WILMINGTON, Del. (CN) -The future of the $8.8 billion CityCenter mega-resort on the Las Vegas Strip – the most expensive private commercial development in U.S. history – was threatened Monday after a subsidiary of Dubai World Development sued MGM Mirage, the project’s developer, for breach of contract.
Infinity World, as 50 percent owner of the project, accuses MGM Mirage in Delaware Chancery Court of mismanagement, blowing the project’s budget despite significant downsizing, and forcing it to bankroll $5 billion more than originally planned. It also asks to be relieved of its future obligations to the project.
Claiming it is “being asked to pay significantly more for a project that is considerably less than it bargained for,” Dubai World warned in its lawsuit that the “current path of the project is simply unsustainable given our partner’s financial troubles.”
Pre-Recession plans for the 67-acre development in the heart of the Las Vegas Strip called for a hotel-casino, high-rises, condos and a mall. The project broke ground in 2005, is set to open in phases starting in late 2009.
Infinity World claims that MGM informed the Securities and Exchange Commission in March that it lost $1.1 billion in the fourth quarter of 2008, and warned of possible default that could force it to seek bankruptcy protection.
Dubai World says MGM’s alleged “written admission” of its inability to pay its debts in the company’s Form 10-K filing constitutes a breach of contract, adding: “MGM admitted there is substantial doubt it will even be able to continue,” the lawsuit states.
The project was originally estimated at nearly $7.5 billion, but Dubai World claims that MGM has increased that estimate to $8.8 billion, of which MGM has raised only $1.8 billion, the lawsuit states.
Dubai World, which also owns 9 percent of MGM Mirage, is represented by Donald Wolfe with Potter Anderson of Wilmington, Del.
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