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CR88-p32&34-CityCentre Feature:SJC-Casino Review 21/1/10 20:53 Page 1
Feature
CITY CENTER
MGM Mirage chairman and
CEO Jim Murren leads the
New York Stock Exchange
remote Closing Bell from
CityCenter on December 16
The beating heart of the city
With some 35 million people visiting Las Vegas last year and with CityCenter pitched as a must see attraction, part owners MGM Mirage
are convinced the business model will work. MGM Mirage CEO Jim Murren explained how to Andrew Gellatly.
heartofthematter do now, the revenue and EBITDA of all our that the Aria convention centre had so far seen “The CityCenter joint venture is
FEATURE properties so the Street will know soon 100 percent success rate at booking prospec- extremely under-leveraged today. Our inabil-
enough whether we’re correct in our premise tive conferences and meetings. ity to raise $3bn to $4bn of bank debt in the
ith the gaming floor at City- that City Center, and the Aria, is the most “Everything we have learned about hospi- past is our opportunity in the future. That at
W
Center’s Aria resort now unprecedented marketing tool that a gaming tality has been deployed here – it is superior maximum leverage we only have $1.8bn
open for business and the company has ever had to increase business to its peers,” said Murren. “And the only way against an enterprise that could easily
series of openings that activity at resorts we already own. This is the to complete such an extraordinary resort support more in our opinion.”
marked completion of the counterpoint to the concern that City Center was to do it all at once.” Murren added that options to recapitalise
staggering $8.5bn develop- may grow the market but at the expense of The CEO, who began his career as a Wall CityCenter would open up once CityCenter
ment complete, Las Vegas properties which are already here.” Street gaming analyst, is also optimistic that, as had “one or two quarters (of trading) under
watchers are scrutinising every piece of news Murren added: “It’s simplistic to think that the US economy recovers, the new property our belt”, but suggested that at present the
coming out of the audacious property that rep- we are going to take customers that are already will earn its fair share of new visitors and their investment community had “given us zero
resents the biggest bet of all by MGM Mirage loyal to us at businesses we already own and incremental gaming revenues. “You cannot value” for CityCenter despite recent valua-
and their joint venture partner Dubai World. shift them over to a resort that we own half of. now go to Las Vegas and not visit City Center – tions that had priced MGM Mirage’s stake in
The project, with its vast glass towers, We’ve been working on a solution to this for I don’t think it is possible,” he said. the completed project at $2.44bn.
public art projects and ‘pocket parks’, is like five years – how to maximise the business “Remember that in a very dark time for the Alongside MGM itself, and private-equity
nothing else Las Vegas has ever seen and the activity within the properties we own. We will US economy 35 million people still visited Las interests, one possibility -should Dubai
fact that it is open at all seems a near miracle, measure success of CityCenter on the totality Vegas last year. If CityCenter were just theoret- World decide to offload its interest- is that
after the economic slump crushed MGM’s of MGM Mirage’s profitability,” he said. ical then I think visitation to Las Vegas would MGM’s major shareholder Kirk Kerkorian
once-robust cash flow. For all of its obvious ostentation City- still increase in 2010, but CityCenter does exist might opt to buy up the stake via his invest-
Financing the project pushed the company Center has also earned plaudits for its and I expect close to 38 million people will ment vehicle Tracinda.
to the very edge of bankruptcy in 2009, while green credentials- and saved MGM a pile of visit. We will get our rightful share because we Murren also acknowledged that MGM’s
it remained locked in a legal battle with 50 taxes by doing so. are the catalyst and we have designed the major shareholder Kirk Kerkorian might be
per cent partner Dubai World. But the bankers In Nevada, buildings that earn Leadership in thing that everyone wants to see.” among those investors looking to take a
eventually came through, and the partners Energy and Environmental Design (LEED) cer- With all eyes focussed on the new project in stake in CityCenter at some point, along
cut a deal to put CityCenter on a relatively tification become eligible for partial abate- the run up to its opening late last year, the with any number of other private equity or
sound financial footing, although the recent ment of property taxes for up to 10-years and news that MGM’s joint venture partner Dubai gaming industry interests.
financial upheaval in Dubai may still force MGM’s CityCenter has received three LEED World had asked for a standstill on its debt “We are intrigued by the enquiries we’ve
another round of refinancing and recapitali- Gold certifications from the U.S. Green Build- repayments came as a shock, and prompted been getting. People are interested again,”
sation for the project. ing Council for its power generation technol- speculation that the City Center project could said Murren, speaking in the employee
Even seasoned observers of Las Vegas’ ogy, water conservation technology and the be thrown into further turmoil. But CityCenter canteen deep within City Center’s glass
history have their concerns about the innovative way in which it cools public space is a fully funded project and Dubai World has towers, “nothing’s happened yet, but if I’m
wisdom of opening such a massive property, on the slot floor, worth annual tax savings of no required equity contributions remaining. getting that level of dialogue, I can imagine
costing $3m a day to run, that will compete approximately $28m to MGM’s bottom line MGM also has right of first refusal in the Tracinda might be as well. Investors looking
directly with its MGM-owned neighbour the And there are indeed some positive event of a JV stake sale and could in theory to pay an economic recovery... there are a
Bellagio, as well as every other five star prop- signs that the property may indeed be cre- execute its right to take-out Dubai World lot of investment angles that are intriguing
erty on the strip. ating new business for Las Vegas by without impacting its own balance sheet. to people right now. The interest level in this
On a tour of the City Center property drawing lucrative convention business Already Murren had been considering plans sector has increased a bit.”
MGM Mirage CEO Jim Murren told Casino away from other cities. to refinance the project the project, but with Murren said that along with the rest of the
Review: “Wall Street is talking about canni- Falling convention business has particularly Dubai World now floundering, observers believe gaming industry, MGM Mirage was “not set
balisation, but obviously we’ll provide, as we hurt casinos in Las Vegas, but Murren indicated a recapitalisation will likely now be fast-tracked. up... for the economic tsunami” of the past 18
32 February 2010 • feature
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