Las Vegas High-Rise Project Mired in Lawsuit

The honeymoon is over for a planned $800 million Las Vegas luxury condominium complex. On April 30, Las Vegas-based GSG Development filed suit in Clark County District Court against its partner, Harcourt Development of Dublin, Ireland, accusing them of breach of contract. It’s seeking unspecified damages.

By Tony Illia

“Since last fall, they promised to fulfill their partnership and not done so, paying in fits and starts, paying some people and not others,” said Kenneth Smith, managing partner of GSG Development. “We have tried to hold this together based on those promises.

The project’s development entity, Sullivan Square Harcourt LLC, is a 60/40 joint-venture between Harcourt and GSG, respectively. The two parties formed a joint-venture in 2006. GSG, 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.

The duo last year broke ground on “Sullivan Square” at Durango Drive and Sunset Road in southwest Las Vegas. The 16.5-acre complex called for eight buildings from 12 to 20 stories tall, totaling 2 million sq ft. The $150 million first phase entails a 20-story high-rise with 159 condominiums. It’s reportedly 80% sold-out. The first homes were scheduled to open in early 2009, with Sullivan Square reaching build-out by 2014.

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But construction stalled after only three months. No work has occurred since November 2007. Martin-Harris Construction of Las Vegas is the general contractor. Subcontractors and consultants owed a combined $2 million have filed eight liens and two lawsuits against the project. GSG Development insists that nonpayment isn’t connected with the current housing market downturn or current credit crunch; rather, it accuses Harcourt of trying to oust them from the project.

“We are being forced out of the project,” said John Manly, GSG’s attorney.  “We don’t know if they are going to build it or not.” 

The firm has sent a letter to homebuyers calling the lawsuit a “last resort” measure. GSG, which launched a new construction management company earlier this year, fears that the project puts its good name at risk.

“This is not how we do business,” said Smith. “We owed in the millions of dollars … It’s really sad. We can’t hold it up any longer. We think Harcourt should be held accountable.”

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