Monday, 2 February 2009

Harcourt Briefing - 2009

The latest news - note (a) the Harcourt lay-offs of employees and shut down of its local office in Vegas (b) the next critical court decision is expected in March.

GSG Development renews lawsuit over failed high-rise project

GSG Development recently renewed its lawsuit against former partner Harcourt Development of Dublin, Ireland, over costs associated with a failed high-rise project in the southwest Las Vegas Valley. The war of words last year led to Clark County District Court. In April, Las Vegas-based GSG Development charged Harcourt with nonpayment of expenses related to Sullivan Square, a planned $1 billion mixed-use complex at Durango Drive and the Las Vegas Beltway.

The project's development entity, Sullivan Square Harcourt LLC, was a 60-40 joint-venture between Harcourt and GSG, respectively. The two parties formed the joint-venture in 2006. GSG Development, the project's managing partner, was responsible for acquiring the land and entitlements, while providing design, development, and construction management services. Harcourt, meanwhile, agreed to underwrite all costs in exchange for majority ownership.

On Aug. 7, Clark County District Court Judge Mark Denton dismissed most of the items contained in GSG's lawsuit. The ruling claimed that the limited liability corporation was not the proper plaintiff. GSG has since filed under its own name. It's seeking reimbursement of roughly $10 million to $20 million in expenses as well as unspecified damages. Calls to GSG seeking comment were directed to the company's attorney.

The legal dispute rages on between former development partners of Sullivan Square at Durango Drive and the Las Vegas Beltway. The site today remains a vacant lot.

"Harcourt had GSG perform millions of dollars of services and agreed to reimburse them on behalf of the entity," said John Manly of Manly & Stewart, a Newport Beach, Calif.-based law firm representing GSG. "They simply refused to pay, despite assurances that they would."

Calls to Harcourt seeking comment were not returned by press time. The company has reportedly shuttered its local office and laid off employees. The 16.5-acre site for Sullivan Square today remains a large dirt hole. Work stalled three months after breaking ground. No visible construction has occurred since November 2007. The project's contractors and consultants are owed money as well. They have since filed a combined eight liens and two lawsuits against the project seeking payment.

"This was a very calculated decision by Harcourt to defraud (GSG Development) and not pay the contractors," said Manly. "You have an Irish developer that is used to getting his way and muscling people around. You can't do that in the United States."

The project's future appears uncertain. Plans had originally called for eight buildings from 12 to 20 stories tall combining for 2 million square feet. The first phase entailed a 20-story, 159-unit high-rise building with residences priced from $375,000 to $1.8 million. It was reportedly 80 percent sold out. Deposits have yet to be returned, according to one account. The first homes were scheduled to open in early 2009.

GSG has since divorced itself from the project. But the company would be willing to return depending on the legal outcome, Manly says. The next critical court decision related to Sullivan Square is expected in March.

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