Wikinvest Wire

Checking in on City Center in Las Vegas

Monday, March 01, 2010

Well, the good news about City Center in Las Vegas is that the elevators haven't stopped working and the aquariums haven't started leaking like they have in the Burj Khalifa in Dubai, the other White Elephant that Dubai World has a major interest in.

This Times Online story provides an update on the latest mega-project in Vegas:

JIM MURREN has heard it all. It started with “there’s no way you’re gonna survive this”, recalled the boss of the biggest casino group in Las Vegas, MGM Mirage. Then it was “well, it’s going to open but it’s going to be a pile of shit because you’re gonna cut corners”. And now they say: “It’s open but can you make money?”
At 18m sq ft, City Center is a city-within-a-city on the Las Vegas Strip, featuring, when fully complete, four hotels with 6,300 rooms, a giant casino, 2,400 homes, 42 restaurants and bars, four spas and a 500,000 sq ft shopping centre. Nothing, not even the Burj Khalifa in Dubai, the world’s tallest building, screams “boom-to-bust” louder. It was designed by world-class architects who command sky-high fees, including Britain’s Norman Foster. The boutiques — Gucci, Louis Vuitton, Cartier — are the stores nobody wants to shop in any more, even if they can afford to. Murren has also spent $40m on art, including sculptures by Henry Moore and Antony Gormley.
I'll never forget what investor Jim Rogers wrote about the city of Las Vegas in his second book Adventure Capitalist - that it will be just a desert again in another century or two.

Of course, none of us will be around to see if he was right, but if the next hundred years are anything like the last two or three, the odds are with Rogers and future travelers passing through that area may kick around in the dust left behind by City Center.
Sadly, the omens for the 48-year-old — and the taxpayer — are not good. City Center, the largest privately funded development in American history, is $1.2 billion over budget. Spending got so out of control that Sheikh Mohammed — yes, Sheikh Mohammed — sued, claiming that Murren was splurging too much money on gold taps and Italian marble. The case was settled out of court.
IMAGE The project has already nearly gone bust. It was bailed out last year by a consortium of American banks after Murren convinced investors and MGM directors that it was better to keep going than “cut off the arm [City Center] to try to save the patient [MGM Mirage]“.
With the slump in the housing market, Murren had to slash the prices of the new homes at City Center by 30% but even so he has taken deposits for only 1,350 of the 2,400 apartments. The shopping centre is half empty and two residential towers have yet to be fitted out. Small wonder the value of the development has been written down by $1.1 billion.

“We’re not out of the woods,” said Murren, with commendable sang-froid. Others use different language. City Center is “an absolute catastrophe,” says America’s best-known developer, Donald Trump.
On Friday, MGM announced that lenders had given it two more years to pay back a $5.5 billion portion of its overall $12 billion debt that was to come due in October 2011. The company also expects to reduce its debt burden with an initial public offering in Hong Kong based on its joint-venture casino partnership in Macau. Analysts estimate an IPO could raise between $250m and $500m.

Whatever happens, one thing is certain. Nobody will be so bold — or so dumb — as to build a casino resort on this scale for at least a generation.
That may be a bit too optimistic - never would probably be a better guess as to when the next developer will take on something this big.


Anonymous said...

The central banks of the world stole people's pensions, and loaned out the loot for nonsense like this. Better to just let people spend their own pensions on what they want to buy. Debt based economies don't work in the long run, and retirees need their pensions to live on.

Anonymous said...

With all the hideous, ill proportioned, poorly meshing structures, City Center is still somehow less ugly than a subdivision of McMansions.

Anonymous said...

City Center actually hired experts to make this mess? First, the casino is the furthest building back from the strip and the parking structure is pretty cramped in width yet the spots are too far apart to make any sense. After that you have to walk a ways across a walkway and then into a new area with an escalator just to start to get to the front of the casino. It seems to be almost anti-gambler friendly in those regards. The sports book is a nightmare design in of itself. Hard to read digital boards on weird angles above you. Crystals is a giant open air kind of shopping area where no one is buying. It liked the most useless waste of space and bizarre art structures ever made. On opening day the jeweler inside one of the businesses said they sold nothing despite the invitees. All the signs are there that this place will fail. The should not have forced this project to finish. There is nothing attractive about the two buildings ive been in. Its architecture is hideous and looks to me to be out-of-touch with the times. The designs look taken from a bad mesh of 70's and 80's pop art. Donald Trump may be right about this place.

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