CityCenter was supposed to be the next great Las Vegas megaresort when it was completed in December 2009. But less than five years after it was completed one of the property's most visible towers is being taken down piece by piece because it's a danger to public safety.

MGM Resorts (NYSE:MGM) and Dubai World, who jointly own CityCenter, discovered halfway through construction that Harmon Tower at the front entrance of the $8.5 billion resort is structurally unsound. The tower is at the middle of a $400 million lawsuit between the owners and builder Tutor Perini (NYSE:TPC) even as the tower is taken apart piece by piece.

It's potentially the biggest mistake in Las Vegas' history given the fact that Harmon never generated a dollar of revenue. Now it won't even be given the chance. 

Harmon Tower Construction

Harmon Tower nearing its "completion" in late 2009. Image is in public domain.

The $400 million mistake
The initial problem discovered at Harmon Tower was rebar that was misplaced within 15 floors of the building, weakening the entire structure. A large slab of concrete won't support even its own weight on its own so rebar is included in the middle of the structure to hold the concrete together. But if it's placed too high or two low in a floor it won't hold together and it will weaken the whole structure.

Harmon Tower Las Vegas

For five years the Harmon Tower has been little more than a billboard for MGM Resorts. Image source: Wikimedia.

After the problem was discovered, the plan was to cut the building's height from 47 stories to 28, but testing by structural engineering firm Chukwuma Ekwueme discovered over 7,000 defects. By the time testing was completed, which included pulling out samples, the building wasn't even salvageable.

In August, the court ended a 5-year period of limbo for the building by approving demolition.

Who pays for Las Vegas' Harmon Tower debacle?
The question now is who pays for this $400 million mistake? MGM and Tutor Perini have been arguing over who is at fault and courts have yet to decide. MGM and Dubai World are missing out on hundreds of millions in potential revenue, especially when you consider the condo sales from upper floors of Harmon Tower.

There's also the indirect benefit of more gamblers traveling through CityCenter and neighboring Bellagio and Monte Carlo that the tower could have brought. Its central perch overlooking the middle of the Las Vegas Strip could have garnered some of the highest room rates on The Strip.

Instead, CityCenter has generated $44.0 million in operating losses over the past year, a terrible figure for a brand new $8.5 billion resort. Even if Tutor Perini is found responsible for the $400 million tower debacle, the resort has lost five years of potential revenue that could have made the entire resort profitable.

From Tutor Perini's perspective, it has already recorded most of the losses it expects from the Harmon Tower and management expects insurance should cover lawsuit claims. In many ways, it's business as usual until the trial with MGM begins in February.  

Whatever happens in the court battle, Harmon Tower is coming down and one of the Strip's biggest debacles will soon be over. MGM says it doesn't yet have plans for the land, but given the losses it already incurred at CityCenter, I doubt it would want to disrupt operations with another construction project.

Gambling is a risky business but who knew that risk would make its way to a hotel tower in the middle of the Las Vegas Strip?

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.