Jan. 7 (Bloomberg) -- MGM Mirage and Dubai World postponed the opening of one hotel and canceled a condominium development at their CityCenter construction on the Las Vegas Strip to trim costs and “maximize” returns in a declining market.

Scrapping the Harmon residential condos saves $200 million and opening the Harmon Hotel & Spa at the end of 2010 or later defers another $200 million in spending, providing cash-flow “relief” for both partners, Chief Executive Officer James Murren said today in a telephone interview.

Unable to secure all the financing needed to finish the $11.2 billion CityCenter project by December, Dubai World and MGM Mirage, majority owned by Kirk Kerkorian, had earlier pared $400 million in construction costs. Gambling revenue on the Strip, where MGM Mirage is the biggest owner with 10 casinos, is set for its biggest slump amid the worst financial crisis since the Great Depression.

“The key is maximizing the return on what we do open, and reducing the overall project cost,” Murren said. “The banks were extremely happy with this development. They think it’s smart in this environment, and obviously we’ve got their support.”

The rest of CityCenter, including a 61-story casino resort, two other hotels, more than 2,000 condos and a 500,000-square- foot retail and entertainment district, will still open in December 2009.

‘Weak’ Residential Market

MGM Mirage and builders spent weeks reviewing Harmon condo designs that required structural changes, Murren said. The cost and delays “gave us an opportunity to evaluate the whole project from a standpoint of finishing it off and building those condominiums in the light of fact that the residential market is weak,” he said.

The condos were designed with 200 units, of which 88 were under sales contracts, the partners said today in a statement. The outside will be finished around an incomplete interior. Harmon buyers will get their deposits back or be offered units at other CityCenter condos.

When to finish the Harmon Hotel is “really up to us,” Murren said. “Not having those rooms open up with the rest of CityCenter allows us to focus on maximizing the yielding of the casino rooms at Aria and at the non-gaming rooms at Vdara and Mandarin” hotels.

MGM Mirage fell $1.44, or 9 percent, to $14.52 at 4:03 p.m. in New York Stock Exchange composite trading. The shares declined 84 percent last year.

The company said in October that it had raised $1.8 billion of the $3 billion in loans it needs to finish CityCenter. Falling costs for building materials and surplus labor from other canceled Las Vegas projects will save the company overtime and help it negotiate with subcontractors, executives said Oct. 29.

‘Productive Dialogue’

MGM Mirage has had “far more productive dialogue,” with its banks in the past two weeks, Murren said. The partners’ ability to raise the remaining money “has increased materially,” he said.

“I don’t know if we’ll get to the total $1.2 billion, but we’re going to make a lot of progress increasing the borrowing there, which is a great benefit to the partners,” Murren said.

Las Vegas is one of the areas hardest hit by the deterioration of the U.S. residential real-estate market. Las Vegas home prices peaked in August 2006 and have fallen 39 percent through last October, according to the S&P/Case-Shiller Home Price Index.

MGM Mirage agreed last month to sell Treasure Island Hotel & Casino to real-estate investor Phil Ruffin for $775 million.

In November, MGM Mirage CEO Terry Lanni quit and was replaced by Murren, 47, formerly the chief operating officer.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

Last Updated: January 7, 2009 16:21 EST