CityCenter reaches payment agreements with 205 subcontractors

By Steve Green

Monday, Nov. 15, 2010 | 12:48 p.m.

The CityCenter casino-resort complex on the Las Vegas Strip says it's making good progress in paying subcontractors for their work on the project -- and is reiterating that no decision has been made on the fate of the stalled Harmon Hotel & Spa there.

In a court filing Friday, attorneys for the $8.5 billion project managed by MGM Resorts International said CityCenter has now reached agreements with 205 of 221 subcontractors.

The agreements call for payments of about $186 million, resolving about $218 million in outstanding subcontractor claims.

Total payments to these 205 companies, including payments before litigation erupted over the project, will be $3.459 billion or 99.13 percent of what was billed for them by general contractor Perini Building Co.

The attorneys said CityCenter through Friday had cut final checks to 150 of the subcontractors totaling nearly $161 million.

"That's a lot of money we're putting out into the community" as opposed to withholding payments because of litigation, Alan Feldman, senior vice president of public affairs at MGM Resorts, said Monday.

CityCenter's attorneys said they're optimistic about reaching agreements with several of the remaining 16 subcontractors, though deals won't be reached at this stage with two firms directly involved with the Harmon and two that are owned by Perini.

The court filings were made in a massive lawsuit filed by Perini in March in Clark County District Court charging CityCenter had failed to pay hundreds of millions of dollars due Perini and its subcontractors. This lack of payment, Perini complained, prevented it from paying the final invoices of subcontractors.

CityCenter, however, said it was Perini's responsibility to pay the subcontractors and when Perini failed to do so, CityCenter stepped up to pay those contractors it could reach agreements with. CityCenter also charged the $490.3 million Perini sought in the lawsuit was offset by construction defects and nonconforming work at the Harmon and elsewhere at CityCenter.

As to a report in the Las Vegas Review-Journal on Saturday that MGM Resorts had targeted the Harmon for demolition, Feldman said such a decision has not yet been made.

Feldman said that testing and engineering analysis of the building must be completed before decisions are made on whether it can be repaired and used.

"It certainly can't be used for its intended purpose, which is a five-star hotel," Feldman said.

Perini maintains the structure can be fixed.

But there are many questions, resolution of which awaits the completion of the engineering analysis. Any fixes would have to be approved by the Clark County Department of Development Services.

That county agency has approved ongoing destructive testing of the building including the jack-hammering away of concrete to inspect the underlying support system.

The issues include how or if the building can be used at all, what it would cost to repair it, who would pay for the repairs and CityCenter's ongoing claim for lost business.

MGM Resorts, in its latest earnings report, said CityCenter took a $279 million charge in the third quarter to write down the value of the Harmon, where construction was halted in March.

MGM Resorts said Nov. 3 that CityCenter has concluded it "is unlikely the Harmon will be completed using the building as it now stands."

Because of the construction defects involving concrete and reinforcing rebar at the 400-room, nongaming boutique hotel, it was limited to 26 of the 49 originally-planned floors.

Before the construction defects were discovered, the Harmon was intended to have some 200 condominiums atop the 400 hotel rooms.