Submitted by Jen Jones on Wed, 04/22/2009 - 1:31am
There is no shortage of excess in Las Vegas. Quite literally, the entire city is built on money.
For most tourists, the mammoth gambling compounds are more appealing for their sheer physical magnitude than the lure of potential fortune they so overtly represent. Even those who visit from our nation's largest cities marvel at the architectural scope of the Sin City strip. However, it appears that even the world's most popular party city can be impacted by a recession, as real estate insiders to the most monumental building project the desert has ever seen are beginning to consider the protective benefits of bankruptcy.
As anyone who has visited Las Vegas in the last couple of years can attest to, the construction of the $9 billion CityCenter mixed-use development is simply a marvel to witness. If finished, it will be larger than the downtowns of many small cities. And it's being built right on the strip. Despite the perpetual stream of gambling income that attracted investors to the jackpot project, today's economic skid has significantly raised the stakes for its completion.
The development, a portion of which is scheduled to open later this year, was conceived as the city's centerpiece. It will consist of several hotels, retail centers, condominiums, clubs, event centers and of course, casinos. Despite the number of cranes swinging above and around its skeletal framework, hard-hatted tin-knockers scurrying about like ants with marching orders and the ubiquitous "beep-beep-beep" din of construction vehicles in reverse, the house has lost a few hands.
The project's partners, MGM Mirage and Dubai World, are having trouble keeping up with its spiraling costs. On a macro-level, the companies' reasons for bankruptcy are not unlike an individual's: good intentions gone unsuspectingly awry.
Yes, even in the financial oversight of a multi-billion casino development, it can happen.
In March, Dubai World, the development arm of the United Arab Emirates (no stranger to ambitious real estate projects) sued MGM Mirage over mismanagement with the hope of cutting its future financial burden to the project. With everyone else involved getting nervous, MGM Mirage placed another $200 million into the project to keep the cranes lifting and dump trucks dumping. Smartly, the company also hired bankruptcy counsel.
Invoking recent government mantras, a gaming expert at nearby UNLV said that CityCenter may be "...too big to fail." And if you've seen the project in person, it's understandable how that comment might ring true.
Unfortunately, a lot more hangs in the balance than the opening of a few more casinos and hotel rooms, as CityCenter is projected to bring 10,000 additional jobs to Las Vegas in addition to the more than 8,500 workers currently helping to build it. It has been wrought with inspection troubles, worker protests about safety, architectural road blocks and an endless stream of missed deadlines.
With MGM Mirage's stock on the decline, finding the additional funds to keep the world's largest construction effort afloat will prove challenging. Filing Chapter 11 however, could be just what gets the project back to even. By filing and properly managing the right plan, MGM Mirage would be allowed to restructure debt and deliver the project's phases as planned.
Considering the monumental impact the failure of a project so big would have on Las Vegas, not to mention the collective economic demeanor of the country, it appears Chapter 11 bankruptcy is the company's best bet.
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