|By Howard Stutz, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
Aug. 4, 2009--With the opening of the $8.5 billion CityCenter roughly four months away, MGM Mirage quickly found out that Wall Street had more interest in the prospects for the massive Strip development than the company's $212.6 million operating loss in the second quarter.
And MGM Mirage was happy to oblige.
The Strip's largest casino operator spent much of its quarterly earnings conference call Monday discussing CityCenter, the 76-acre complex that includes the 4,004-room Aria hotel-casino, boutique nongaming hotels, high-rise residential condominiums, and a 500,000-square-foot retail, dining and entertainment complex.
The project will open in phases starting Dec. 1. MGM Mirage executives were uniformly on message Monday: CityCenter will grow the market in ways similar to the openings of The Mirage (1989) and Bellagio (1998).
"This is the next generation of casino complex, the only one of its kind that will be built for many years to come," MGM Mirage Chairman and Chief Executive Officer Jim Murren said at the outset of the conference call.
"About 39 million people will visit Las Vegas next year and most will visit CityCenter," Murren said. "We have not lost sight of the proposition for the company."
Murren, MGM Mirage Chief Financial Officer Dan D'Arrigo and CityCenter CEO Bobby Baldwin all said that CityCenter's hotels would not cannibalize customers from Bellagio or the company's other high-end resorts.
Baldwin said some 132,000 room nights are already on the books for Aria, the centerpiece of CityCenter. The nongaming Vdara has booked 61,000 room nights.
With Aria offering room rates above Bellagio and Vdara offering rates slightly below Bellagio, MGM Mirage executives were quick to point out that Bellagio still had strong advanced bookings, all of which are indicators that Las Vegas is beginning a slow recovery from the past year's economic downturn.
"There has been a good level of interest and we're seeing room nights begin to fill up," D'Arrigo said after the conference call. "Clearly, there are some positive signs out there, but we're clearly not out of the woods yet."
MGM Mirage's loss in the quarter that ended June 30 was due primarily to steps the casino operator took to straighten out its financial health. The loss translated into 60 cents per share. In the same quarter last year, the company posted a profit of $113.1 million, or 40 cents per share.
Analysts polled by FactSet Research predicted MGM Mirage would lose 7 cents a share in the quarter.
MGM Mirage recorded noncash impairment charges of $188 million, or 34 cents per diluted share net of tax, and recorded losses of $58 million, or 11 cents a share, after retiring some debt. Both moves were done as the company completed a $2.65 billion restructuring plan, which kept the casino from filing for bankruptcy.
Company revenue fell 22 percent in the quarter to $1.49 billion compared with $1.9 billion a year ago.
"This has been a monumental quarter for us, as the significant capital market transactions and other corporate finance activities meaningfully improved our financial position," Murren said.
Analysts were also willing to look past the quarter and concentrate on signs that CityCenter's opening could turn out to be a catalyst for the entire Strip.
Oppenheimer gaming analyst David Katz said he still believes the rest of 2009 and next year will still be a challenging time for casino operators in Las Vegas, but MGM Mirage has taken the steps needed to focus attention and finances on the project.
"We believe the Street's focus will shift to the opening of the property and prospective strategies for improvement of the corporate balance sheet and the prospects for asset sales," Katz told investors.
Katz said the company needs to complete the sales of CityCenter's 2,400 high-rise condominiums, valued at roughly $2.6 billion.
"Overall, the prospects for a recovery in Las Vegas over the long term and the financial pressure are relatively balanced," Katz said in a research note.
Baldwin said $350 million in deposits had been taken on 1,336 CityCenter condominiums with some 1,100 still on the market.
With luxury high-rise condo sales at a standstill, MGM Mirage and Dubai World, its joint venture partner in CityCenter, are looking at a variety of options toward helping buyers close transactions. Baldwin said the bulk of the closings would take place starting in January.
Vdara, with 1,495 hotel and condominium units, had been scheduled to open Oct. 1, but because construction on the infrastructure inside CityCenter wouldn't have been complete, the opening was pushed back to Dec. 1.
The Mandarin Oriental and the all-residential Veer will open Dec. 3. Crystals, CityCenter's retail, entertainment and dining component, will open Dec. 3 while Aria opens Dec. 16.
Baldwin said he expects 48 percent of Crystals to be open by Dec. 3 while 84 percent of the space should have tenants by April.
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871.
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