Two Way Hard Three | Las Vegas Casino & Design Blog

For the past several weeks, rumors of a potential sale of The Mirage have been making the rounds. Personally, I've heard at least two different versions and one from a credible source, though no one that has claimed direct knowledge of a deal.

Today, Howard Stutz in the RJ has a piece that made the front page 'Breaking News' section on the persistent rumors:

In all the versions of the story I keep hearing, the buyer is always Penn National, with Pinnacle Entertainment a distant second chance possibility. The rumored price is typically between $1.2 and $1.5 billion.

MGM Mirage has consistently said that they evaluate all offers but they have nothing to announce.

Still, does this sale make sense for MGM Mirage? Without a dollar figure, it's hard to say but as Stutz indicated, if liquidity is enough of an issue to force this, I would have expected other assets to be divested first, such as the 50% stake in Borgata or perhaps something like Luxor. Of course, The Mirage may be the only asset that this buyer wants (and can afford - I'm sure they'd love Bellagio).

The Mirage has recently been significantly re-worked and would be a great Las Vegas starting point for a company like Penn.

And to those that keep hoping Steve Wynn would buy the hotel back - no chance (unless the price was super-low). He's looking one direction and that's forward.

UPDATE: As stated in the comments, the RJ link is dead and the home page now includes a note saying Penn Natl is not interested... At this time...


Read archived comments (26 so far)
January 13, 2009 3:43 PM Posted by John H.

Regard Wynn, it's just like Jeff Simpson said on the last Vegas Gang: the only property he might take a serious look at is Bellagio. He might look at Mirage if it were going for a bargain basement price, but the only property I could seem him paying more than a billion dollars for is Bellagio.

January 13, 2009 4:50 PM Posted by David McKee

MGM might not want to unload The Mirage as badly as scuttlebutt would have it, especially with so many recent capital improvements invested in it. Writing down the value of the 'Mandalay Mile' (plus the Gold Strike in Tunica) could be interpreted as an attempt to stimulate interest in properties not named Bellagio or The Mirage ("Lookee here, we've got stuff almost kinda sorta as good -- priced to move!"). Just a thought.

January 13, 2009 4:59 PM Posted by Art M.

I don't get it. I can understand the need for MGM Mirage to raise capital with the economy being what it is, and CityCenter hanging out there, but why divest yourself of marquee properties that helped build your brand? They surely have plenty of assets in more lackluster properties, partnerships, and land. Do they really need CC, the Excalibur, or even the Luxor? I'd have dumped all three of those before the Mirage or even TI. They do nothing but dilute the MGM-Mirage name.

January 13, 2009 5:16 PM Posted by John H.

Remember that CC and Excaibur, though, are literal cash cows. In fact, they are probably doing much better than their higher priced sister properties in this tumultuous economic environment. In that way, at least to me, it's more than obvious as to why MGM would look at off-loading a property like the Mirage before even thinking about CC.

Luxor, though, is the wild card. I don't see what purpose it really serves in the MGM hierarchy, when it's market is already being served by NYNY and MC; and aside from the fact that it would destroy the continuity of the Mandalay Mile, it could fetch quite a bit of money from a number of investors who could invest into the actual infrastructure--actually upgrading the rooms, etc.-- of the property.

January 13, 2009 6:05 PM Posted by mike_ch

Steve Wynn seems to be waiting for either Bellagio or the Frontier land to be going at the right price.

January 13, 2009 6:09 PM Posted by Brian Fey

Art - I couldn't agree more, and have stated this time and time again. I will have to reserve some comment until I see the final price, should this rumor be fact. But if MGM sells Mirage for $1.2 Billion, and if the board approves it, then they should all be taken out and back and shot. That company has more crap, and I mean that in a literal sense, they could sell, I'd be highly insulted as a person who has a large investment in MGM stock, if they let a asset like Mirage for for such a stupidly low amount of money. Everywhere I turn, its City Center this, and City Center that. They only own half of City Center, which means they only get half the profit. And to tell you the truth, I am not sure half of City Center's profit, will equal the profit Mirage and TI make together. City Center is going to have to generate a EBITDA of around $600 Million, in order to just equal that of Mirage-TI. And even then, they are only even, not ahead. So they sell Mirage and TI, and yes CC is equaling the profit, but they now have 9 Billion in new debt, which would mean in the end, they put less money in the bank, after they pay their huge interest payments. $775 was cheap for TI, but Mirage for $1.2 would be a steal. I don't think it goes that cheap, if so, I think Phil would have bought it instead. I have many more thoughts on this subject, but I'll save them for later. :)

January 13, 2009 6:47 PM Posted by BigRedDogATL

The link in the original post, to the LVRJ article no longer functions. It seems if LVRJ has pulled the article.

January 13, 2009 7:08 PM Posted by Doug

Well, Penn National probably doesn't want the Excal, Luxor or something in Tunica - and I wouldn't either. (Although, I do hope to see the Excal torn down for a first-class resort someday, but that's at least five years away now or maybe more - or maybe never).

The LVRJ made a good point that The Mirage is also good cash flow and MGM might want to keep it. But a sale would cause another much needed stock jump for MGM. And don't forget that MGM wants to get their project in Atlantic City going.

January 13, 2009 7:10 PM Posted by detroit1051

BigRedDog is right. The original breaking news story is no longer available, but the front page has a new breaking news tease saying Penn is not That link is also inoperative. Perhaps the RJ and Sun want to make sure there's some substance to the stories before publishing something tomorrow morning. I didn't check Friess' blog or any others yet.

January 13, 2009 9:38 PM Posted by mike_ch

Penn Nat'l is as not interested as MGM is, and their language has been very crafty the past month.

People seem to be equating build quality with profits. Wynn's pre-97 properties won't make the kind of money Circus's pre-97 properties will because they require so little money invested to maintain a status quo.

But I predict that every time there's word that a Mirage Resorts property is sold, some people will cringe and worry about how the new owners will only clean the casino once a year and replace the lobby fish tank with a large flat-panel display of a fishtank.

January 14, 2009 1:42 AM Posted by brent

I don't understand why they poured money into Mirage with the volcano and renovations if they planned on selling it, unless of course this is a desperation move to fund City Center. Now, sprucing up a place like Luxor to make it a more convincing sale... I could see that. But, Mirage is an icon, and even in "dusty" condition it would still garner a premium considering it's recognition, location, etc. For what they spent on the volcano alone, it seems like a very long term investment. I'm sure the renovations will boost the selling price, but probably not any more than what they spent on them. In this economy, they aren't going to push an inflated sale pitching it as "ready to move in" property. The buyers know these are desperate times and they are looking for deals.

January 14, 2009 1:45 AM Posted by Mark D

Mike_ch and John H, the Mirage makes more EBITDA profit than Excalibur and Luxor combined, with far less than half the number of hotel rooms, now that's a cash-cow. Just check the financials on Circus Circus profits are puny by comparison. There are four real cash-cows in MGM/Mirage's Strip portfolio, Bellagio, MGM Grand, Mandalay Bay and the Mirage.

January 14, 2009 5:10 AM Posted by detroit1051

PENN's denial of an interest in The Mirage is back on the RJ's website.

January 14, 2009 7:00 AM Posted by Hunter

Mark - thanks for dredging those numbers up. That is what I suspected and one of the reasons a possible sale would surprise me.

The concept of Excal and CC being these amazing cash generators is thrown out often as a reason they want to keep them - and it's true, they do throw off a lot of cash, don't cost a lot to maintain and the ROI figure is thus quite high - but The Mirage more so, especially given it is long long long since principally paid off.

It probably comes down to the buyer though - if MGM is forced to sell something, they may not have a choice as to what they sell. If I was Penn Nat'l, I wouldn't want Circus Circus either if I could have The Mirage.

January 14, 2009 11:37 AM Posted by Jeff in OKC

Can anyone tell me how to find each MGM properties financials? I looked on the MGM site, but must not be loking at the right area for individual results. Thanks.

January 14, 2009 12:32 PM Posted by Erich,%202008.pdf

Hopefully that link works Jeff. It's in the MGM Mirage investors website under supplemental data

January 14, 2009 1:29 PM Posted by detroit1051

I couldn't get the link to work, but I converted it to a Tinyurl, and it works (I hope). MGM used to break down all financials by property (casino, restaurants, etc), but they no longer do.

January 14, 2009 2:57 PM Posted by Jeff in OKC

The Tinyurl worked, thanks. Does it make me a SuperVegasGeek if I printed it off and am now studying it?

January 14, 2009 6:13 PM Posted by socalduck

Selling Mirage really makes no sense. It's clearly one of the better-performing properties financially, and offers a far better product than MC, Luxor, Excal, NYNY, or the clown house. There is also a lot of valuable, under-utilized land out back available for future expansion.

I tend to think that if Penn National really is the most likely candidate to acquire one of MGM's properties, then a mid-tier property like NYNY seems a better fit, based on the type of markets and customers they currently serve.

January 15, 2009 10:12 AM Posted by David McKee

I can't argue with your logic, socalduck, save that MGM Mirage appears to be marking anything that's contiguous to either CityCenter or its North Strip sequel as "off-limits." Monte Carlo, the clown house and Slots-A-Fun were all spared during last Friday's late-afternoon write-down of multiple Mandalay Resort Group acquisitions (Luxor, Excalibur, M'Bay and Tunica's Gold Strike).

January 15, 2009 12:05 PM Posted by Andrew h

The Monte is off limits IMHO, City Center 2 anyone? And maybe by extension NYNY, at some point in the next 10 years MC is coming down to make way for CC2. I agree with everyone else this deal if true makes no sense. The Mirage for 1.2, or even 1.5 makes zero sense, Ti was sold for 7 times projected 2009 earnings I believe. This deal would put the Mirage at around the same multiple, when it should be around 10-15 times 2009 earnings IMHO. If the Mirage goes for 1.5 with all of that land, what does Bellagio go for?

January 15, 2009 7:01 PM Posted by mike_ch

I don't know how much Bellagio is worth, but I'd imagine everything isn't worth much with this being such a buyer's market. The question is what these places are worth in a few years, and I think MGM thinks Bellagio will be worth so much that they'd rather take the bullet of selling Mirage for too low in order to hold onto it.

But, I'm not sure it's happening, and if it's happening I'm not sure it's going to work. Mirage is almost 20, and I feel it deserves a marketing push this year celebrating that but the big day will probably be mooted with cupcakes in employee areas or whatever, because saying "Yay, we're old!" doesn't make you appealing to buyers.

They're trying to woo buyers away from Bellagio to the other things, and I only give them a 60% chance of that working. My own suspicion is that it won't work, and the moment Penn or anybody makes a bid for Bellagio that Wynn will step in with a much larger offer that discourages anyone from getting into a bidding war and driving the price up.

January 16, 2009 8:43 AM Posted by Las Vegas USA

That is crazy that they are looking to sell in the first place.

January 16, 2009 9:03 PM Posted by Brian Fey

I could be 110% wrong, but I really don't think Wynn has much desire to get Bellagio back. Sure Wynn would buy the Venetian for the right price, even the IP. But I truly don't think he would even make a bid on Bellagio. I think Steve looks forward, not back. I'm guessing he'd be more like, been there, done that. He does not like to buy hotels, he likes to build them. I don't see him buying Bellagio for say I don't know 3-4 Billion, when he could take that money, and build a hotel that could top it. I'm estimating the golf course will cost 5-7 Billion, that would cover more than half of the cost of that whole project.

January 17, 2009 6:34 PM Posted by mike_ch

Brian, with the golf course Wynn has enough land to build on until the cows come home.

At some point one must remember that even Wynn won't live forever, and he's also running a business that he wants to turn over someday. Buying Bellagio is a smart move in that context because it removes it from the field of competition.

I suppose Wynn's ego is so big that he thinks anyone who owns Bellagio can't take it anywhere but down, but in reality you and I both know that property would be dangerous in the right hands and so it's better to take it.

January 19, 2009 2:50 AM Posted by Dram_man

I had no idea all this talk is going around about MGM, but if I can chime in on something. There is always the MGM Macau, and frankly it would not be first time I have heard such a rumor.