Las Vegas trophy project becomes symbol of trouble

By Damon Hodge

LAS VEGAS (Reuters) - It was conceived as the centerpiece of a thriving Las Vegas -- one of the world's most expensive building projects that would bring back glamour to the Strip and cap an unprecedented three-year economic boom.

Instead the $9 billion development named CityCenter -- touted as the city's most ambitious endeavor -- has come to symbolize a global retail and leisure slump and the city's struggles to come to grips with crushing unemployment and dwindling casino revenue.

Partners MGM Mirage -- struggling to bankroll the project's ballooning cost -- and Dubai World had pondered placing the development under bankruptcy, thrusting its future into question, sources say.

Things appear to be buzzing along at the 67-acre glass and steel mini-metropolis of envisioned condominiums, hotels, shops and casinos in the middle of the Strip, dwarfing MGM Mirage's own sprawling Bellagio and Harrah's Caesar's Palace.

The complex is scheduled to open in phases starting late this year, although analysts say it's unclear if that target will be met.

Motorists and pedestrians slow to gawk at buildings glittering in the desert sun, while workers in white hard-hats and orange vests throng the site.

But trouble is brewing beneath the surface. In March, Dubai World, the development arm of the United Arab Emirates, sued MGM Mirage, claiming mismanagement and wanting out of further financial commitments. The U.S. company hired bankruptcy counsel, setting off alarms about solvency. And the company was forced to inject an emergency $200 million to keep construction going.

"The events of the last six months have been our Pearl Harbor, economically," said Bill Thompson, gaming expert and professor of public administration at the University of Nevada, Las Vegas. "CityCenter might be too big to fail. If it opens, it's a dramatic gesture that says we're winning, we're not defeated, we're on the way back."

"If it fails, it would be like a second Pearl Harbor."

It now needs $800 million more to access a $1.8 billion credit facility to let it complete the project, but funding prospects look bleak in a global recession.

Hope hovers on the horizon. MGM Mirage, which a source said had hired Morgan Stanley to advise on selling its other casinos, is in discussions with Colony Capital LLC about investing in CityCenter, sources say. Australia's Crown Ltd has denied speculation it too was considering sinking money into the project.

WOE BEGONE

Investors fled as the recession killed a three-year boom. MGM Mirage's shares have plunged 95 percent in the past year.

CityCenter's financial woes are the latest in a string of setbacks for a project that promised to change how people think of Vegas and was called the nation's most expensive, privately financed construction when it was announced in November 2004.

MGM Mirage enlisted a coterie of renowned architects including Cesar Pelli and Norman Foster to design what ex-CEO Terry Lanni called a "paradigm-shifting project."