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?”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.
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.
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.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.
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.