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MGM Mirage cancels CityCenter condo project

7 January 2009

By Joe Schoenmann and Liz Benston, Las Vegas Sun
LAS VEGAS, Nevada -- The Harmon Hotel & Spa – originally planned as a 49-story building with some 200 condominiums atop 400 hotel rooms, will no longer offer condominiums and instead will open in late 2010 as a 400-room hotel, MGM Mirage said today.

The Harmon, one of six towers at MGM Mirage's CityCenter resort complex under construction on the Strip, had been slated to open in November.

As first reported in the Las Vegas Sun early this morning, MGM Mirage was considering topping off The Harmon where the hotel ends, which would be a little more than half of its planned height, after months of extensive structural repair work that slowed progress on the tower.

MGM Mirage executives had recommended the change as of Monday afternoon but other parties involved in CityCenter, including the company's lenders and joint venture partner Dubai World, had not yet signed off on the decision.

By cancelling the condominiums, the partners will be able to avoid the need "for substantial redesign" of The Harmon "resulting from contractor errors," CityCenter Chief Executive Robert Baldwin said in a statement today.

The scaled-back building, as well as other cost-saving measures initiated by MGM Mirage amid this recession, will result in savings of about $600 million at CityCenter. Postponing The Harmon by a year will defer about $200 million in construction costs to fit out the building's interior, Baldwin said.

The final budget for CityCenter, the largest commercial construction job in U.S. history, is in flux but is likely to be less than the most recent official figure of $9.2 billion.

Since August, workers have been correcting concrete and rebar construction at The Harmon. Rebar is the steel used to reinforce concrete.

At The Harmon, "they ... installed it wrong. That's the bottom line," said Ron Lynn, Clark County Building Division chief. "They made a mistake."

Clark County inspectors, he said, uncovered rebar problems on 14 floors.

Lynn characterized the rebar problems as "significant" and "very unique."

"We do not see this very often," he added.

The placement of the steel bars and how they are configured are calculated to maximize a structure's strength.

"It's very important," he said. "Even if you have the correct number and size of rebar, it's not enough if it's not in the right place."

In The Harmon, Lynn explained, some of the rebar was spaced incorrectly and some ties, which hold the bars together, had been cut by a torch.

Had the problems never been detected, the building would very likely have been able to withstand its own weight, Lynn said.

"It's tested every day with the activities of construction including workers, equipment and wet concrete," he said.

But the potential risk would have increased with an earthquake or high winds.

"Just having the rebar there provides some structural strength, but when you have a high wind or seismic load, you have to tie them together, and if they are improperly tied or spaced, that can result in problems," he said.

Lynn said an employee of Halcrow Yolles, the engineer of record, discovered The Harmon's rebar problems last summer after walking the site and noticing some cut ties.

That led to a larger investigation. In some cases, rebar problems were found before concrete had been poured around them. Where concrete had been poured, the concrete would have to be chipped away and repoured after fixes were made.

As of Tuesday, plans for all those repairs had not been submitted to the county.

"They are still trying to figure out how to do some aspects of the final structural fix," Lynn said.

In an Oct. 27 letter to AAI Architects regarding "Harmon Tower Construction-Progress of Link Beam Repair," Frank Martinovic, Halcrow Yolles principal, hinted at the difficulty of fixing the problem in his opening paragraph:

"The current status of the link beam repair is such that it does not appear the contractor can execute the repair as detailed in a timely manner," he wrote. "Given this fact, I see no recourse but to abandon the repair as currently being executed once level 15 is complete."

Martinovic also wrote that a re-analysis of the building was taking place with "the goal of this analysis ... to repair the building without the extensive demolition and in a manner that can be executed quickly in order to meet the project goals."

Martinovic could not be reached for comment this week.

Lesley Pittman, a spokeswoman for CityCenter contractor Perini Building Co., said the corrective work is in progress. Pittman declined further comment.

Insiders close to the project said the souring market for condo sales played a minor role in the decision. Scaling down the building made more sense than demolishing the building or leaving it unfinished, they say. Construction had stalled at the 23rd floor.

Lynn noted that inspectors find issues on "almost every" construction site. Another significant problem, albeit one easier to fix, was found at Veer, also within the CityCenter complex.

At that site, inspectors found problems with the stirrups or ties holding rebar "cages" together. During prefabrication of the cages, Lynn said, troubles developed with how the ties were fused or welded to some rebar. To fix the problem, the county required fiberglass jacket wrappings around the columns.

That fix was expensive but very effective, Lynn said.

"Those columns are stronger now than they were before," he said.

Shapiro & Sher Group's Aaron Auxier said the cancellation of The Harmon condos is an "extreme letdown" for buyers as well as brokers who have been disappointed by a series of condo projects that have been ditched amid poor market conditions.

MGM Mirage bills The Harmon as a glamorous, boutique hotel with a spa and residences. Designed by Foster + Partners, it is an iconic, oval-shaped building at the northeast corner of CityCenter's 67-acre campus, at Harmon Avenue and Las Vegas Boulevard.

Las Vegas nightclub operator Light Group is developing and managing the hotel for CityCenter joint venture partners MGM Mirage and Dubai World. Officials for Light Group could not be reached for comment.

"The Harmon is the premier condo destination for the celebrity clientele," said Auxier, whose clients have signed purchase contracts for millions of dollars' worth of penthouses at The Harmon.

MGM Mirage said today that buyers, who had signed purchase contracts for 88 of The Harmon's approximately 200 units, are entitled to refunds on their deposits. These deposits are likely worth tens of millions of dollars.

Buyers may also purchase units at other CityCenter buildings with condominiums, including Mandarin Oriental, Vdara and Veer Towers. Mandarin and Veer feature residential condos and Vdara is a condo-hotel building, with hotel rooms that can be owned by individuals and rented out to tourists.

Auxier's clients include musicians, athletes and other celebrities who sought out The Harmon because it was designed to provide them with privacy in addition to its other amenities.

With The Harmon Residences scrapped, Palms Place, a night life magnet for the Hollywood set adjacent to the Palms, will take the place of The Harmon as the "hippest condo address in the city", he said.

Copyright © Las Vegas Sun. Inc. Republished with permission.


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