MGM Resorts targets Harmon Hotel for demolition

MGM Resorts officials, very quietly and with no public fanfare, want to demolish the unopened 27-story Harmon Hotel -- one of the components of its $8.5 billion CityCenter development.

But litigation and pinpointing blame for the troubled building will prevent anything from happening to the unfinished tower until late 2012.

In its recent third-quarter earnings statement, MGM Resorts said it took a $279 million noncash impairment charge for the Harmon and concluded "it is unlikely the Harmon will be completed using the building as it now stands."

MGM Resorts International operates CityCenter in a 50-50 joint venture with Dubai World.

In an interview this week, CityCenter Chief Executive Officer Bobby Baldwin said the company has hired two sets of structural engineers to determine the building's condition and what steps might be taken. MGM Resorts will bring in a third group of experts to analyze the building.

A report on the findings will be filed with the Clark County District Court, as part of CityCenter's lawsuit against Perini Building Co., the project's general contractor.

Perini will also be allowed to hire structural experts to assess the Harmon.

"Right now, I have a building I can't do anything with," said Baldwin, adding that Harmon has become "the poster child for nonconforming work worldwide."

Clark County Building Department officials will not allow any construction to be done to the Harmon, which was originally designed as a 47-story hotel and condominium tower.

In 2008, inspectors found structural work on the Harmon did not match building plans submitted to the county. The construction issues involved improperly placed steel reinforcing bar, commonly known as rebar.

In January 2009, MGM Resorts scrapped the planned 200 condominium units for the upper floors and stopped the tower at 27 stories, focusing on the Harmon having just 400 hotel rooms. Company officials said at the time they would delay deciding what to do about finishing the Harmon until this year.

The building was to be run as a nongaming hotel by The Light Group, a restaurant and nightclub operator. The Harmon would also feature MR CHOW, a branch of the popular Los Angeles restaurant owned by Michael Chow.

But with the building the focus of litigation, construction was halted on the interior. The outside of the building is blue glass which surrounds what is essentially a 27-story empty shell. CityCenter affixed large vinyl building wraps on the tower to promote "Viva Elvis," the Cirque du Soleil show at Aria.

"Unfortunately, it's probably going to be a billboard until these issues are determined," Baldwin said.

An official with Perini did not return a phone call seeking comment Friday.

Soon after the CityCenter development opened in December 2009, Perini filed some $491 million in mechanic liens against CityCenter, saying the company had not paid subcontractors hired by the builder for work on the development.

The companies exchanged charges and countercharges and Perini launched a public relations effort to force payment, even enlisting Gov. Jim Gibbons, who hosted a 90-minute meeting at his office in the Sawyer Building with Perini officials and subcontractor representatives in late May.

After Perini filed a lawsuit, MGM Resorts officials met at Aria with subcontractor representatives on June 9 and announced plans to take over the close-out process from Perini.

This week, Baldwin said CityCenter had negotiated payments with 199 of the 223 subcontractors determined to be part of the process. Of the 24 remaining subcontractors, Pacific Coast Steel and Ceco Building Systems were excluded from the process by the court because they were the companies that worked on the Harmon.

As for the 22 remaining subcontractors, Baldwin said he was hopeful six will have negotiated settlements "within a matter of days." That would leave 16 subcontractors, two of which are owned by Perini.

"I don't expect a whole lot of cooperation there," Baldwin said. He hopes to close out the remaining 14 by the end of the year.

The settlement with the 199 subcontractors was $178 million. The companies had been seeking $209 million. Baldwin said the 24 remaining subcontractors are seeking a combined $144 million.

"I believe well-intended business people can work out these issues," Baldwin said. "It's just going to take time."

Hearings are scheduled the next week in District Court on whether or not CityCenter is in compliance with the case management order, a lengthy legal document the sets out a road map for the proceedings.

A trial has been scheduled for next October and the judge set aside seven months for the litigation. Issues will include any subcontractors that haven't been paid, more than $100 million Perini believes it is owed for supervising CityCenter's construction and the Harmon matters.

Baldwin said the structural engineering community worldwide is aware of the issues surrounding the Harmon. The matter is compounded by its location at CityCenter, which drew international attention. The 67-acre project attracted numerous famous architects and designers that planned the project, which included the Aria hotel-casino, nongaming hotels, high-rise residential and a retail, dining and entertainment district.

The firm of famed English architect Lord Norman Foster designed the Harmon.

"It was one of the most beautifully designed buildings ever, and it's sitting static for over two years," Baldwin said. "The most sophisticated of all the architects (Foster) ended up being involved in a building that was our biggest disappointment."

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.