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Editor, The Konformist
COMMERCIAL REAL ESTATE
MARCH 27, 2009
Las Vegas Project Weighs Bankruptcy
Woes at Massive City Center Project, MGM Mirage's Centerpiece on the Strip, Rattle Casino Industry
By JEFFREY MCCRACKEN
And Tamara AudiCity Center, the $8.6 billion Las Vegas development owned by MGM Mirage and DubaiWorld, is preparing for a potential bankruptcy filing that could bring the massive project to a halt, according to people familiar with the situation.
MGM Mirage and investment partner Dubai World appear unlikely to make a $220 million payment due Friday on City Center -- a massive resort and casino project under construction on 67 acres. City Center has hired Dewey & LeBoeuf to prepare itself for a possible bankruptcy filing, and the firm's Martin Bienenstock, a noted bankruptcy attorney, is handling the work, according to people familiar with matter. The law firm of Weil, Gotshal & Manges LLP is working for MGM Mirage on a range of legal issues, according to these people.
A filing could come this weekend, depending on talks among MGM Mirage, its lenders and Dubai World, these people said. There is a possibility that any filing for court-protection could be averted if the talks lead to an agreement.
Dubai World, a conglomerate owned by the government of Dubai, has sued MGM Mirage for breach of contract and blamed it for cost overruns. It also signaled it won't provide its half of Friday's payment. MGM Mirage, meanwhile, is struggling to persuade its reluctant lenders to allow it to solely fund the project. While talks between MGM Mirage and Dubai World were ongoing Thursday night, there "may be no choice" but for City Center to file bankruptcy "if Dubai World doesn't fund," said a person close to MGM Mirage.
The casino company faces a cash crunch as it tries to meet obligations on more than $13 billion in debt. The company narrowly averted defaulting on loans last week and warned that it could default by mid-May.
City Center's troubles could spill out across Las Vegas. The project is a stark example of how excesses spawned during a lengthy gambling boom are coming back to haunt the casino industry. The project is so large that thousands of workers depend on it for jobs. At the same time, it has the rest of the city's casino industry on edge. If it gets built, it would add thousands of high-end hotel rooms that would cannibalize business from the city's gambling tables and hotels.
Missing Friday's payment would start the clock ticking on City Center's future. Work could grind to a halt within days, idling 8,500 construction jobs, said a person familiar with the talks between MGM Mirage and Dubai World. A delayed opening would also risk the jobs of 12,000 workers who are to staff the complex.
A shutdown of City Center "would be devastating to the southern Nevada economy," said Steve Ross, secretary-treasurer of the Southern Nevada Building and Construction Trades Council, which represents 22,000 construction workers.
Las Vegas, a city known for its elaborate multibillion-dollar resorts, is already reeling. Echelon, a $4.8 billion resort project on the Las Vegas Strip, was shuttered last year after its parent, Boyd Gaming Corp., and partner Morgans Hotel Group struggled to finance the project. A Las Vegas Sands Corp. condo tower sits unfinished after the casino operator decided to concentrate on finishing other projects. Several projects were canceled before work even started.
Las Vegas has suffered as tourism revenue has declined for more than a year. Unemployment hovers near 10%, and hotel-room occupancy rates have fallen to below 90% -- unusual for a town used to operating at near capacity.
City Center's over-the-top extravagance was conceived in a very different economic climate. When the project was unveiled in 2004, Las Vegas was at the height of a luxury-driven tourism boom. Gourmet restaurants were over-booked, room rates were skyrocketing and pricey shows were sold out. City Center was envisioned as the crown jewel.
MGM Mirage, controlled by billionaire investor Kirk Kerkorian, saw City Center as the next step in the evolution of both the company and Las Vegas.
The project, with two sleek condo towers, a 4,000-room resort casino, two smaller luxury hotels, a monorail, $40 million in public art and its own fire station, was envisioned as a "city within a city." MGM Mirage executives saw it as nothing less than a reinvention of Las Vegas.
Shortly after the project was launched, MGM Mirage Chairman and Chief Executive Jim Murren said, "City Center represents what we feel is a significant new direction for our city and our company."
Even under bankruptcy-court protection, construction could continue or be restarted once the two sides agree on how to fund the project. Neither company is likely to walk away. MGM Mirage has $1 billion in cash invested in the project, in addition to the land contribution. Dubai World has $4.3 billion invested.
While Las Vegas is worried about the impact on employment of a City Center delay, there is sentiment in the casino industry that any delay at City Center could help other casinos -- including those owned by MGM Mirage -- keep from losing even more visitors.
It is not clear what impact a City Center Chapter 11 filing would have on MGM Mirage's other finances.
MGM Mirage's lenders have become concerned enough about the situation that they have hired the law firm of Mayer Brown LLP as bankruptcy counsel, according to people familiar with the matter.
Bank of America and Deutsche Bank are the agent banks for MGM Mirage, said these people. MGM Mirage's lenders will not let the casino giant make the City Center payment Friday unless Dubai World makes its payment, according to people familiar with the matter.
MGM Mirage earnings are projected by Wall Street analysts to tumble to $1.2 billion to $1.6 billion this year, meaning to be in line with loan covenants it needs to reduce its debt to between $9 billion and $12 billion.
Write to Jeffrey McCracken at jeff.mccracken@...
US tent cities highlight new realities as recession wears on
Oliver Burkeman in Washington
guardian.co.uk, Thursday 26 March 2009
For years, Joan Burke has had to battle the fact that homelessness, for most Americans, is an invisible scourge. Recently, however, invisibility hasn't exactly been the problem.
Ten minutes' walk from where she works, at the homelessness charity Loaves and Fishes, in Sacramento, California, lies an all-too-visible "tent city" - a shanty town, built on wasteground beside railway tracks, that has become one of the most prominent symbols of the recession.
Tent cities reminiscent of the "Hoovervilles" of the Great Depression have been springing up in cities across the United States - from Reno in Nevada to Tampa in Florida - as foreclosures and redundancies force middle-class families from their homes.
"Where the tent city is now is literally a toxic waste dump, it's unsafe, but these people are very resourceful," Burke said. "Some people are living in squalor, with just a tarp tied to a chainlink fence. But then you'll see someone with several tents: The tent they live in, plus some outbuilding tents. And they couldn't be more neat and more tidy. They're working hard to create a sense of home."
Many of the 200 residents of Sacramento's Tent City, as with those around the country, are not recent victims of the downturn: They are the chronically homeless, some of them mentally ill. But the encampment seized national attention after Oprah Winfrey featured it on her daytime television show, part of a series of reports she has been running on the "new faces" of homelessness.
Embarrassed by an influx of television crews, Arnold Schwarzenegger this week announced plans to house the tent-dwellers in a nearby convention centre until a $1m (£690,000) plan for more permanent shelter can be implemented.
The California governor told reporters he had "personally delivered a letter to President Barack Obama last week, to request that economic stimulus funds for the homeless be fast-tracked".
Obama grappled with the phenomenon on Tuesday, when a reporter at his primetime news conference asked him about the "tent cities sprouting up across the country". The president said he was "heartbroken that any child in America is homeless", adding: "The most important thing I can do on their behalf is to make sure their parents have a job."
In both the number and types of inhabitants, the new tent cities do not equate to the homelessness of the 1930s. But the symbolism is powerful, and may have significant political consequences. It was not all that far from Sacramento, or from Fresno - home to another Californian tent city - that the celebrated Depression-era photographer Dorothea Lange took her haunting photos of families living in makeshift camps, forced west by the collapsed economy and the Dust Bowl further east.
"We all take care of each other," Michelle Holbrook, a 34-year-old resident of the Sacramento camp who lost her job as a carer, told the San Jose Mercury News. "I've become the camp mother: I do most of the cooking, and make hot water for coffee." A resident of Reno's tent city, Tammy, said: "We eat things that other people throw out, or whatever ... It's really embarrassing to say, but that's the way it sometimes is out here." Another Reno tent-dweller, Jim, told one of Oprah's reporters it was "like learning how to live all over again".
Obama's stimulus package includes $1.5bn for emergency shelters, and, if passed, his budget should significantly expand funding for affordable housing. Philip Mangano, director of the US Interagency Council on Homelessness, has called the stimulus funds "manna from heaven", saying they would boost his two-pronged strategy of preventing homelessness while rapidly re-housing those who fall victim to it. Last year, the US government reported that homelessness in America had declined by 30% between 2005 and 2007.
Burke, whose organisation provides food and shower facilities for Sacramento's Tent City residents, has mixed feelings about the national media exposure. It may help build support for addressing the problem, she said, but also threatens to reinforce a distinction between the "deserving" victims of the recession and those who have been homeless for longer, and for other reasons.
"It's an oddity of human nature that we are more about people who have suffered for a short time, rather than people who have suffered for a long time," she said. "When we can identify with somebody's situation, obviously, our empathy is engaged quickly: You can look at someone and say, 'You know, goodness, they owned their own home, they look like I do.' But if someone's been homeless for a while, they no longer look like we think we look. If you're living in a tent, it doesn't take long before you're somewhat unkempt and dirty, because you're living in the dirt."
The changing economy has, accordingly, thrown very different kinds of people into close quarters with one another. In Fresno, freelance electricians and truck drivers, employed until months ago, rub shoulders with crack addicts and those with serious psychological problems. There have been reports of violence in one part of Fresno's encampment, known as New Jack City, but Burke said what really impressed her in Sacramento was the degree of cooperation.
"There is a sort of very pure democracy and self-governance at play. People are making up the rules of their cluster of tents, deciding what's permitted, just as in any sort of community," she said. "You don't want to romanticise this - it isn't camping - but there is a community, and there is a sense of helping others. We've had a series of storms here recently, and if there's somebody new who doesn't have a tent, people will take them in. It's that understanding that, you know, there's somebody worse off than I am."
G20 Summit: university professor suspended over bankers 'hanging from lampposts'
27 Mar 2009
An organiser of G20 protests, Chris Knight, was suspended from his job as a university professor after he warned bankers could be "hanging from lampposts", it was reported.
Mr Knight, the professor of anthropology at the University of east London who is organising protests under the banner G20 Meltdown, told BBC Radio 4's PM on Wednesday: "We are going to be hanging a lot of people like Fred the Shred from lampposts on April Fool's Day and I can only say let's hope they are just effigies.
"To be honest, if he winds us up any more I'm afraid there will be real bankers hanging from lampposts and let's hope that that doesn't actually have to happen.
"They should realise the amount of fury and hatred there is for them and act quickly, because quite honestly if it isn't humour it is going to be anger.
"I am trying to keep it humorous and let the anger come up in a creative and hopefully productive and peaceful way.
"If the other people don't join in the fun I'm talking about the bankers and those rather pompous ministers and come over and surrender their power obviously it's going to get us even more wound up and things could get nasty. Let's hope it doesn't."
The University of east London told the BBC that the professor was yesterday suspended from duties while an investigation took place into his comments.
The statement read: "Professor Chris Knight has been suspended from his duties at the University of east London, pending investigation.
"In order not to prejudice this process we cannot make any further comment."
Swiss banks ban top executive travel
By Richard Milne in Geneva
March 26 2009
Switzerland's private banks have started to ban their top executives from travelling abroad, even to neighbouring France and Germany, because of fears they will be detained as part of a global crackdown on bank secrecy.
The head of one leading private bank in Geneva said the growing determination of countries such as the US and Germany to tackle tax evasion and secrecy meant banks felt they had to take extra measures to protect employees.
"Some banks have taken this precaution," he said. "If today I go to Germany to visit two banks I deal with...German customs can take me in and question me."
The travel bans, which have not been brought in by all banks, have focused on those visiting the US, following the detention there last year of a senior private banker from UBS, Switzerland's biggest bank, as part of a federal tax investigation.
The head of the private bank, which itself has no travel restrictions, said: "Today if you are a banker from Switzerland going to the US you have to fear you will be taken in for questioning. I am thinking twice about going to America."
However, four people in the private banking industry in Geneva told the Financial Times of banks bringing in total travel bans for staff, even for adjoining European countries.
"Private bankers aren't even travelling to France. The partners are not leaving Geneva at all," said a senior industry figure close to several private banks. No bank contacted by the Financial Times wanted to discuss the matter publicly.
The restrictions come ahead of next week's Group of 20 summit where a clampdown on tax havens is set to be discussed.
Under pressure from other countries, Switzerland, which is estimated to account for about a third of the world's $11,000bn in clandestine personal wealth, agreed this month to ease its bank secrecy laws and accept international standards on tax transparency.
From their discreet offices on a luxury goods shopping street overlooking Lac Leman, private bankers in Geneva reacted this week with a mixture of intense anger, at what they see as an unjustified attack by big countries, and concern about the threat to their business model.
"It is not really about bank secrecy; it is about solving an internal problem [for the big countries] by finding an enemy outside to bash," said one senior banker.
Joe the Plumber gets another gig
By John Amato
Friday Mar 27, 2009
This is not a joke. Americans for Prosperity, an anti-Employee Free Choice Act group, is hiring Joe the Plumber to speak at rallies against the average working class in America.
Joe the Plumber is hitting the campaign trail again! He's been pressed into service to do a series of events throughout Pennsylvania rallying opposition to the Employee Free Choice Act, the organizer of the events confirms.
Mr. Plumber will speak at rallies against the measure in Pittsburgh, Harrisburg, and Philadelphia on March 30th and 31st, according to a spokesperson for the anti-EFCA group Americans for Prosperity.
"The public loves Joe the Plumber," the spokesperson, Mary Ellen Burke, claimed to me. "They see him as a role model."
Asked whether Joe the Plumber had any particular knowledge or expertise about EFCA that might explain the decision to enlist him, Burke said that he was being enlisted to provide a "grassroots perspective" and "the working perspective" on the measure.
Pressed on whether Joe the Plumber has any particular claim to being a spokesperson on the issue, Burke replied that "he represents the American worker." Burke couldn't immediately say whether Joe the Plumber was being paid for his appearances.
Wonder if he'll tell the anti-EFCA crowds they make him horny, too. Sounds like a sure recipe for success.
The public doesn't love Joe the Plumber, insane conservatives do. This only makes things look so much worse for Republicans in this country. How weak and foolish Susan Collins or Olympia Snowe must feel seeing that Joe the Plumber is being billed as a celebrity in the GOP. It's so pathetic.
I guarantee you that after his run dies -- well, OK, it may never die, because they are a leaderless party, and he's about as qualified as any of them -- but when it does and if a union job opens up for him, he'll take it in a second.