Two Way Hard Three | Las Vegas Casino & Design Blog

Posted by Mark D

I wonder what the ramifications for Perini are? In this article in the Sun, they say that the other rumored problems at Veer have be fixed. http://www.lasvegassun.com/news/2009/jan/07/builder-error-significant/

So, does that mean that the hotel will indeed be capped at 28 floors?

Posted by Dave

Does anyone think they'd be better off starting from scratch? With everything else around 50 stories, a 23-floor building is going to really mess with the proportions. It would look something like one of the Tropicana towers stuck between Wynn and Encore. And from now on, those of us who know will always think "oh yeah, bad rebar" when we look at it.

This is really a shame, but better to confront these problems now than wait until they're putting up the drapes on the 49th floor. It['s situations like this, where this is no easy solution, that the top execs earn their big bucks. There are certainly some tough decisions ahead. You've got to feel for MGM MIrage because this is a situation where they don't have direct control, but are ultimately responsible. It's not like Bobby Baldwin's personally following the crews with a tape measure, making sure they've spacing the rebar correctly. But it's his project that gets canceled.

What I want to know is what happened to the guy(s) who bungled the job? It must feel great to know that your fine workmanship is responsible for hundreds of millions of dollars in damages and a black eye for you and your employers.

This is a fascinating story for many reasons...

Yes, the project will look strangely stunted, especially since The Harmon is right next to the Cosmo and they would have been about the same height. I guess folks on the top floors of The Cosmopolitan are thrilled as they have much better views now.

It will be very interesting to see if lawsuits are filed. It would seem MGM Mirage would have cause but I am not a lawyer.

What other [formerly] skyscapers/large buildings have had this happen? I assume this isn't the first time in history but I certainly can't name any off the top of my head.

Posted by Dave

One thing that comes to mind is the Traymore hotel in Atlantic City, which opened in 1915 and was imploded about 60 years later, partially because workers had mixed the concrete with seawater (they were right by the ocean), which rusted the rebar.

Very interesting to see how this is being reported.

Many of the stories focus on the cost savings and collapsing condo market, as if this was a choice MGM Mirage made because units weren't selling.

Other than imploding to start over, doesn't sound like they had much of a choice at all, yet people are only talking about not having to build out the rest of the hotel.

Until today, MGM Mirage has been saying that City Center's condos are "on pretty solid ground and this is real estate that’s not going anywhere..." So they've been telling folks not to worry and that the condos will sell and the rooms will have guests...

Nothing about the potential lost revenue (if you believe them about being able to sell these things), nothing about whatever it will cost to cap the building, etc...

Posted by mike_ch

As far as height goes, it seems fine to me. That building brushes up with the sidewalk and would be Yet Another Tall Building placed at the edge of the sidewalk (hello, Augustus Tower) instead of set back from the road. In the 90s-2005ish everything on the Strip was set back about an equal distance from the road and it gave everything this crazy appearance as though it was designed that way. Then everyone started re-examining how they were going to use their land (good thing) and plopping hotel towers down in awkward spaces (bad thing.)

That said, for a lot of reasons it wasn't smart to let so much of Vegas' economy rest with one company like post-mergers MGM Mirage, and I can only guess someone at MGM land decided that fixing the Harmon to what it was supposed to be would require a lot of money, and it was better to have a stunted Harmon and avoid some condo supply than to have a full-sized Harmon and have to do something drastic like sell Mirage to get it done.

We, the customer, are not going to be missing much from this building, unless anyone here hoped to buy a condo. Heck, this is good news for anyone who argues that the Strip should have less of them.

I guess the real question is whether the rebar is actually wrongly installed and the have to cap it off at a lower level, or whether MGM made the decison to cap it off, due to the expectation of the condos not selling?

I wonder if the 88 owners will bolt from the CityCenter projrct in its entirety, or will they look something else in the Vdara, Veer or Mand. Oriental. I can envision that there will be some of all of the above.

The whole project is incredibly cool and big, but the timing of the economics could not be worse. In the long run I think that this will be a great resort, and even the condo owners will be excited, but for the time being there has got to be a lot of hand wringing.

Is it possible that the building could be added to at a later date? We know the foundation is correct, and the structure (properly corrected) would be capable. The chases for the wiring and plumbing should remain, so the biggest issue should be the desire to do so when the rest of the project is complete. Maybe the CEO of Cosmo-Tropicana Entertainment will unveil the addition to the tower in their remodeling plans of 2045.

The number of floors that may have been built with the rebar installed incorrectly prior to the discovery of the problem really raises questions about Perini’s quality control/supervision of their subcontractors. I could more easily understand them having a problem with the rebar on one floor prior to discovery of the problem but several floors? It looks to me like MGM Mirage would have a pretty good case for a suit against Perini and or their subcontractors.

I think I’m in the camp of this is a blessing wrapped in a building mistake for MGM Mirage. I really was concerned about the idea of Light Group running a hotel project. I know that they have had fantastic success with all of their ventures, but it is a big leap for a small nightclub/restaurant management firm to take on a complex hotel development with condo’s, which just serve to complicate the entire project so much more; now you are not only dealing with your FIT and Group guests, but also balancing the deed and titled owners (anyone who has ever worked for a deeded timeshare hotel development would understand just how big of an issue this can become). In fact I get the feeling that the only reason Light Group was ever involved in the project was to appease the then potential suitors and eventual half owners at Dubai Word; and to keep the major UAE players coming to spend their money at MGM Mirage properties (Zabeel Investments, one of the major Dubai players, is one of the primary investors in Light Group.)
Now with the building’s numerous issues Light Group is heavily rumored to want to wash its hands of the project. This produces numerous strategic alternatives for MGM Mirage.
Just off the top of my head:
A. Run it as a “small” (400 rooms is still about 4 times the national avg.) boutique property, something that is really missing from MGM Mirages management portfolio. The building could be marketed as the trendy place to stay, really competing with the Palms, Hard Rock, and P-Ho for clientele. Adapt the Hard Rock pricing model: extremely high room prices, draws in people who are young and have money, at the expense of nightly room occupancy while still generating a high ADR.
B. Run it as a proof of concept/training ground. If MGM Mirage is serious about the expansion and growth becoming a hotel management firm rather than a gaming company this would be their test project. We already know that they are planning to expand the MGM Grand, Bellagio, and a new brand developing a number of non-gaming hotels which would be just about this size. They could use this building essentially as a managerial training ground, a place to teach and develop future managers in a controlled environment. Hell, if they wanted they could get really adventurous and strike a deal with UNLV and allow them to use some of their facilities as classrooms, or offering students hands on work experience basically forming a solid employment pipeline for the future.
C. The building also lends itself to outside development. How about a long term contract with a company who excels at developing trendy hotels this about this size, but has been unable to really get a firm footing in Vegas due to the high price of strip land. This contract could be extremely lucrative to MGM Mirage simply because it would remove all operating expense of the building from the picture, and due to the close proximity of the Aria casino they would be increasing gaming revenue (wouldn’t that roundish building look amazing with a big ‘W’ on the front, Starwood take head, here is your chance).
There will be one hell of a lawsuit between Perini and MGM Mirage to come out of this mess, my guess is it will end up being settled out of court and Perini will end up eating just about the entire cost of this building, giving MGM Mirage a free strip side 400 room hotel. Pretty good deal, they can do a lot with this space. Not to mention the new views for Veer, Vdara, and Aria.

"The Harmon's structure and 25-floor exterior will be finished on schedule, while completion of its interior with 400 rooms will be postponed, allowing the company to defer spending $200 million until next year."
http://www.forbes.com/feeds/ap/2009/01/07/ap5891992.html

I agree with keeping it a small boutique type of hotel. Make service the number one priority of the establishment. Have 2 butlers per floor. A whatever or whenever type of attitude. Hmmmm... sound familiar?? Why not bring in Starwood's W brand. They already have The Mandarin Oriental brand going in on property. It would be the perfect match. I always said there needs to be a W Hotel on the strip. I also thought The W hotel brand should take over the Cosmopolitan if they had the cash to pony up!!! By the way, have they announced who is getting the non-envious job of running the Cosmo???

I wanted to take a moment and comment on trewiltrewil's comments. trewiltrewil makes some interesting and good points about the property and its direction in the future. Here are some thoughts to consider;

Light Group is still managing the day-to-day operations even though rumors are running wildly. In fact, I doubt that Andrew Sasson would want to ruffle any feathers by terminating the Harmon contract since the vast majority of Light Group's current portfolio is with MGM Mirage and additional F&B outlets are coming online with the remainder of CityCenter.
While Light Group has never operated a hotel, it has more importantly been successful in its operations. Light Group, like any other business can easily hire the "best of the best " to manage the property.

Although the shell is not even completed, the interior and exterior design are meant to be in the luxury segment and not of the upper-scale as trewiltrewil proposes. The property would be doing itself a disservice if its competitors were PH,Hard Rock and Palms (excluding Palms Place).

A flagged property is an interesting idea but probably not a good one. Starwood execs would love to see the W name on the strip but MGM Mirage would be foolish to shell out millions in franchise fees for a property that is sure to prosper when it opens in late 2010. Also, trewiltrewil's revenue management technique could be flawed for a w hotel depending on the contractual obligations. Starwood contracts that I have seen reward the owner of the property when the hotel is nearly sold out - usually through SPG rates ( I could explain further but i don't feel like writing a book tonight). My main point here is that with a flagged property, one could drop ADR by a small margin, and increase RevPar substantially by doing so (if it's nearly sold out). This is an elementary approach since there is a lot more to revenue management of hotels and especially casinos (or contract's with other casinos in the Harmon's case).

trewiltrewil mentioned the Hard Rock and that they operate by generating a high ADR but leave rooms unoccupied. The unoccupied rooms are fine but why would one care about generating a high ADR. If I'm an executive from Morgans and I'm looking at revenue, I care about revpar (if we are just discussing the hotel). ADR tells me nothing about how the property is performing from a revenue standpoint. In addition, comp rooms, depending on the rate structure, could skew ADR numbers . I would segment the market rather than boldly charging high prices to everyone.

Last thing, UNLV is in the process of building its own $50 million training hotel on Flamingo if I am correct. I'm sure Gary Loveman would love to have back the $25mil that Harrah's gave UNLV to partly fund the project.

But Light Group is still managing the Harmon anyway so my discussion really doesn't matter...

No way they can add on later. They are stoping now, because the foundation and structure cannot handle the additional weight. So the only way it goes higher, is to tear it down and start over, so there will be no addition later. This was just a huge mistake on the part of Perini, period. MGM did not pull this, to save money, in a bad condo market. In the end, this will hurt them, more than it will help them.

It really sucks for the condo owners, because now the prime spots in the other towers are already taken. If you were one of the first, you had your pick of the litter, so to speak. The owners who wish to relocate to another tower in the project, will have to pick through the left overs now. That's sad.

Lastly, Perini was a great company. With their merge with Tutor-Salibia, they were sure to only get stronger. They have never attempted a project of this size or magnitude. For that matter, almost no company in the United States has. If this project went off perfectly, they could have launched themselves into a entirely new league of work. Now, Perini and its reputation will be battered and bruised, if not scared for life. We should not understate the seriousness of this situation. This is a major problem, a screw up so large, it will go down in the history books. Its also heart breaking to all those involved, who spent countless hours, the architects, designers, and engineers, who designed a property which will never even been completed as it was designed to be. Imagine if you were the interior designer or the subcontractor on the condo units, who had spent the last year of your life banking on your income coming in from a project that is now, never even going to happen. You can't really put a price on how many people this will have a very negative effect on their lives.

Posted by mike_ch

Brian, MGM was taking sales on all the other towers for at least months, if not a whole year before beginning to sell units at The Harmon. If you were planning to buy a condo there, you sat by and watched all the best condos in all the other towers be taken.

To a certain extent, you accepted that. On the other hand, MGM may want to do *something* to placate the people who sat by and watched all the best seats in Mandarin and Vdara and Veer be filled, only to be told that they aren't getting anything when it was their turn.

Harmon could have been built up to 49 floors but MGM decided it would just cost too much

http://www.lasvegassun.com/news/2009/jan/08/company-exec-says-scaling-down-most-logical-move/

Posted by Mark D

Investigation into how this happened.
http://www.lasvegassun.com/news/2009/jan/08/how-did-tower-flaws-persist/

I'm not sure what accounts for the discrepancy but the official word from MGM Mirage is that Harmon 1.0 would have been 47 floors (not 49). Harmon 1.1 will be 25 floors (or should that be Harmon 0.5?).

Well, unless they are just trying to offer some nice PR, MGM does seem to be going pretty easy on Perini. They say they still believe in the company and have a strong relationship, despite the problems at Harmon. This is good to hear if true, as Perini is hoping to land City Center AC if that ever happens, as well as future work in LV.

Breaking News... Light Group is renaming the Harmon's club - ReBar

Hasn't Charlie Palmer been trying to build a 400 room hotel for like 5 years... well here you go.

I honestly don't know how compelling a 400 room hotel without many facilities is compelling to MGM or the upscale traveller... "your room is within close proximity to boutiques should as Chanel and Louis Vuitton". OK.. how is this different than Wynn and Bellagio???

I guess Mr. Chow gets the boot as well?

This is for David McKee. The reason there is often discrepancies is that numbers 4, 13, and 44 are often skipped as they are bad luck. 4 and 44 is majpr bad luck in Chinese culture, and we all know about 13. That may explain the vanishing floors from "49" to 47 true stories.

Thanks, Ken. The intricacies of floor-numbering superstitions are -- obviously -- something I've never fully grasped, aside from the universal aversion to 13th floors.

As for MGM and Perini, the casino company has been on the Perini-is-always-right mantra for so long (particularly with regard to construction hazards) that it arguably can't push Perini under the bus now without looking hypocritical or worse.

This doesn't come as a shock. With the way the economy has taken a down turn we will most likely see more of this very soon.

Posted by Mark D

Yeah, Harrah's just canceled completion of the Octavius tower.
http://www.lvrj.com/news/breaking_news/37462974.html

Steel sticking out of concrete then cut off to hide problem. Wow that's really shotty

http://www.lasvegassun.com/news/2009/jan/15/watchers-were-not-watched/

I wonder if this will effect their ability to gain a LEED rating at all. Makes you wonder too what other little 'flaws' have been covered up.

NY Times writes about the silver lining in Harmon's construction defects and scope change:
http://www.nytimes.com/2009/03/15/realestate/commercial/15sqft.html?tntemail0=y&_r=1&emc=tnt&pagewanted=all