STEVE MARCUS / LAS VEGAS SUN
Wednesday, Dec. 30, 2009 | 12:26 p.m.
Shops at Summerlin Centre
Construction companies are agitating to be paid for work on the Shops at Summerlin Centre regional shopping mall -- and one says the mothballed project is losing value as its exposed steel superstructure deteriorates due to exposure to the weather.
Construction manager Vratsinas Construction Co. filed a motion last week in mall owner General Growth Properties Inc.'s bankruptcy case, asking for permission to foreclose on liens valued at $28.3 million.
Also intervening in the bankruptcy case in hopes of getting paid are subcontractors Precision Concrete of North Las Vegas, owed $2.8 million; and Clark Pacific of Sacramento, owed $2.4 million.
In court papers, attorneys for Vratsinas said construction was about 40 percent complete when work was suspended Oct. 31, 2008, on the 106-acre open-air mixed-use development that would include retail, office, hospitality and residential components.
The project is just south of the Red Rock Resort hotel-casino along the Las Vegas Beltway, south of Charleston Boulevard.
The development is valued on paper at $220 million -- but the recession has likely reduced its worth as currently there's little demand for another regional shopping mall as Las Vegas endures the worst economic downturn in memory.
Little Rock, Ark.-based Vratsinas complained that because it has not been paid by General Growth, it has been unable to pay the subcontractors and that the subcontractors initiated a complaint with the Nevada State Contractors Board to revoke Vratsinas' contractor's license for non-payment.
While that complaint was dismissed, the subcontractors may try again to pursue payment through a revocation of Vratsinas' license and a claim against its bond, Vratsinas said in its filing.
Vratsinas complained that General Growth has not come up with a plan to pay the debt to Vratsinas and "through counsel, has taken the position that it, along with the other debtors in these cases, is part of a 'financial model that depends upon refinancing' at a time that the 'capital markets are moribund, or dead,' leaving no realistic chance that the debtor will either sell the real estate project or refinance the related debts any time soon."
In seeking permission to foreclose on its liens or at least gain periodic payments to cover the declining value of its lien, Vratsinas noted: "There is no indication from Summerlin Centre that it will restart and complete the real estate project. The exposed steel superstructure is exposed to corrosive weather and the elements — and is deteriorating in value. The Las Vegas real estate market is in a very depressed condition — noted as one of the most heavily impacted by the financial downturn."
"At this time the project consists of a partially completed steel superstructure with exposed rebar and other metal girders and parts. Although the project was demobilized, constant exposure to weather and other environmental elements will likely cause the exposed steel superstructure to erode," Vratsinas said in its filing. "Based upon experience with other suspended projects, there is a significant likelihood that local construction inspectors may require the entire exposed steel superstructure to be demolished and rebuilt if the construction project is ever restarted.
"Alternatively, before the project could be restarted. it is likely that very costly reworking of the steel superstructure will be required in order to repair weather-related exposure and degradation of the building materials. It appears, indeed, that the real estate project is declining in value as it remains exposed to the weather, and the current value is likely substantially less then book value," Vratsinas said.
A request for comment on the Vratsinas assertions was placed with General Growth.
In court papers, General Growth has said the Vratsinas, Precision Concrete and Clark Pacific claims are among $34.4 million in liens filed against the unfinished project.
The unfinished Summerlin mall was not among the 194 General Growth subsidiaries that will exit from bankruptcy under a plan approved earlier this month by the bankruptcy court in New York.
That plan emerged after agreements were reached with holders of $10.25 billion of mortgage loans involving those subsidiaries.
Local General Growth properties emerging from bankruptcy under that plan include the Grand Canal Shoppes at the Venetian hotel-casino, the Boulevard Mall and some office developments in Summerlin at the Crossing Business Center and Corporate Pointe.
General Growth is working on reorganization plans for additional subsidiaries, including local properties not included in this month's approved plan.
Locally the subsidiaries remaining in bankruptcy include the Fashion Show Mall on the Las Vegas Strip, Shoppes at the Palazzo at the Palazzo and the main Howard Hughes Properties Inc. land development business in Summerlin.