- Madison Square Garden Entertainment increased the price tag for the MSG Sphere project in Las Vegas to close to $2.18 billion, up from its prior estimate of approximately $2 billion, according to its fiscal 2023 first quarter earnings report, a 9% increase.
- The jump in construction cost primarily reflects the ongoing impact of inflation, global supply chain pressures and the overall complexity of the project, said David Byrnes, chief financial officer at MSG, during its fiscal 2023 first quarter earnings call. The completion date remains on track to open in the second half of 2023, said Byrnes during the call.
- Actual construction costs incurred through Sept. 30 reached about $1.78 billion, including approximately $226 million of accrued, unpaid expenses. MSG expects to fund the remaining construction costs from cash on hand, including savings from a cost reduction plan that defers certain discretionary capital projects, according to the report.
The construction team had to “refine a third” of design plans in order to adjust to the complexity of the project, said Byrnes during the earnings call, which was a major cost driver.
Both the build-out of the exosphere and the venue’s interior spaces, such as the installation of the interior display plane, are racking up those higher costs, said Byrnes.
“We have numerous packages of work that were competitively bid to contractors many months ago, with all of the actual costs being determined on a time and material basis on the back end,” said Byrnes. “As those materials are delivered and as the work gets completed, we’re continuing to see certain costs go up across certain work streams.”
Incorrect and incomplete design plans ranked in the top 10 causes of construction claims or disputes, according to global consulting firm HKA’s CRUX Insight report. At the same time, construction analysts and contractors expect even more shortages and price hikes ahead for essential construction materials in 2023.
Nevertheless, Byrnes remains confident the project will finish on time.
“Work continues on the exterior of the venue with the installation of the LED mega panels on the exosphere, where crews have been progressing from the top of the venue down,” said Byrnes. “We’re confident that we have sufficient liquidity from cash-on-hand and cash flow from operations to complete the construction.”
MSG Sphere at The Venetian will be the largest spherical structure in the world at 366-feet tall and 516-feet wide once complete in the second half of 2023. The venue will have a capacity of approximately 17,500 seats, expandable to 20,000 with standing room.