MGM Mirage and Dubai World are facing a claim for US$492 million (Dh1.8 billion) involving the $8.5bn CityCenter development they jointly own in Las Vegas. Perini Building, the contractor on the Las Vegas hotel development, is expected to file "mechanics' liens" against Dubai World and MGM within two weeks.
A mechanic's lien is a legal guarantee that provides security for contractors who have to spend their own money on labour, materials and other services while working on a development. MGM Mirage says it has its own potential dispute with Perini, however. The company is planning to make counterclaims against Perini regarding what it says are "defects" in the contractor's work on the Harmon Hotel, which is the one component of the CityCenter development that has yet to open.
The hotel was meant to be 49 stories high but was scaled back to 28 stories because of structural errors during construction, according to reports. MGM Mirage said that the amount of its claim against Perini might exceed its liability to the contractor. Dubai World declined to comment on the matter. Perini's notice was issued last Thursday, and the lien had to be filed within 15 days of that date, MGM Mirage said.
"Nevertheless, because the general contractor may be able to file liens on CityCenter for an amount in excess of what CityCenter's fully drawn $1.8bn senior secured credit facility allowed, CityCenter has obtained a six-month amendment to the credit facility that allows for additional construction liens in an amount more than sufficient to cover the threatened liens." The future of the project and the partnership between Dubai World and MGM Mirage has looked uncertain for many months. Dubai World last year sued MGM Mirage, citing breach of contract and mismanagement of costs.
Struggling under billions of dollars of debt, MGM Mirage warned last year of a possible default on CityCenter, which almost led the company to bankruptcy court in the US. The companies resolved the dispute and reached an agreement with lenders. CityCenter's showpiece, the 4,004-room Aria gaming resort that opened on December 16, had operating income of $7m in its first 15 days of business. MGM Mirage, meanwhile, made a fourth-quarter loss of $433.9m.
Las Vegas has suffered steep revenue declines during the global economic crisis. Executives at MGM Mirage have said that the CityCenter development could help revive the economy of the desert city by bringing in more visitors. The project has so far created some 12,000 jobs, a boon given Las Vegas's unemployment rate, which stood at 13 per cent in December. The 27-hectare resort on the Las Vegas Strip includes a Cirque du Soleil show tribute to Elvis, 2,400 condominiums and luxury non-gaming hotels including Las Vegas's first Mandarin Oriental. There is also a 46,450 square metre retail and entertainment district and a $40m fine art collection.