We haven't had an open topic for some time so here goes...
One thing to kick it off: Dubai is suing MGM Mirage over City Center:
And the LVSUN:
Categories: Business of Gaming, CityCenter, Las Vegas Strip, MGM Resorts International
Tags: citycenter, lasvegas, mgmmirage, vegas
Oh great! Are they fair weathered fans? They wanted to be a part of the project when things were going gang busters, but they want out now, that the economy has tanked? I hope to hear more details on this for sure. I'll try to reserve judgement until further details are available.
Has anyone ever considered this option....
MGM-Mirage sells the entire City Center Project. All 100% of it. And they go back to doing what they do best, running casinos, not developing them. I wonder if Dubai could or would buy out MGM from the project. This would save City Center, and MGM. Because if MGM goes down, City Center probably goes with it. Then you have almost half the LV Strip hotels in bankruptcy. This is going to get very interesting. So much for Dubai being great and confident partners, as was said on the call last week. My how things can change. Or does MGM sell Bellagio to Penn, MC to Light Group, and use that money to buy back the other 50% of City Center back. They'd still be short some money if my math is right. WOW, is all I can really say right now. Are we going to witness the complete collapse of MGM-Mirage right before our very eyes. Who could have possibly predicted this, just 2 years ago. Amazing!
Well, I'll take credit for that since two years ago I was receiving shabby service at Mandalay, saw Bellagio's rollercoaster of quality, watching casinos become visually indiatinct and generally saying that a breakup of the Strip's two headed dragon makeup was needed to save the vegas experience.
Who can feign surprise when this project has been bungled over and over by questionable management practices at MGM and sloppy errors by Perini? It was as if every hand dealt was played to screw up? The Dubai folks probably thought they were getting into a market similar to their own fancy resorts at home, but found out that after Vegas gets your money, they don't care about you. As I've said for years.
Can MGM sell? Of course! Would DP World take it? Not unless they can get exceptional circumstances passes from the NGC. No way would they want to open up their finances to the world. A simple donation to charity in the middle east can be seen as supporting Very Bad Things in the US. You might remember they backed out of the ports deal when Congress started digging into them and refused tojust let them by like any other company. No way do they get into ownership here
Can things get any worse for MGM?
Dubai wants to save its own skin, and it will throw MGM under the bus if necessary. Here's an analyst's comment:
"Larry Klatzkin of Jefferies speculated that Dubai World might be seeking greater ownership. It has put $3.3 billion into the project compared to MGM’s $1 billion plus land, and may want more than 50 percent ownership, he said. MGM paid $400 million for the land.
Dubai and MGM each have to put in another $500 million in order to access a $1.8 billion credit line.
“Dubai needs this project to open,” Klatzkin said in expressing the belief that at this late stage “we would be surprised if this ended up in a major change in value to MGM, although it is possible Dubai could end up as the controlling partner of the project.”
We need more details on the joint venture contract. This could be: (1) a purely procedural move in anticipation of bankruptcy so that the banks don't take control; (2) a desperate attempt to get out of the project, although MGM does not have the resources to pay them off; or (3) an attempt to take control of the project. However, DW has two major problems limiting their options - lack of funding due to real estate problems in Dubai and no chance at getting a gaming license. My guess is that absent some breakup provision in the contract, MGM and DW are stuck with each other. DW is claiming breach of contract, but I don't see any truly egregious behavior from MGM which would support this claim.
This action significantly increases the possibility that CC won't be finished in the near term. If construction is stopped, it won't open for several years. CC could quickly turn into a huge deadzone in the middle of the strip.
I suppose it's possible that Dubai is looking to own all nongaming assets, but I twittered a few months ago about a NYTimes story about what the economic picture looks like over there, and it's not pretty. All those fancy pipe dream jobs are stopped, the immigrant construction force laid off, and now the country is in recession mode. That means the taps are on for any social programs for the natives to help them weather the storm, while immigrants who were there to work and are now laid off are told they will be put in prison if they're found after their visa expired.
Dubai's airport is littered with abandoned cars from immigrants who fled to avoid imprisonment, and many of them left behind debts the government is going to have to clean up behind them.
I suppose it's vaguely possible that they want to throw more money at the wall with CityCenter, but at this point I'd think they're looking to protect the things they already opened.
Also, apologies. I'm just awful today, repeating myself (above) or making hideous errors (the post above the, uh, post above.)
I've been mashing out replies on an iPhone lately as I've been practically on vacation and staying with a relative and internet access is limited.
Maybe be old news to some, but Wynn Macau replaced its "Tree of Prosperity", the animated gold tree that comes out of the floor of their small shopping area with a golden dragon. Just one year and its something new. Unlike Caesars Forum Shops that have those rubber animated statues near the Torneau watch store thats has been the same old attraction for going on 20 years now. Heres the video of the new dragon in case you haven't seen it.
If the Wynn dragon, made the news, then I sure missed it also, because that sure is news to me. I have heard no mention of any changes to the Tree. Very interesting. The only thing certain at Wynn, is change. He never seems to leave things alone for long. I guess that's what keeps things interesting.
Dubai sends a letter to Carson City to explain what's up. They're, uh, kind of unhappy:
The money quote:"Along with it's questionable financial condition, we contend that MGM has mismanaged the development of CityCenter, resulting in costs significantly over budget despite downsizing certain facilities. As a result, IWDC to date has had to make $4.3 billion in capital contributions, far in excess of MGM's initial estimate. We are being asked to pay considerably more for a scaled-back project than what we bargained for in 2007 when we entered into the joint venture."
They repeat a number of times that they are committed to opening CityCenter, but it sounds like they're going to rake MGM over the coals. I wonder if they are planning to drive the company into financial ruin and buy MGM's stake at a bargain?
Its hard to say what's going on exactly. I find it pretty amazing, that MGM has only put in 1 Billion plus land, if that is in fact true. Unless I'm forgetting something, the project has only changed in scope by the 200 rooms at Harmon. In the grand scheme of things, that isn't all that much really, on a project with 7000+ rooms. I guess the only thing that makes me feel somewhat ok about my stock holding in MGM, is Kirk. He is a very smart man, and I think he will do everything in his power to secure the stability and viability of this company. I have to say, I was pretty surprised in light of all the news today, the stock actually finished higher. I realize most of that was just due to an overall market that rallied 500 points, but I still thought that was a good sign. We don't know what's in the contract. Does Dubai have any real grounds for their suit, I can't say. I do hope they don't have a escape clause, but its just hard to say. I hope in the next several days, we get some clarity on what's to come.
Other have stated the possibility of this project stalling. I just don't see that happening. I think its too late in the game to stop now. That would be the single worst thing that could happen for all partied involved, including Perini. I think the best thing that can happen at this point, is to finish the project, close on the condo's that are sold, and start repaying down the debt. There is no question Aria will be a money maker, it will be one of the hottest and most visited and talked about places in town. They just need to get this thing open. And I really think it will open on Dec 17th, as planned.
Yeah, they changed it out a few months ago. I believe someone commented about it here.
This has to result in either DW getting a larger stake in MGM and/or City Center, or MGM raising cash (selling properties) to put more cash into the CC project.
Everyone wants the project completed ASAP and open--both companies, their shareholders and creditors, the Nevada economy and future employees, Nevada politicians, LV residents and tourists.
I highly doubt that any of the individuals who have reserved condos at the CityCenter will go through with the closing . The prices are crazy high, established in the peak of the market.
I bet most, if not all will, take a pass or demand a massive renegotiation of the sales price. I know that they could lose their deposit, but at certain point one would be throwing good money after bad with this scenario of uncertainty.
I wonder if deposits held in escrow are protected from bankrupcy proceedings. Does anybody know?
I know its very easy for me to say this right now but while others were saying that CC was the greatest thing since sliced bread, from the moment I saw the first drawings I wondered what the attraction was in building a something that looked like a “downtown” of a Major City, at the time I commented wondering if they were going to have slots where 3 Red Staplers hit the Jackpot, or if there was going to be the Wernham Hogg Ultra-lounge…..
Having the greatest architects in the planet is fine if you are building a corporate entity, although in these times maybe not very prudent, but for what at the end of the day is a hotel/condo/resort - not so much..
Like many things today CC is now at the point where it’s too big to fail, the money will come from somewhere, but at what cost? Let’s look at what at least IMHO is a good barometer of what is happening now.
MGM Signature Condos – Stop groaning everyone, I know I have brought this up more than once, but no-one has yet to disagree that this is the best equvilent to CC properties that is for sale in the open market right now. It wasn’t even a month ago that I saw these as low as $189K, now there is one listed this week at $175K, how low can these go? And more to the point why would anyone want to spend another $300-450K to have a condo at Veer or Vdara?
Skylofts – As my personal fave hotel in LV, I keep an eye on reservation site in case a good deal shows up, before it was difficult to get anything on the weekend at less than a months notice, and forget trying to get anything around a Fight/Concert/Holiday, Right now there are rooms available anytime between now and the end of the year, I have never seen this much availability before.
Bellagio – We have been getting offers - that in the past I would have said that someone else must be using our Players club card, even checking the Standard rates on the website, there are many weekends where the rooms start at $199
If MGM can’t easily sell their current “top end” condo’s and/or rooms from their current stock, what chance when these additional 7000 properties come online? No Wonder DW are getting nervous!
Wonder what Leonard thinks of all this, as well as everything going on at LVS???
Dubai has already applied for a gaming license and they are approved by gaming regulators to increase their MGM stake up to 20%.
Jon Ralson now uploaded the complete text of the lawsuit:
Once again, DW not only cites MGM's own figures about it's dire situation and how this triggers their actions, but goes out of their way to criticize how MGM-Mirage handles business, complaining of no contingency for the economic slump, as well as repeating much of what was in the letter above. In addition:
"Despite repeated concerns expressed by Plaintiff about the escalating cost of the CityCenter project, MGM has continued to push forward excessively spending without regard to appropriate accountability. (...) These cost overruns demonstrate MGM's lack of candor in the management of the development of the CityCenter project."
"The JV agreement contains an implied covenant of good faith and fair dealing. In its misrepresentations and lack of candor regarding its financial well-being, MGM violated its duty of good faith and fair dealing owed to Infinity.
This unfair and improper conduct of MGM is wholly unreasonable and constitutes gross disregard of MGM's obligations under the JV agreement. As a direct and proximate result of MGM's breach of the implied covenant of good faith and fair dealing, Infinity has suffered damages in an amount to be proven at trial."
They are asking for damages to be awarded for this "unfairness."
Just writing a catty letter to Nevada politicians was eyebrow raising, but it looks like the Dubai people are going to question the competence of MGM management publicly in court. Even if the court refuses to award any damages over their feeling violated, these accusations of opaque management feels to me like a public attempt to sway any firms from wanting to work with them, and maybe scare shareholders away.
That could fall into acquiring all of CityCenter or maybe even all of the company if they wanted, by causing the stock price to sink so that the company can be picked up by a song, or shareholders to revolt.
Either way, it's interesting that they're not simply covering their backs financially, but going out of their way to sully the company as dishonest while they're at it.
There has to be this small part of Steve Wynn that is thinking.... I told you so.
This has happened to Mr. Wynn before. I am currently rereading Running Scared (Worse than I remembered it being, but I am a chronic Las Vegas reader). Tthe final chapter is about how the pundits said the city would never absorb the rooms from Mandalay, Venetian and Bellagio, the airport couldn't handle the additional capacity, and the higher room rates would never fly. The shareholders revolted from Wynn's art spending, plus the cost of Bellagio and Beau Rivage, ultimately forcing him out at Mirage. I always wonder why people forget that.
It's clear now that CityCenter was miscalculated and some people are loving it by saying "I told so." However, in bad times like nowadays we should hope for this project to be completed and opened as soon as possible. Over fifteen thousands jobs are in risk, and if CityCenter doesn't open things will be worse in Las Vegas. What are the possibilities of DC bailout a giant gambling company that are in a such risk of bankruptcy?
BTW: TI employees are the happiest people in Las Vegas now!
I suspect that DB is unhappy with the management of the project and are trying to gain control over it, ie take it away from MGM. I have never been a big fan of this project. From a site design standpoint, I think they stuffed too much into too small a space. The fact that Veer blocks the sightlines of Aria from the strip is really poor design. Also, the piss yellow glass on Veer is really ugly and will not stand the test of time. And MGM has poorly managed this project from a cost standpoint not to mention the construction snafu's and all of the accidents. I think they bit off more than they could chew for their first development project. They should have done this development in phases starting with Aria and built out the site as the sales and economy permitted. The MGM stock price is already in the crapper ($3.06/share down from over $80) it would not be much of a problem for anyone with cash to buy them out but why do that. Much better to pick off selected assets or buy the revalued company after the inevitable bankruptcy. In fact, I think this suit will prevent MGM from obtaining any further financing until it is resolved, thus pushing them into to bankruptcy very soon. The game as it is played at this level is very ruthless and I think DB is playing rough. It will be interesting to see what happens.
Yemenidjian is trying to get Tropicana
Brad Stone has resigned from LVS:
City Center is nothing compared to the crap Dubai is stuck with now. They were in the midst of building more giant fake islands, the world's largest airport, god knows how many master planned cities within a city, and if course the tallest building in the world. City Center might be a disaster in the short term, but in time, demand will catch up with it. Dubai was literally in the midst of turning half their damn city-state into some manufactured tourist trap, ultra-wealthy utopia. Even at the height of the boom it was difficult to justify the scale of what they were doing. It would be like Vegas creating a whole new strip with 3 times as many hotels and giant fake bodies of water for yachts and fake beaches. It was a supply brings demand philosophy. They have much bigger problems on their hands than City Center.
Dubai is broke and has already received two bail out cash infusions from the central bank of the United Arab Emirates in Abu Dhabi. They're canceling unprofitable international investments all over the word.
What a way to start off the week:
-Dow up 500 points.
-Dubai suing MGM
-Stone resigns from Sands
-A former MGM executive wants Tropicana
and it's not Wednesday yet...
Important business here. I read on my 365 days of Las Vegas calendar that the first slot machine was created by a "Charles Fey" in the early 1890's. I'm wondering if our esteemed contributor Brain Fey is related?
I'd bet it would be news to Brian - but you never know!
I remember seeing that machine up in Reno at the Liberty Bell restaurant near the convention center. The game is called the Liberty Bell.
Sorry about the typo. Brian, not Brain.
A Freudian slip, perhaps? :-)
According to this story, LVS is considering selling part of/shares in its Macau operations:
(thanks to David McKee for pointing this out)
Maybe he's my long lost "rich" uncle? :) No relation that I know of, but who knows.
Speculation about Dubai from Fantini's Gaming Report:
"...Meanwhile, some observers are starting to wonder if Dubai World is focusing on MGM to take the glare off itself and the possibility that it cannot afford to make CityCenter payments. Dubai recently had to borrow $10 billion from the United Arab Emirates, and S&P last week noted that debt payments owed by the sheikdom’s companies could triple by 2011. MGM and Dubai World each have to make $500 million contributions to CityCenter so that the $8.8 billion project can tap a $1.8 billion credit line."
Kirk Kerkorian subject of Business Week story:
Encore windows are going to need replacing after scaffolding accident..
Didn't anybody bother to check this morning's weather forecast before they sent those unfortunate guys up there? Yikes! They've earned a long weekend.
wonder how long it will take to replace those....i'm guessing more than a week.
CityCenter Bankruptcy this weekend?
"MGM Mirage has hired counsel for a possible bankruptcy filing by an $8.6 billion resort and casino development in the heart of the Las Vegas strip.
MGM Mirage and investment partner Dubai World appear unlikely to make a $220 million payment due Friday on City Center -- a massive project under construction on 67 acres. MGM Mirage hired law firm Weil, Gotshal & Manges LLP to help prepare a possible Chapter 11 court filing for City Center, as well as to explore other options, according to people familiar with the matter."
Note: One of these links should work if you can't access the WSJ directly:
Yeah, seriously seriously bad news.
I would *not* be surprised to see MGM pay it - if they can... or maybe not. Could be more leverage against DW.
Here is the NYTimes version of the story.
I wonder if Kirkorian's age is impacting this at all. I mean he is 91 and you wonder if he is still sharp and has the energy to put into this situation. Or is Murren running the show and Kirkorian is on the sidelines??
Wynn Annual Meeting is on Cinco de Mayo. The proxy statement includes some interesting information such as an additional unit being added to the private living quarters. I assume this was required by the separation of Steve and Elaine. Yet, it takes another revenue generating villa out of service.
Steve gets a rent break because of the deterioration of the rental market.
Riviera has missed a payment:
Colony Capital considering investing in CityCenter.
Do I need to go run MGM? WSJ is reporting this morning that MGM has hired a firm to actively pursue selling Detroit & Beau Rivage. This is crazy if true. Why sell a casino when you only have one property in a market, and your property is the top in it's market. They have a dozen or so Vegas properties, sell more of those. Having all your eggs in one basket is what caused all your problems, cause that one market, which is 90% of your business fell off a cliff. They should watch Jim Cramers "am I diversified" section of the show. And MGM, you are not , and looking to become even less so.
It would seem preferable to sell one of the Vegas places but you're assuming that's an option for them.
They might not be able to find a buyer with cash and/or credit for the more expensive Vegas properties.
ARIA has started promoting its restaurants. This was sent in an email today:
The website has added some new info:
Steve Wynn will be on 60 Minutes Sunday. Isn't this a rerun?
"STEVE WYNN - The casino mogul most responsible for taking Las Vegas to new heights of gaming and glitter talks to Charlie Rose about his spectacular success and the eye disease that's slowly robbing him of his ability to see the fruits of his labor. Catherine Olian is the producer. "
Murren has been given a 25% raise. The corporate line is that this is just to reflect his change in office, and this is as much as Lanni made ($2m a year.) Of course, everyone who remembers that "Mr. Big" RJ poster a few years ago remembers that Lanni was making far more than the other Strip leaders.
I can sort of see it their way, but at the same time I really don't think their present situation is anywhere near where it was a few years ago. Maybe it's some kind of common man fallacy to think that executive pay should reflect company health.
I don't know what the proper level of compensation should be for Murren but this seems like a major PR gaffe at a time like this.
That's kind of what I was thinking but didn't want to say it.
Whether it was built upon speculative fantasy or not, MGM was a brighter company in Lanni's period than Murren's, and since they sold Treasure Island it was technically a larger company, too. Now maybe getting smaller will make things better for them, in which case it can go up.
Though I should mention, this is simply base salary. According to that 2007 chart, Harrah's also sets it at $2m, Station at $2.2m, Wynn at $2.8m, but these companies all paid less when all other factors are leveled in. Sheldon gets a relatively low $1m base salary and even his total is much lower than the others, though obviously he wasn't poor in 2006. Regardless of all this, in an era where CEOs are capping their own pay until performance goals are met, this is an odd move.
Anyway, I guess this is future material for the Vegas Gang.
I think the only misstep was not giving Murren the raise when they gave him Lanni's job. They didn't fill Murren's prior job, so their explanation is that he is now doing 3 jobs (Chairman, President and CEO) , instead of his previous 1. The pay and bonus package appears to be reasonable for the times, and certainly less than a couple years ago, like Loveman's $37 million bonus at Harrah's. Besides, the villification this move is getting on the Sun's website says something about how difficult this economy is for high end executives. Murderers get less abusive comments, today.
Casinos and Churches.
The proximity of Guardian Angel Cathedral to Encore interferes with Wynn's plans for the golf course development...unless a bill in the legislature passes. This is interesting, especially the part about MGM Mirage opposing the bill.
Nothing major here, but apparently, Wynn Resorts lawyers had a meeting with some of the government officials, who are responsible, for wanting to expand gaming in Texas. We all heard that Sheldon was down there a week or so ago, but I'm a little surprised that Wynn is showing interest in Texas. I guess that would be much closer for me to visit. :) This is probably nothing, just Wynn being friendly and keeping their options open, but its somewhat interesting for us gaming junkies never the less.
Brian, I think this is a big deal. I seem to recall Mr. Wynn said that he was in Dallas recently, visiting "friends" (I think that was on The Strip Podcast-pre Encore opening Special). I think Mr. Wynn could generate a much higher level of interest in legalized gaming in Texas, simply by saying he is looking at it. D/FW is a top 10 market, and the opportunity for him is huge. Clearly, he is the rock star of gaming, and he can generate an audience over 10 times as large as Mr. Adelson, whom most Texans (and Okies) have never heard of. Now, I wonder what the Chickasaws think of that possibility.
Ralston's on a roll. Interview with Ruffin:
It's refreshing to have a Vegas columnist share his opinion on Murren's pay raise:
"Maybe it's a silly question, but just how low does the stock have to drop before a corporate boss decides it's time to knock a few bucks off his salary as a symbolic gesture of solidarity with all the employees whose wages and tips are taking a beating?
How poorly does the company have to perform before an executive's bonus fails to kick in?"
Detroit: My thoughts upon reading your post:
"Balls? In the R-J? It must be John L Smith."
If it was any other writer from that paper I'd expect a diatribe about how the free market set Murren's salary for him.
Business Week has a story on Daniel Liebeskind, architect of CityCenter's The Crystals.
The two reader comments following the story show that not everyone is enamored with him
Looks like Hilton might be out of the Cosmo. They're suspending their new brand that was nothing more than a puffed-up press release in the first place.
I don't know that Hilton is out of Cosom, they just may not be able to brand it with that new division they were trying to launch. If by change they are completely out, and DB is stuck with the place, then perhaps that would be a positive for MGM. Maybe if by change that's the case, DB will still need to find someone to run and manage the place. They could help them out of their financial bind, in exchange for MGM taking care of Cosmo for them? I realize this is a long shot, but stranger things have happened.
Also, on another note, Wynn made some financing changes today, Bill Learner, speculated that Wynn might be getting his house in order, before trying to purchase other properties. Once again, there is probably no merit to this speculation, but its a possibility. This is Las Vegas man, anything is possible.
As City Center nears completion, and more cranes come down, you get a more clear picture of what the final project will look like, it reminds me what a damn shame it is, that Harmon had to be cut down to half size. With all the other structures towering over it, including the beach tower at Cosmo, it really looks unbalanced. It still blows my mind that a company the size of Perini, who has built countless multi-leveled towers, could make such a huge mistake. This tower was no earth shattering in design or scale, 50 story buildings are built all over the world every year. If anything I could have understood major mistakes happening on Veer, that would make sense. But not the Harmon. This was essentially the easiest structure to build on the entire property, and they got it wrong. So disappointing.
Seems to be lots of talk today about MGM selling off Mirage, not Bellagio. Wynn freed up some money yesterday, which some say could put them in a position to make a purchase soon. I wonder now, if Wynn would be interested in Mirage, instead of, or if he can't get Bellagio. He and Phil Ruffin seem to get along well, so that could work well from that angle, as whoever owns Mirage will have to work with the owners of TI on a continual basis, from both the tram and parking garage situation. I hadn't thought Wynn would be interested in the Mirage, but perhaps I'm wrong. A sale of Mirage for $1.5ish would be fair for both parties, and might be of interest to Wynn. Keep in Mind, that Mirage still sits on one of the largest pieces of land of any resort on the Strip, short of CP, MGM, and possibly MB. So there is great value from that aspect as well.
I can't see Steve Wynn buying The Mirage. It was his first great Strip property, but by today's standards, he made some mistakes. Most notably, the rooms are very small with small bathrooms. I seem to recall we discussed this some time ago here, but he would have to lose a lot of room inventory to bring them up to the size and standards expected today. This is personal experience, but I found The Mirage's sound conditioning very poor, even through the walls of the Penhouse Suites.
Even if Steve wanted a less upscale property than Wynn/Encore, I'm not sure he'd want to go back to The Mirage.
Hum... Maybe FB won't be opening this year after all. Just one more hotel in trouble to add to the list I guess. What a mess.
There's no question that CityCenter will open, but there's not the same urgency to bail out Fontainebleau. This is a depression, not a recession.
The Tropicana has closed 560 rooms for renovation issues.
It’s a couple of weeks old, but I just came across this regarding the Lawsuit over the MGM Signature Condos:-
Look just below the player window, it’s the second item- Signature Ruling.
Not Surprising that before they can even proceed in court, they have to convince a Judge to overturn the Arbitration clause in the contract, for now the Condo Owners did succeed in doing this - but MGM is appealing. Its an interesting interview with the Attorney representing the Condo Owners.
All comments are copyright the author and do not necessarily reflect our opinion.
All photos, stories, podcasts and other works are copyright Vegas Media Group / Hanchor LLC unless otherwise noted.