Las Vegas bets big on $8.5 billion CityCenter project

LAS VEGAS — Sin City is pinning its biggest bet ever — $8.5 billion — on a 67-acre, six-tower complex of striking hotels, gourmet restaurants, swank shops and a single casino that starts opening today in the heart of the Las Vegas Strip.

Many watching the high-stakes roll of the dice shudder at the thought that nearly 5,900 rooms in three hotels will be awaiting guests when CityCenter's crown jewel — the 4,004-room Aria Resort & Casino — opens Dec. 16.

That will increase Las Vegas' already saturated inventory by more than 4 percent at a time when fewer visitors are coming and room prices have fallen 25 percent from last year.

CityCenter's debut might pull rates even lower, but state leaders hope the complex leads Nevada out of two years of economic misery that has hit the state with record unemployment, foreclosures and bankruptcies.

"We're in a 12-round fight. The first six rounds, you guys got beat up," Tony Alamo of the Nevada Gaming Commission told CityCenter owners MGM Mirage and Dubai World when Aria's license was approved.

"We're putting all our eggs in the 'grow-the-market' basket. I would be lying to you if I wasn't concerned — that's a reality," he said. "This is not just the company, it's the state."

MGM Mirage and Dubai World each have billions in debt in the CityCenter project, and Dubai World last week asked creditors for a six-month break from payments on the $60 billion it owes creditors. And on Monday, a top Dubai finance official says Dubai World's debt is not guaranteed by the emirate's government.

Abdulrahman al-Saleh, director general of Dubai's Finance Department, says lenders to the conglomerate bear some responsibility for the current crisis. He says they lent money based on the viability of the firm's projects, not because of government guarantees.

MGM Mirage officials say the Dubai World situation won't affect CityCenter; the partners agreed with banks in April to fully fund and finish the project.

MGM Mirage spokesman Alan Feldman said the agreement includes cross-default language that protects the company against any issues at Dubai World.

Rise and fall

When The Mirage opened in 1989 in Las Vegas, it launched two decades of expansion that more than doubled the number of rooms in Las Vegas to some 141,000 today. A record 39.2 million visitors came to Sin City in 2007, but that dropped to 37.5 million last year as the recession kept many people away.

Sin City's rapid growth came to a halt, crippling casinos and construction, the state's two largest industries. Nevada's unemployment hit a record 13.3 percent in September.

Including condominiums, CityCenter will have nearly 6,800 units open early next year with 400 more hotel rooms planned.

Phil Ruffin, who owns the Treasure Island casino-resort about 1 ½ miles north of CityCenter, said new hotels have historically helped tourism but CityCenter is opening into unprecedented economic circumstances.

"It's going to be bloody out there," the Kansas billionaire told The Associated Press. "We wish them all the success in the world because it would help the whole city of Las Vegas, but I can't think of a worse time to open up 7,000 rooms."

A downtown design

CityCenter has 18 million square feet in six soaring glass towers and a retail promenade, all built to give visitors a sense of its enormous scale. Each building has gold certification from the U.S. Green Building Council's Leadership in Energy and Environmental Design program.

The modern design evokes the feel of a major city's bustling downtown, in contrast with the sprawling resorts that have dominated the Strip, including an Egyptian pyramid, Venetian canals, a pirate show and a volcano.

MGM Mirage and Dubai World hired 12,000 workers from a pool of 175,000 applicants, calling it the largest employment opportunity in the U.S. this year.

However, the end of construction at CityCenter will mean about 10,000 laborers must find other projects — something nearly impossible in Las Vegas these days.

CityCenter's owners now find themselves fighting for returns on a resort valued at roughly $4.88 billion as of Sept. 30, less than 60 percent of its construction cost, according to estimates MGM Mirage released last month.

Competitors, meanwhile, will see if CityCenter brings more visitors to Las Vegas, then fight to get them in their casinos.

"It's going to be a scramble about customers," Ruffin said. "No doubt about that."

Dubai World heavily

invested in U.S. hotels

Dubai World borrowed billions of dollars to acquire some of the most high-profile commercial developments in the United States in recent years, and it could be forced to sell them at a loss if the Persian Gulf conglomerate can't restructure its debts. Among Dubai World's U.S. assets are several luxury hotels — a sector that has been one of the hardest hit by the fallout from rising unemployment and plunging real-estate values this year.

Dubai World has $5.4 billion invested in CityCenter Casino & Resort in Las Vegas. And one of Dubai World's biggest units, Istithmar World, spearheaded the holding company's acquisition of the Mandarin Oriental, New York, for about $380 million in 2007, and a 50 percent stake in the Fontainebleau Miami Beach for about $375 million last year.

The U.S. commercial real-estate market is in the midst of the most severe downturn in decades, and that's led to a surge in loan defaults. In many cases lenders have opted to give borrowers more time rather than face taking over properties in a declining market.

But should Dubai World be put in the position where it has to sell some of its U.S. assets — many of them bought at the top of the market — it may struggle to find buyers and likely face steep losses on its investments. U.S. hotels have generally lost almost half their value since the peak in 2007, according to Fitch Ratings.

The Associated Press