 10,000 full-time jobs.

Global titans in architecture – Cesar Pelli, Norman Foster and Daniel Liebskind – left their impratur on the colossal development of epic proportions. In typical Vegas fashion, the developers risked it all – and now it’s unclear whether the crap shoot was worth it.

It was conceived as the centerpiece of a thriving Las Vegas -- one of the world's most expensive building projects that would bring back glamour to the Strip and cap an unprecedented three-year economic boom.

Instead the $9 billion development named CityCenter -- touted as the city's most ambitious endeavor -- has come to symbolize a global retail and leisure slump and the city's struggles to come to grips with crushing unemployment and dwindling casino revenue.

Partners MGM Mirage struggling to bankroll the project's ballooning cost -- and Dubai World DBWLD.UL had pondered placing the development under bankruptcy, thrusting its future into question, sources say.

In March, Dubai World, the development arm of the United Arab Emirates, sued MGM Mirage, claiming mismanagement and wanting out of further financial commitments. The U.S. company hired bankruptcy counsel, setting off alarms about solvency. And the company was forced to inject an emergency $200 million to keep construction going.

"The events of the last six months have been our Pearl Harbor, economically," said Bill Thompson, gaming expert and professor of public administration at the University of Nevada, Las Vegas. "CityCenter might be too big to fail. If it opens, it's a dramatic gesture that says we're winning, we're not defeated, we're on the way back."

"If it fails, it would be like a second Pearl Harbor." [Reuters]