When the owner of CityCenter finally ended its relationship with contractor Perini Building Co., the last scene involved security staff escorting the contractor’s personnel off-site and then changing the locks. Like a bad divorce, this one could get expensive.
On March 25, Perini filed a lawsuit in Nevada state court against several entities controlled by CityCenter’s owner, MGM Mirage Inc. and Infinity World Development Corp., a unit of Dubai World, for $490 million in unpaid invoices.
“We are doing whatever we have to do to protect ourselves and our subcontractors,” says Ronald Tutor, chief executive of the contractor’s parent company, Tutor Perini Corp. “They simply stop making payments and start offering excuses. Their position is absurd.”
Two days later, MGM/Infinity booted Perini from the Harmon Hotel & Spa jobsite, the only CityCenter building still under construction. The 26-story Harmon had been scheduled to open later this year. In its lawsuit, Perini complained MGM/CityCenter was delaying Perini from finishing the job.
The project has since been “postponed until such time as CityCenter determines to proceed with its completion,” said MGM Mirage in a statement.
Harmon is shaping up to be the legal epicenter of Citycenter’s final battle over closeout costs. Harmon’s troubles first involved pricey repairs to reach its original height as a result of rebar floor links that were moved without receiving approval from the project’s structural engineer and Clark County building officials. Then, during the financial market meltdown in January 2009, MGM Mirage scaled back the oval-shaped glass tower to 26 stories from 48 stories, eliminating 200 high-end condominium residences of which only 44% sold. The move saves $600 million in construction costs and defers another $200 million for interior finishes, MGM Mirage says.
“We are investigating Perini’s liability to CityCenter due to construction defects at the Harmon Hotel & Spa,” says MGM Mirage spokesman Gordon Absher. “We believe CityCenter’s actual obligation to Perini is significantly less than the amount claimed.”
Perini considers the idea nonsense. Ronald Tutor says, “The Harmon issues are completely insured, and they’re hiding behind it.” Perini’s 13-page complaint says “certain issues relating to the lack of constructability of the design, as well as negligent third-party inspection,” are to blame for the Harmon’s troubles. The lawsuit also claims that the owner admitted that condos were being “eliminated due to market conditions.”
Perini and numerous subs have filed liens. MGM Mirage has asked for arbitration, but Perini says its contract called for arbitration for only changes, not closeout issues. Says an MGM Mirage spokesman, “Ultimately, the legal system will determine what jurisdiction it will go to and how it will all get worked [out].”