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Fireworks explode over the Aria hotel-casino during the official opening Wednesday, Dec. 16, 2009. Aria is the centerpiece of the $8.5 billion CityCenter project, which is a partnership between MGM Mirage and Dubai World.
Published Friday, March 12, 2010 | 3:34 p.m.
Updated Friday, March 12, 2010 | 4:16 p.m.
MGM Mirage today disclosed that disputes have emerged involving hundreds of millions of dollars between its CityCenter joint venture and the $8.5 billion project's primary general contractor.
Perini Building Co. on Thursday delivered a notice of its intent to file mechanics’ liens totaling about $492 million against CityCenter. Those liens represent the builder's claims for payment against the resort complex on the Las Vegas Strip.
MGM Mirage said it would dispute the claimed amount and also signaled it has counterclaims over construction defects at the Harmon Hotel part of the project, where construction has been suspended. When work resumes, it's scheduled to be completed at 28 floors, rather than the planned 49 floors.
"CityCenter believes that its actual obligation to the general contractor is substantially less than the amount claimed and that it is also entitled to significant offsets against the claimed amount. CityCenter intends to pursue all of its rights and remedies against the general contractor, including arbitration,'' MGM Mirage said in a regulatory filing.
"While CityCenter’s investigation into the general contractor’s potential liability regarding the Harmon Hotel is continuing, and there can be no assurance at this point as to the ultimate outcome of any action CityCenter may undertake, CityCenter believes that the amount of its claim against the general contractor may exceed the amount of CityCenter’s estimated remaining liability to the general contractor,'' MGM Mirage said in its filing.
MGM Mirage said CityCenter has obtained a six-month amendment to a credit facility that allows for additional construction liens in excess of the threatened amount.
Resolution of the lien issues and CityCenter's claims against Perini for the Harmon are part of the settlement process typical in large construction projects such as CityCenter.
In the case of CityCenter, some subcontractors have complained in recent weeks of not being paid in a timely manner.
Alan Feldman, MGM Mirage senior vice president of public affairs, confirmed today that there have been payment problems for subcontractors.
He said MGM Mirage hopes issues with the general contractor can be resolved so the subcontractors can be paid. MGM Mirage has long touted the economic benefits of CityCenter, including benefits for small and minority-owned contractors.
"That's why we want to get this done in six months," Feldman said.
A spokeswoman for Perini could not immediately be reached for comment. Perini is part of Los Angeles-area company Tutor Perini Corp., one of the world's largest construction companies.
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that is one heck of a mechanic's lien.
OUCH!!! But then again, everything Perini builds ends up the same way..they must grease the "palm" to get all those contracts and NOT ONE of them have come in on budget or time..talk about low-ball bids..
Why punish the sub-contractors?
Six months is an awfully long time to wait for money that was rightfully earned.
The two big players, MGM Mirage and Perini, can afford it. The little guys, who must have been thrilled at getting the opportunity to work on this massive project, cannot.
Good old Lou Perini. Framingham, Mass.
Always rumored to be connected to the mob. They seem to have a stranglehold on casino construction. Saw them in West Virginia at Charles Town.
So those of you old timers that wish the mob was back in control in Vegas will see what can happen when they really do show up. This could be very interesting, and Jim Murren and his acolytes best keep a rear view mirror, as well as a couple of grunts beside them. Accidents happen...
Suppose there may be a chance something can be built here without the courts and all those fine lawyers getting involved?
Fast-forward 18 months:
lawyers on both sides, often having lunch together at Smith & Wollensky - will make $10M negotiating this down to $97M settlement.
Oscar wishes he was " back-inda-days"
Deutche Bank is all over the place in casino flops, home repos, etc.
And Chrysler was drained and discarded by Daimler Benz.
Notice a pattern here ??
And so it begins....
Meanwhile, suppiers and subcontractors will go broke waiting to be paid...
If you look at this from a viewpoint of the fact that the work has been done, the project is completed, it's time for MGM to PAY the contractors for the work they did PERIOD! bdover is not too far off in his comment above.
Maybe they'll get their money after MGM/Mirage sells off their half of the Borgata. Then again, maybe Macau gets that money.
Harmon was a huge screw-up, but the contractors still need to be paid.
All of the subs are the responsibility of the General Contractor. With all of the defective constriction on the City Center, I will be very surprised if the amounts ends up below 1.5 billion after he loss of 21 floors and the lost potential income from Gambling. Perini deserves everything he gets for such shoddy work.
Dubai used slave labor to build their city and their artificial island. What did all of the contractors expect??? lol
Perini as all the other Contractors will use the developer as an excuse for not paying the sub-contractors and suppliers.This is a very common practice.
Perini is obligated to pay all of its sub-contractors and suppliers in which the contracts are signed by the Contractor and sub-contractor
If Perini owes Perini pays and then collects from the developer if any money is owed.
I am very sure if previous comments are true Perini will wiggle out of their obligation and MGM will be left with holding the bag through liens.
Very smart for City Center to take this into court and get an order in place so that perini is not able to wiggle out.Futher more the damages for the faulty construction of Harmon has caused some damages to MGM.
Seems to me to be a simple strategy to offset the loss of floors on the Harmon for starters.
Someone mentioned loss of gaming, no I don't believe it was anything like that, just the loss from a building that should have been a lot taller than the stub there, the Harmon.
$5 BUCKS SAYS MGM MIRAGE WILL BE IN BANKRUPTCY BY THE END OF THE YEAR.
THOSE DUBAI-WORLD / INFINITY WORLD DEVELOPMENT SHEIKS WILL DROP MGM MIRAGE INTO A VAT OF BOILING OIL OVER THIS.
ANYONE FORGOTTEN THIS LITTLE GEM FROM A MARCH 17, 2009 REGULATORY FILING:
"...MGM Mirage said it can't "provide assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to use under our senior credit facility" and expressed doubt regarding its ability to continue as a going concern...."
AND JUST TODAY, MGM MIRAGE IS GETTING 'TRUST LIQUIDATED' OUT OF THE NEW JERSEY CASINO BUSINESS. WHAT'S LEFT..?
MACAU..? PANSY HO..?
WHY DOES MGM MIRAGE EVEN HAVE A LICENSE TO DO BUSINESS IN NEVADA......?
LET'S SEE THE LAYOFF NOTICES FROM THOSE 12,000 'JOBS' ALLEGEDLY CREATED, AND THE CORPORATE 'CAMPAIGN DONATIONS', THAT WILL TELL THE TALE........
http://www.forbes.com/2009/03/23/mgm-mir...
This is your usual end of job spat where the Owner doesn't pay the General all their money, so the subs get screwed. They ignored the lessons of the Sheldon Adelson School of Subscrewing in the 90's at the Venetian. So I don't feel bad.
The subcontractors will settle for 50% or less for their claims, since they want to stay in business in this rotten economy. Been there, done that.
Perini's blunder on the Harmon tower may be enough justification for MGM to stick it to them big time. Once MGM makes that case in court Perini won't have a leg to stand on. They are soooo screwed.
I see a long row of dominos falling....
I recall that the mechanics lien litigation on the Venetian was so extensive, Sheldon Adelson imported an "expert" mechanics lien litigation and trial firm from Atlanta to Las Vegas, just so he would have no doubts about the loyalties of his lawyers. The firm is still here, doing other work.
So, won't it be ironic if MGM Mirage farms out the mechanics lien litigation defense to that same firm.
And subcontractors from the Venetian case, please give us a bit of a summary. What was the Venetian's average win ratio, in terms of percentage shaved off the mechanics lien claims when finally paid.
I assume by now they are paid. Am I right???
i've noticed mgm has been very quiet about how citycenter is doing.
it seems the visitor count to vegas hasn't changed that much and the gaming win is down, but they've added all these new rooms.
While the shark fights the piranha in court, all the sub-contractor minnows starve. This is another bad omen about the financial state of MGM Mirage. As a retired lawyer, the only thing I am sure of is that the many lawyers will eat well (we can call them the vultures).
Only a matter of time before this disaster splits its seams (CC)
no disclosures,or media doesnt signal any initial response from most people due to the agenda,BUT all one that lives here has to do is wander down to the old lipsticked pig on a sun pm - thu pm,and it will stare you right in the face or atleast the few workers will be looking back at ya
peace out
Cynical Observer, depends on who your attorney was. Simple as that.
Oh, and the Venetian did not have one law firm from Atlanta representing them, they had 4 law firms. Hale Lane was the local counsel, Weinberg Wheeler is the firm you speak of from Atlanta, a Boston firm handled another aspect, and local firm Lionel Sawyer handled all the appellate work, and every decision was appealed. The General Contractor, Bovis, had 2 law firms. An Atlanta firm and local counsel. That case was in State Court, Federal Court, and Arbitration. Longest trial in Nevada history.
I do believe MGM will prevail with respects to claims of payments for change orders where maximum allowable markups and profit is governed by prime contract whereas the subcontractors are tied to the main contract between Perini and MGM.
The change orders on this project were in fact in the millions if not billions and understanding the process MGM used to pay change orders, I feel that exorbitant profits were more than likely attained by subcontractors that well exceeded the maximum markups the contract allowed.
MGM contract was one of the best I've seen and the pass through change order provisions Perini tied subcontractors too by reference in their subcontract provides MGM legal remedies to audit the books and avenues to collect on payments that exceeded the allowable percentages subcontractors could make on contract change orders.
I for one would tend to think that MGM will audit the records of many subcontractors and many others lawsuits will be filed to collect on over payments when change order work was performed and the main contract between Perini and MGM were incorporated into the subcontracts.
Developers usually start with the Heavy Civil construction; projects of this size and magnitude usually result in civil change orders that well exceed base contract scope. With the inherent problems of this size have and employee corruption in the Heavy Civil construction industry, MGM should prevail in reimbursements.
I have worked these projects and if you could see just how bad the workmanship is you would be stunned. There is a company doing finish work there that only gets the work because of it's size but turns over garbage as a finished project. They have been throwed off more projects then one could imagine because of just how bad the work they do is. How they would ever get paid is a shock to me.
i smell bankruptcy and floors closing on the tower and layoffs. it going to be a slow death there.
Ha Ha Ha, and so it begins, just as everyone predicted. Those blundering idiots from MGM need to learn a basic rule of life. "You cannot make something happen just by saying it is going to happen". Not paying construction bills and not paying contractors is just a way of saving money. Money that has to be saved because the business isn't there to support the payments. Even if the contractor's prevail and close on the liens, what will they get? They may have to actually tear down this complex and sell material for scrap in order to recoup their losses.
Kash is right. Placing a lien on a property simply means that the Owner might have trouble selling the property. Who in their right mind would buy an 8.9 Billion dollar boondoggle in a failing city? Or even a small piece of it?
Nobody. Not even Icahn the Vulture would dare touch CC. Plus when MGM Mirage goes BK in 2012 (I think), the subs liens will be canceled, and they will lose everything.
Sheldon Adelson developed the method of Subscrewing, nobody learned, and hard lessons will now be the norm in Sin City.
Yes, "Those who failed to learn from history are doomed to repeat it" George Santayana 1863-1952. WTG, George.
Dismantling a structure the magnitude of CityCenter would require a lot of workers trained in steel building demolition--new vocational training programs, etc. (Trade in your valet vest for a welders helmet and flame up!) Perhaps the architecture could be modified to produce a huge solar energy plant--foused energy steam production and solar panels.
I agree with FromBellevilleCanada. The only ones that will make any money off of this mess are the lawyers. Everyone else will be screwed.