After lengthy hearing, it’s clearer than ever that Harmon is doomed to demolition

The Harmon Hotel at CityCenter sits unfinished with the Veer Towers seen in the background on July 29, 2011.

It’s almost certain that the Harmon hotel tower in Las Vegas — which a top CityCenter executive calls a “monument of construction defects” — will be demolished sooner or later in spectacular and unusual fashion.

Las Vegas is well known for imploding its aging hotels and casinos — the Stardust and the New Frontier were among the most recent to come down.

What’s unusual for the Harmon is that it’s a brand-new, almost-completed structure. No one can recall such a large building — 26 stories — having to come down locally without opening.

But during a four-day hearing last week in a lawsuit over whether the building could be demolished, nothing emerged to indicate it will be saved. Instead, with its prime location on the Las Vegas Strip and hefty construction cost — $279 million, which was long ago written off by CityCenter — the Harmon is poised to be remembered as the one key component of the $8.5 billion CityCenter resort complex that never opened because of defective work there.

That defective work, blamed on both design and construction flaws, has rendered the Harmon a public safety hazard, according to Clark County’s building department.

Dueling engineers for CityCenter and its general contractor, Perini Building Co., disagree on whether, because of the defects, the Harmon would collapse in an earthquake or a fire that could weaken its structural steel.

Court testimony in a Harmon lawsuit last week showed the engineers for both sides agree that the Harmon has plenty of problems. Where they disagree is if it’s worth spending time and money to design and execute extensive repairs to make the building code-compliant.

CityCenter, Perini and its subcontractors have been fighting over the defective work and blaming each other in a massive lawsuit since 2010. Besides the issues over defective work, the contractors claim to be owed $192 million for their work — a sum CityCenter disputes, given the condition of the Harmon. Another dimension to the lawsuit — how CityCenter’s finances have been harmed by the unusable condition of the Harmon — is likely to be developed in coming months.

CityCenter is now asking Clark County District Court Judge Elizabeth Gonzalez for permission to implode the Harmon prior to a February 2013 trial on the defects and CityCenter’s refusal to pay the contractors.

Gonzalez’s permission is needed because the structure is a key piece of evidence in the lawsuit. CityCenter and its manager and half owner, MGM Resorts International, say enough evidence has been collected about the defective work for the trial to proceed without the building standing.

Perini and subcontractors deny a

CityCenter engineer’s assertion that the Harmon would fall in an earthquake and insist the building should remain intact through the trial. That way, they say, more evidence can be examined as needed, and the jury won’t be influenced by the fact that the tower was imploded.

The issue in the legal fight about CityCenter’s implosion plan is less about whether the Harmon will be demolished than when the building will be removed.

Clark County has ordered the public safety hazard posed by the Harmon abated, and it gave CityCenter the choice of doing that with either repairs or demolition. CityCenter chose the demolition route.

Since work was halted on the Harmon in early 2010, MGM Resorts officials have made it clear the Harmon could never be used for the only purpose it was designed for: a hip, upscale hotel. And they’re not interested in arguments by Perini that it can be repaired. Who would want to stay in the Harmon after the worldwide publicity about its defects, even if it is repaired, they ask.

“As we have said since last August, our experts are convinced that the fastest, surest and safest way to protect public safety from this unusable monument of construction defects is to tear it down,” said Gordon Absher, vice president of public affairs for MGM Resorts International.

“Because of the magnitude of construction defects, the public safety issues and the reputational damage already suffered at the Harmon, CityCenter plans to address by demolition the public safety issues presented as soon as it is legally able to do so,” Absher said Friday.

None of this, of course, is a secret to Perini. The company earlier tried but failed to convince Gonzalez it had a right to repair the Harmon under Nevada law.

Testimony by one of Perini’s hired engineers last week — coupled with the company’s knowledge that CityCenter is set on demolishing the building — suggested the company is aiming mainly at limiting damages against it in next year’s trial. The engineer contended that the Harmon was improperly designed and could be repaired.

Once the decision is made to proceed with the implosion, the process would likely take a year or so and cost about $30 million. Crews would first spend four to five months preparing the site and then, after the implosion, another five or six months hauling away debris and cleaning it up.

Before the building is imploded, plans call for its glass skin and the ground-level podium structure adjacent to the tower to be disassembled and removed. That would leave a huge pile of concrete and steel to be hauled away after explosive charges take down the building in a controlled fashion.

CityCenter hasn’t disclosed what plans may be in the works, if any, for the Harmon site after the planned implosion.

“CityCenter is currently more focused on addressing the public safety issues presented by the defective structure than over future plans for a very valuable piece of real estate,” Absher said.

As reported by the Sun in January 2009, problems at the Harmon were detected by county inspectors in the summer of 2008. Among the building code violations reported by inspectors were missing or improperly installed reinforcing steel and missing critical connections between structural elements.

Because of the flaws, what had been planned as the 47-story Harmon Hotel & Spa was dramatically reconfigured in what was seen as a major embarrassment to CityCenter. Plans were scrapped for 200 condominiums to be built atop the Harmon’s 400 hotel rooms, and CityCenter at the time decided to cap construction at 26 floors. Two years later, work was again halted — likely permanently — when even more defects were found in the structure.

The construction problems came at a time when CityCenter and MGM Resorts International faced significant financial hurdles. The recession made it difficult for MGM Resorts and its partner in CityCenter to finalize financing for the project, and the partners squared off in court over CityCenter’s financial issues.

MGM Resorts and CityCenter eventually resolved the financial problems.

But the Harmon remains at issue — not only in the building defect lawsuit but lawsuits filed by shareholders over MGM Resorts’ stock price sinking from more than $15 in early January 2009 to $1.89 on March 5, 2009.

The shareholders contend MGM Resorts officials had failed to disclose the company’s deteriorating financial position in 2008 and early 2009. What’s more, they claim, company officials didn’t promptly report “that serious problems were plaguing the construction of CityCenter.”

Among the information company officials kept secret, the shareholders claim, were notices of violation from building inspectors at the Harmon between July 2008 and September 2008.

“According to former MGM employees, defendants actually knew of these issues as early as June 2008. But, in an effort to maintain the company’s artificially inflated stock price, defendants failed to disclose any of these facts,” one suit says.

Attorneys for the shareholders say they’ve been told by “Confidential Witness 8 or CW8” — a Harmon project engineer for Perini — that design problems with the podium portion of the Harmon surfaced even earlier, by November 2007.

“The full scope of the tower’s problems then became apparent in June 2008, when, according to CW8, structural engineers from Halcrow Yolles (one of CityCenter’s engineering firms) identified significant issues with the columns, which are used to hold up the floors,” one of the shareholder lawsuits says.

“CW8 also stated that Halcrow Yolles discovered that the ‘link beams’ on certain floors of the tower were wrong and that the problems could cause the walls of the building to collapse,” the suit says.

MGM Resorts denies assertions it failed to disclose required information to shareholders and has been fighting the shareholder suits.

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Discussion 8 comments

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  1. Wow! The implications of this are staggering.

  2. As a local, I expect we will somehow pay for this. Certainly when the 4 am on a Tuesday demolition happens we will pay as a city. Debris is everywhere after one of these. A quadrant of the city downwind gets covered in debris, soot and dirt. We will get to watch a pile of concrete and steel laying half on the street for six months. We build, implode, build, implode. When will it be enough here?
    We have no water here, yet we add hotel rooms, toilets, sinks, fountains and showers at an exponential rate. These water abusive devices are used by tourists who do not care about waste in 'Their' vacation town. We in turn, suffer enormous utility prices, and an extreme lack of water here in So Nevada.
    The casino business brings more people into our city in a day than it did in a year in its infancy. We are suffering in the worst economic times we have seen certainly in my lifetime. We build stuff way too fast with little or no regard for the consequences or the local people and environment. They say "We are building more rooms for our future!" or "Building more rooms makes more jobs for our locals." That didn't work when we were booming so why would we keep doing the same thing, causing the same problems?
    Tear the building down and leave it down, plant a giant tree there. But we wont though. Blind corporate greed will not allow it.
    We have 110,000 square miles of sun soaked land in Nevada we could be covering with solar panels and cannabis plants. Turn the economy around and diversify. We could be enjoying free energy for the state, positive environmental changes to soil and dry barren land by adding water, nutrients, plant matter and jobs. We could be selling electricity, hemp, cannabis products to many many other states and could turn around this state and be first at something again in America besides nuclear weapons, and legalized gambling. We could legalize marijuana use and our state would be out of the red and into the green in a year. It is already legal medicinally but illegal to acquire in the state. If we went into the growing trade as a state we could open the dispensaries local law shut down because of ignorance of the law and illegal arrests.
    But we will build more rooms, more malls, more casinos, more pretentious restaurants and night clubs locals can't afford two gigantic ferris wheels a couple blocks apart, mob museums and a bullet train to Victorville.. We will make sure there are plenty of places to drink Alcohol (Arguably one of the most deadly substances known to man), pick up hookers and lose all your money. Don't forget to throw up on the sidewalk while you are here because, What Happens in Vegas, Stays in Vegas.

  3. Chunky says:

    What a mess! Everyone was buying and building everything at record place and something like this was bound to happen. It's simply unbelievable it could happen at this scale. Imagine all the construction defects hidden amongst the smaller commercial and residential construction that went up.

    Mr. Sevenfoot, surely when they sell the film rights for the implosion of Harmon they'll bring in crews from LA to shoot it and locals will get the scraps and leftovers. Chunky agrees with you on the solar farms but maybe not so much on the cannabis farming; we don't have the natural soil, precipitation and the climate to support it on a large scale. Nor does the Chunkster himself partake any more; been there, done that. He does however support your freedom to ingest whatever you see fit as long as it does not create safety issues for those around you.

    Back to the issue at hand, this will take many years to sort out in the courts and is bad press for MGM and Las Vegas. However, if Chunky were a juror he'd want the evidence preserved for a trial so the he and other jurors could visit the site to see what the contrasting expert testimony is claiming.

    Meanwhile, Mr. Murren's $500 million billboard will haunt the Strip for a years to come.

    That's what Chunky thinks!

  4. The structural engineer designs where the rebar goes.
    The concrete contractor is supposed to install it where and how the drawings show it.
    The inspector checks to see that it has been done correctly.

    So if the design was flawed, it should have been caught and corrected during plan check.
    If the installation was incorrect, it should have been caught in the field before the concrete was poured.

    So why do we have THIS situation?

    The inspectors already look like incompetents. As for the rest, it will all come down to who knew what and when they knew it.

  5. Demo'ing the Harmon has to happen at this point. For, the damage to the building's reputation - right or wrong - is a PR disaster. There's no way tenants or guests would feel safe in such a building after the concerns raised. And, liability-wise, it's hard to imagine an insurance company being willing to insure a building that some engineers have declared unsafe.

  6. As I see it there are two blockbuster issues here:

    1. Inspection failure. The requirement for inspection at each important stage of construction is supposed to prevent defective structures. It was successfully argued that private, third-party inspectors would be more efficient and cost-effective that the public inspection system. This project was one of many which apparently had private third-party inspection rather than public inspection.

    A. It was more efficient -- if you measure efficiency by how little the builder had to actually comply with the plans -- but the private third-party inspection system appears to have utterly failed on this project.

    B. I'm with Chunky in wondering just how many other buildings are out there now, waiting to fall down because someone cut corners and the private third party inspectors missed it (or deliberately ignored it) and passed the buildings.

    2. Management failure to protect the corporate interest. There may be two interesting examples here:

    A. At Perini and its subs: Rushing through the construction steps without completing them, to save costs and maximize profit. This is a consequence of allowing advancement and compensation to be based on short-term profit rather than a balance of short and long term profits. If I complete this building in record time, take all the costs out of it and the result is a huge profit, I get big money, a promotion, and a record I can use to get a new job somewhere else with even higher pay and benefits. When the building falls down or has to be torn down, I'm (1) rich and (2) gone. The shareholders and the managers who follow me and have to clean up my mess are just SOL.

    B. At MGM. Perini alleges that the MGM management knew of the problem but did nothing. If true (and what Perini claims is just a claim and not yet proven), it would seem to violate Sarbanes-Oxley and the Securities Acts. This must have been a material transaction for MGM, and if so, MGM management would have had to report what they knew and indicated the financial consequences to the Balance Sheet and the Income Statement. If Perini is right (and I'm not saying it is), then it would provide another illustration of the pernicious effects the focus on short term profitability as corrupting management to the detriment of shareholders. Perhaps this is projection by Perini (whose management had the same reporting and disclosure responsibilities). But if true, we need to rethink a whole host of things because the actions of management(s) in this instance were obviously not in the best interests of their companies and shareholders..

    Whatever the causes, we have at least one building which can (A) collapse on our customers passing by it and (B) take down anyone unlucky enough to be inside it when it collapses. We need to make sure that things like this do not happen again.

  7. Chunky, you almost made me shoot soda out of my news with your comment. I also have to join the cacophony of people agreeing with you about shortcuts being taken in building hotels in Nevada. I would have to say that the MGM fire would have never happened without shortcuts in building. I wonder about the MGM / Grand Sierra / whatever it is called these days up in Reno because it was constructed in less than 26 months, setting records all the way.

  8. City Center had, what, seven different design architects? Plus management, plus contractors, plus MGM - if I were a lawyer I'd be looking hard at project controls.

    BTW, I just read a case study of a building in Portland, Oregon that stood empty for 18 years - it never got its Certificate of Occupancy. The case study didn't document why the CofO wasn't obtained, but did mention a few things like floors out of flat by 4". Recently the building was bought and renovated, including a new outer curtainwall skin and turned into a hotel. I wouldn't give up on the Harmon too quickly.