SUN: Racing's media makeover paying off

[dalakhani]

Originally Posted by Cannon Shell

Las Vegas's City Center resort, the most expensive hotel-and-casino development to date, bled cash during its first full quarter of operations.

The $8.5 billion City Center, jointly owned by MGM Mirage and Dubai World, struggled to fill its 4,000-room luxury hotel after opening in December. It has only been able to finalize sales of about 100 of its 2,400 luxury condominiums. And it is enmeshed in a dispute with its chief contractor, Perini Building Co., over about $500 million in construction fees.

In the first quarter, City Center recorded an operating loss of $255 million. That includes a $171 million write-down in the value of the project's condos. The company took back $24 million from buyers who forfeited their deposits on condos. Before accounting for the write-downs or other charges, City Center incurred a loss of $32 million.

The success of City Center has implications for the rest of Las Vegas. Other properties along the Las Vegas Strip have always worried that if City Center's occupancy rates remain low, the resort might be forced to discount heavily, sparking a price war that could drag down the broader market.

City Center President Bobby Baldwin joked during a conference call with analysts Thursday that if the trend doesn't improve by next quarter, "I won't be on the call."

But he and other MGM Mirage executives remain upbeat about the long-term prospects for City Center and insist that it is poised to benefit as Las Vegas rebounds from a deep downturn. Already, the number of people occupying hotel rooms is showing signs of improvement.

MGM Mirage Chief Executive Jim Murren said that the company expected to have a tough first quarter amid the recession. "But the trends have been moving sequentially in the right direction," he added during a conference call.

Mr. Murren conceived of the City Center project six years ago as a way to create a new urban center for Las Vegas. He shepherded it through to completion, even as its prospects grew dimmer. The project consists of six towers filled with luxury condos, a 150,000-square-foot casino and three hotels, in addition to a mall designed by Daniel Libeskind.

The construction costs were so massive, that at one point last year City Center narrowly avoided bankruptcy.

On Thursday, MGM Mirage reported a first-quarter loss of $96.7 million compared with a profit of $105.2 million a year earlier. Much of the loss was caused by City Center. The company released preliminary results last month.

The centerpiece hotel and casino, Aria, had an occupancy rate of 63% for the first three months of the year, 22 percentage points below the 85% rate for MGM Mirage's nine other Las Vegas Strip casinos during the first quarter.

So far, investors have been patient, expecting that the property—and the company—will benefit from a Las Vegas recovery. The region continues to lag other big hotel markets.

Las Vegas Sands Corp., which also reported its first-quarter earnings Thursday, offered an indication that the picture in Las Vegas may be improving. The company posted its first profit in two years as its earnings rose 62% in Las Vegas and quadrupled in Macau.

Like Messrs. Murren and Baldwin of MGM Mirage, Las Vegas Sands CEO Sheldon Adelson said he was encouraged by increased group bookings in Las Vegas. But while leisure rates have appeared to jump during the past four-to-six weeks, group rates haven't shown signs of improvement, Las Vegas Sands executives said.

Large Las Vegas resorts like City Center often report higher-than-normal expenses in their first quarter as they ramp up business.

Analysts say the property's true potential and success won't be measured until after a Las Vegas comeback fully takes hold.

"City Center is a worry," said Sanford C. Bernstein analyst Janet Brashear. "MGM obviously has high hopes and we know the market is going to recover, but the casino world is fickle."

In an interview, MGM Mirage Chief Marketing Officer Bill Hornbuckle said he is planning new marketing campaigns and will continue to use lower rates and promotions to boost occupancy. "Like anything in gaming, luck always becomes a factor," he said. He added that he expects occupancy and room rates to stabilize as the group-sales business picks up. "All signs are good. Remember, the cure-all here is simply time," he said.

Though the construction cranes have gone, City Center is still embroiled in a $500 million dispute with Perini over how much responsibility the contractor should bear for the Harmon Hotel, where serious construction problems occurred. As a result of the discovery of defects there that needed to be remedied, the Harmon building is half as tall as originally planned. Now its opening is delayed indefinitely.

It also remains unclear how much money City Center's condos will eventually bring in. At the height of the market, condo proceeds were expected to bring in $2.7 billion. Now, the number of buyers who will ultimately close on a condo sale is uncertain.

New-home prices in Las Vegas are down about 40% from their peak in 2006, with the luxury condo market experiencing larger declines. The company reduced condo prices at City Center by 30% and has closed on the sales of 109 units so far, for $119 million. City Center provided the loans for those sales. Around an equal number of condo buyers have chosen to forfeit their deposit and walk away from the deal, said Tony Dennis, executive vice president for MGM Mirage's residential-sales division. Mr. Dennis said an additional 600 buyers are in the loan-approval process.

Hotels almost always lose money in the first quarter. Bellagio put Steve Wynn out of business for a couple of years and it had nothing to do with gaming losses and that opened during a pretty robust economy. Just imagine if it had been saddled with an extra 4000 condos to sell and it had to succeed in today's market.

Considering everything, City Center has done fine and it will be a great success. You think Baldwin a fool? Lanni? Murren? Kirkorian?

Vegas is shifting its focus once again as forward thinking people realize that gaming isnt going to keep the town afloat alone forever. The old economy is dead. What will Vegas be fifty years from now? What is city center a big step toward?

Vegas's competition as a gaming center is too great. Asian gamblers will play in Macao (hence the goldrush at the start of the last decade over there) before crossing the Pacific. East coast gamblers can go to Atlantis, Borgata, Mohegan Sun or a million other places that will be sprouting up. Charlestown even has table games on the horizon.

Vegas is shifting toward being a convention town. The days of castles, volcanoes and the french riviera are numbered and they will be replaced by green friendly, sterile black buildings with efficient meeting space in tandem with condensed versions of all we love about Las Vegas. There will still be gambling and nightlife but it will be a piece of the pie, not the whole thing.

[Cannon Shell]

Originally Posted by dalakhani

Hotels almost always lose money in the first quarter. Bellagio put Steve Wynn out of business for a couple of years and it had nothing to do with gaming losses and that opened during a pretty robust economy. Just imagine if it had been saddled with an extra 4000 condos to sell and it had to succeed in today's market.

Considering everything, City Center has done fine and it will be a great success. You think Baldwin a fool? Lanni? Murren? Kirkorian?

Vegas is shifting its focus once again as forward thinking people realize that gaming isnt going to keep the town afloat alone forever. The old economy is dead. What will Vegas be fifty years from now? What is city center a big step toward?

Vegas's competition as a gaming center is too great. Asian gamblers will play in Macao (hence the goldrush at the start of the last decade over there) before crossing the Pacific. East coast gamblers can go to Atlantis, Borgata, Mohegan Sun or a million other places that will be sprouting up. Charlestown even has table games on the horizon.

Vegas is shifting toward being a convention town. The days of castles, volcanoes and the french riviera are numbered and they will be replaced by green friendly, sterile black buildings with efficient meeting space in tandem with condensed versions of all we love about Las Vegas. There will still be gambling and nightlife but it will be a piece of the pie, not the whole thing.

Vegas has been a convention town for years. However did you not see the numbers showing that group visits were and continue to be down?

Are those guys smart? Sure they are but the reality of the situation is that the numbers that make the thing work are now not even close to realistic and they thought they had an ironclad partner who turned out to be less than that. I am not a Wall Street analyst nor do i claim to have any expertise in the area. But I can read and outside of MGM employees statements, I havent read anything positive about this project and a whole lot negative. When there are rumblings that MGM can go bellyup if this thing goes south, I think your optimism is ....overly optimistic?

By the way there is a 150,000sq foot casino as one of the major pieces of the city center puzzle so to say that it is non-gambling related is not exactly true.

[dalakhani]

Originally Posted by Cannon Shell

Vegas has been a convention town for years. However did you not see the numbers showing that group visits were and continue to be down?

Are those guys smart? Sure they are but the reality of the situation is that the numbers that make the thing work are now not even close to realistic and they thought they had an ironclad partner who turned out to be less than that. I am not a Wall Street analyst nor do i claim to have any expertise in the area. But I can read and outside of MGM employees statements, I havent read anything positive about this project and a whole lot negative. When there are rumblings that MGM can go bellyup if this thing goes south, I think your optimism is ....overly optimistic?

By the way there is a 150,000sq foot casino as one of the major pieces of the city center puzzle so to say that it is non-gambling related is not exactly true.

This statement here is completely clueless.

150k in gaming space out of 16,797,000 sq ft. LOL. Yeah Chuck, its a major piece of gaming. The ventian, by contrast, has 550k in gaming space out of 3.3 million total sq ft.

[Cannon Shell]

Originally Posted by dalakhani

This statement here is completely clueless.

150k in gaming space out of 16,797,000 sq ft. LOL. Yeah Chuck, its a major piece of gaming. The ventian, by contrast, has 550k in gaming space out of 3.3 million total sq ft.

The centerpiece hotel and casino, Aria, had an occupancy rate of 63% for the first three months of the year, 22 percentage points below the 85% rate for MGM Mirage's nine other Las Vegas Strip casinos during the first quarter

That is not my quote

nor is this

Mr. Murren conceived of the City Center project six years ago as a way to create a new urban center for Las Vegas. He shepherded it through to completion, even as its prospects grew dimmer. The project consists of six towers filled with luxury condos, a 150,000-square-foot casino and three hotels, in addition to a mall designed by Daniel Libeskind.

seems like someone thinks it is important

[dalakhani]

Originally Posted by Cannon Shell

The centerpiece hotel and casino, Aria, had an occupancy rate of 63% for the first three months of the year, 22 percentage points below the 85% rate for MGM Mirage's nine other Las Vegas Strip casinos during the first quarter

That is not my quote

nor is this

Mr. Murren conceived of the City Center project six years ago as a way to create a new urban center for Las Vegas. He shepherded it through to completion, even as its prospects grew dimmer. The project consists of six towers filled with luxury condos, a 150,000-square-foot casino and three hotels, in addition to a mall designed by Daniel Libeskind.

seems like someone thinks it is important

Look at chuck trying dance. You said it was a "major piece to the puzzle". That is not what that journalist or anyone else said. 150k in gaming space is a pittance in relation to the size of the place. The idea behind the place is a step away from gaming. The mention of the gaming space is about as important as who designed the mall.

Are you really going to compare occupancy on a new hotel geared to a totally different market to an established hotel geared to an established market...during a recession?????

[Cannon Shell]

Originally Posted by dalakhani

Look at chuck trying dance. You said it was a "major piece to the puzzle". That is not what that journalist or anyone else said. 150k in gaming space is a pittance in relation to the size of the place. The idea behind the place is a step away from gaming. The mention of the gaming space is about as important as who designed the mall.

Are you really going to compare occupancy on a new hotel geared to a totally different market to an established hotel geared to an established market...during a recession?????

Give me a break. There is no dance, there is fact. The fact is that the CENTERPIECE OF THE PROJECT is a hotel/casino. hink they are making a ton of money on 63% occupancy at $82 a night? Again i didnt call it the centerpiece and the journalist most likely got that from City center literature.

Regardless of how you want to spin it the place is going to tank. Whether it is because it was going to tsnk anyway or if the recession killed it or some combination of the two the fact is that there is nothing positive about this project. Even the shills from MGM speak guardedly about the thing.

[dalakhani]

Originally Posted by Cannon Shell

Give me a break. There is no dance, there is fact. The fact is that the CENTERPIECE OF THE PROJECT is a hotel/casino. hink they are making a ton of money on 63% occupancy at $82 a night? Again i didnt call it the centerpiece and the journalist most likely got that from City center literature.

Regardless of how you want to spin it the place is going to tank. Whether it is because it was going to tsnk anyway or if the recession killed it or some combination of the two the fact is that there is nothing positive about this project. Even the shills from MGM speak guardedly about the thing.

You called the 150k of gaming space " a major piece of the puzzle" Would you like me to link you to the post you said it in Fred Astaire? LOL

Why do you have such a strong opinion about a project you admittedly don't know a whole lot about? Its interesting to me. And they aren't charging 82 bucks a night. Thats a big part of the problem. The average nightly rate is about twice that and the weekend rate is over 3.5x that.

But what are they going after? Again, success or failure can't be judged in the first quarter.

As far as Dubai World being done, surely you don't think that Kirkorian et al is suddenly broke or creditless. Do you?

[philcski]

Originally Posted by dalakhani

This statement here is completely clueless.

150k in gaming space out of 16,797,000 sq ft. LOL. Yeah Chuck, its a major piece of gaming. The ventian, by contrast, has 120k in gaming space out of 3.3 million total sq ft.

FTFY

[dalakhani]

Originally Posted by philcski

FTFY

Thanks. The point still stands. No?