|By Rod Smith, Las Vegas Review-Journal
Knight Ridder/Tribune Business News
May 11, 2006 - MGM Mirage executives Tuesday touted the company's $7 billion Project CityCenter as the new standard that future Las Vegas developers will have to meet and suggested it could soon be joined by a Project CityCenter East.
"The 18 million-square-foot urban metropolis at the center of the Las Vegas Strip will raise the bar for Las Vegas development and will forever change the resort experience as we know it today," MGM Mirage President Jim Murren said at the company's annual shareholders meeting.
The scope and cost of Project CityCenter -- the largest privately financed development in U.S. history -- will create a new "barrier to entry" for companies that might otherwise want to develop resorts in Las Vegas, the MGM Mirage executive told about 300 people attending the meeting.
Project CityCenter will include a 4,000-room hotel-casino, two 400-room boutique hotels, more than 500,000 square feet of retail space and 2,900 residential units.
MGM Mirage Chairman Terry Lanni told shareholders that enthusiasm is so high for the Strip project that the company is considering building a sister project on the 55 acres it owns adjacent to the Borgata in Atlantic City.
The Borgata is the 2-year-old resort MGM Mirage owns in a 50-50 partnership with Boyd Gaming Corp.
Already, MGM Mirage has discussed the new project with Boyd Gaming Chairman Bill Boyd, although Project CityCenter East would be 100 percent owned and operated by MGM Mirage, Lanni said.
Boyd Gaming spokesman Rob Stillwell said his company is excited by the prospect for the new development and believes it would give an added boost to the already successful Borgata.
Lanni said a serious evaluation of the scope and cost of the Atlantic City project would start next year.
Murren said his company needs such projects because they "move the needle" in terms of revenues, income and cash flow, a key measure of profitability usually defined as earnings before interest, depreciation, taxes and amortization.
Besides CityCenter, he also cited the Signature Towers at MGM Grand, saying the first two towers are sold out and the third tower is selling fast at more than $1,000 per square foot.
"It's safe to say more residential projects are likely," he said.
Developable land, especially on the Strip, is almost entirely spoken for and incredibly expensive, Murren said, noting "No company has more of this land than your company."
He also said little room capacity is being added to the market -- 4 percent a year, which is low by historic standards -- and there are only a handful of credible, financially strong developers in the market.
"We should have no trouble maintaining our competitive advantage given this appealing backdrop and our superior assets," Murren said.
He also pointed to development efforts in Macau, Singapore and Great Britain as bright points in the company's future.
However, Project CityCenter was the focus of attention for the executives and their audience.
Lanni noted that MGM Mirage reached final agreement with Clark County last week on new development standards that will govern Project CityCenter. A key part of the new agreement is the development of a major firehouse on MGM Mirage land.
Without Project CityCenter, the firehouse would not be possible. With it, there will be a ripple effect through the community that will improve fire protection and save taxpayer expense, he said.
One local shareholder asked about the effect of the independent development of the $1.8 billion Cosmopolitan on 10 acres between Bellagio and Project CityCenter.
"I expect a symbiotic relationship that works rather well," Lanni said. "It's not like we're operating gas stations where you fill up once. We're going to attract lots of the business that goes to the Cosmopolitan. We'll benefit. I welcome it. I just wish we owned it."
Most shareholder questions, however, focused on stock prices, especially compared with Wynn Resorts.
Lanni said MGM Mirage shares have increased more than sixfold in the past decade and most of the recent run-up in Wynn shares can be attributed to its development in Macau, where MGM Mirage also has a development agreement.
MGM Mirage closed Tuesday at $45.64, up 4 cents or 0.09 percent a share with 1.1 million shares traded, just under normal trading volume of 1.5 million shares.
Lanni conceded Wynn has been ahead of MGM Mirage in Macau, but he said the time advantage will be short-lived.
"And who knows, next year we might even have the annual meeting at Wynn," he said.
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