Two Way Hard Three | Las Vegas Casino & Design Blog

Hunter, thanks much for the work you do on this blog and for the interesting discussion, and of course again for your most recent coverage of Encore. Happy holidays to you and yours.

Yes, 2009 will bring the openings of M Resort, City Center, and hopefully F-Bleau as well. Maybe this is for another thread, but it will be interesting to hear people's predictions for other things that will happen in the next year. It would appear that it'll be a slow year for the annoucement of future development, but who knows? More sales like MGM's of TI to Ruffin? What about visitorship/gaming revenues? Should be interesting............

Hail2skins, that's a great suggestion. I'll try to think of some ideas after the holidays, but Norm in the RJ published some rumors floating around right now. We've talked about a couple of them here.
Bally's in play?
The Light Group quitting Harmon.
The Mirage being sold to PENN.
Two CityCenter projects will be mothballed.
http://www.lvrj.com/news/36721614.html

No Hunter, Thank You. This is the only place in the world, where I've found a hand full of people that share the same love as I. There are tons of Vegas sites, and message boards, but none really focus on the element of design. Most just talk about the $20 trick, and who has the cheapest midnight steak dinners. Nobody really close to me understands my obsession with Vegas and the companies that operate there. It was not until I met a few people on this board, and yourself, that I finally for the first time in my life, found people that really get me. When I ran into Hunter several times on Tuesday morning, running around taking 20 shots of the same thing, from 20 different angles, that I realized I'd met my match. I can't explain why I am so into these places, and 99.9% of the people in the world don't understand, but most of the people on this site do. That is a wonderful thing. its so fun to be surrounded by like minded people, that share the same type of enthusiasm as I do.

I really think if MGM sells Mirage that would be a huge mistake. If you look at the 6.4 Billion MGM paid for Mirage Resorts, they got 4 places. GN, Mirage, TI, and Bellagio. If I break these down, and do the math, it would seem that MGM just sold TI for less than they bought it for 8 years ago. What's a fair price for Mirage? 1.5 Billion? I'm not sure exactly. 2 Billion? GN was worth very little, but I can't say I recall the sale price when MGM sold it. But lets call it $250 million. So take those subtract them all from the $6.4 you get Bellagio for 3.4-4 Billion, depending on what Mirage brings. That just doesn't add up right. They would be selling things now, for less than they paid for them 8 years ago. There is no way you could secure land and recreate TI for the $775 that Ruffin just paid. Is MGM is that much trouble? With all the crap they own, sell something nobody cares about. Sell Excal, or NYNY, or MC, or Luxor. Don't sell Mirage, or MB. I hope this is rumor, and nothing more.

As for mothballing part of CC, what does that mean exactly. Just finish up the exterior for now, and finish the interior later? I can't come up with any other idea that makes sense. Sell off a few towers? Not sure that works, if none of them will have room for a casino, I don't know that they are very marketable for a good price. Having a expensive hotel on the strip with no casino, makes it very hard to recoop your investment. If you don't believe me, then just ask Donald Trump, who's closed on only about 30% of his units, and their occupancy rates have to be in the 30%'s some nights, if Wynn was only in the 50% level (which still shocks me). Sell Shadow Creek, I don't think it makes any money anyhow, and I realize its hard for MGM to put a value on what its worth to their customers, but I can't imagine you don't stay at MGM if you're a high roller, because you can't play at Shadow Creek. I just don't know what to think. MGM is starting to really make me nervous. Maybe the stock at 85% off is justifiable. I didn't think it was. Time will tell, but if there is any hotel in Vegas I'm attached too, besides Wynn/Encore its Mirage. So I want what's best for it. Mirage is the hotel that started it all for me, over 17 years ago. The Mirage was the drug that got me hooked on all of this.

Merry Christmas everyone.

Posted by Mark D

The MGM Mirage deal also included Beau Rivage in Biloxi. They sold the GN for $215 million to Poster, and that included the GN in Laughlin too.

Posted by mike_ch

Brian: Beau Rivage wasn't the only thing you forgot, the Mirage sale also included all the land that CityCenter was under and a big plot of land in AC that Wynn was given a steal on.

Strange you didn't mention Circus Circus in your list.. That idea was nixed by Steve F because he says it makes too much money, but they'll try to direct loyal CC players to Excalibur. At the moment CC uses a card that isn't using the Players Club design but is linked up to their system nonetheless and I imagine they can break the link somehow. MGM would rather the best CC players be enticed to Excalibur with comps and discounts anyway, I'd think, since it puts them square in the middle of Murrentown whereas the Circus is up near a bunch of competitors.

If Mirage is for sale, I can't imagine Steve Wynn will watch that one go by without extending an offer. People think Wynn won't want his luxury image distorted with a lower end property, but the Boardwalk was technically a Mirage Resorts place for many years and only people who were really paying attention knew about it. Nobody was putting it in the same family.

Mandalay-Luxor-Excalibur won't be broken up. Yes, some of those places are getting old, but the prior management knew a good thing regarding the old "Mandalay Mile" even though MGM will not have the bank to touch on that for about five years at this rate.

Excalibur is better torn down and replaced with something than sold and breaking up that huge chunk of sidewalk. My own, personal guess for the past year is that it would be torn down for a Hotel Cirque, since CDS had talked about wanting to extend from the showroom into putting their brand on a whole resort. However, that idiotic Believe show has probably hurt their chances with MGM execs unless they can blame the whole thing on Criss Angel (which isn't too far from the truth, probably.)

As for mothballing CityCenter, Vdara is on the other side of Harmon Ave and essentially closer to the Cosmo than it is the main complex. On the other hand, it's the only part of CC that's anything near complete right now. I spend a lot of time on their careers page to track the coming and going of things (a ton of Chef jobs showed up at Bellagio last month, no doubt due to Encore luring them away) and they have a separate section for Vdara. Not sure what they're thinking, but we pretty much never have been too sure what the deal is with CC since the original announcement.

Mark, thanks. I hadn't thought about Beau Rivage. I stayed there once in 2006 after Katrina's damage was almost totally repaired. Even though I could see MGM's hand in the renovations, it was still a beautiful Steve Wynn property, It really was a "mini-Bellagio", just too upscale for Biloxi, in my opinion. It must be struggling because I still get a lot of offers from Beau, and most of their events are similar to what one would see at a nice locals casino in Las Vegas. Regardless of who owns it, Beau is the crown jewel of Biloxi.
http://travel.webshots.com/album/554821252bIJpdL

speaking a little of Bellagio, I heard this quote from a commenter at Review Journal under the "Bellagio is not for sale post" (http://www.lvrj.com/news/33208269.html). This commenter said "Watch for an announcement after Encore opens-Wynn is buying back the Bellagio, his team is working on the deal as we speak-believe me!" but I doubt it true what do you guys think?

Interesting - I hadn't heard the rumors about parts of CC being mothballed. I'm assuming these would be Harmon and Vdara? Not sure how they would do this - wrap the buildings and finish them at a later date (like Echelon) or try to sell them off (in which case, I believe any value there is only in the land, which isn't big enough to build a Vegas scale resort).

I think the better option is selling off some 'non-core' assets to fund an investment in the future. For example, TI to Ruffin was a good deal for both parties. I'd speculate the top properties on the block would be Mirage (with TI sold, it's kind of hanging out there and could command a decent price), and Mandalay Bay (best 'all-in-one' package, as well as the convention center - not to mention it's at the end of the MGM block).

I thought it might be a good idea to move Circus Circus, but from what I read, it's a cash cow, and MGM isn't in need enough to sell that. Plus, the north strip is really where the future is (other than CC), so they'll probably hold on to it as well as all the other land they have up there - unless they take a bet that CityCenter will change the face of the mid-south strip (which I believe it will) and that they won't need a major presence in the north strip to be a major contender.

As far as Wynn goes with the potential purchase of Mirage, I don't think it would dilute the image of Wynn/Encore at all. Do you look at Bellagio and think it's not as nice because MGM also runs Circus Circus? However, I don't think he'll buy it - every indication from him is that he wants to build his own stuff (even though he did build the Mirage, it's not what it was when Wynn range Mirage Resorts). Also, I don't think he's interested is expanding very quickly (lessons learned from the MGM buyout - or was it a friendly deal? Depends on who you believe). He's got his company into the best capital position of the major operators by being small and exclusive, not buying everything in sight - which as you all know, he's spoken negative of lately.

I also want to second Brian's point. I haven't been reading here long, but I've found this is a great place for people like myself who are interested in the people behind the hotels, the business of it all, and the concept and design of places. This isn't a place to discuss my most recent royal flush (not that there's anything wrong with those boards - I read many of them). Many people I talk with can't understand why I enjoy Vegas so much, most just write me off as a gaming addict (I do like to play a lot, but if I were an addict, wouldn't I just go to the casino down the street every night? That way, I'd have more money to gamble with because I wouldn't have to pay for a flight and hotel.) I feel that many people here appreciate the city for so many other things besides gaming (as mentioned earlier - business, design, etc.) and that's what makes this place great.

Posted by mike_ch

Joe: No chance. Bellagio is useful for MGM for a number of reasons, and completely disinteresting to Steve Wynn for a number of reasons (there's no room there for him to build anything.)

There's so much space behind and around the Mirage that with enough work you could build another resort and link them together. A couple years ago it was speculated that the Dolphin and Tiger exhibit out back was to be scrapped for a second tower, but that space and all the mostly low-laying infrastructure around is pretty excessive.

Having just stayed there and seen that the building is still in really good shape (the tower is solid compared to many 90s Vegas hotels even if the spaces are more closed in), I don't see the Mirage getting torn down anytime soon but no dobut it was built in the mindset of much lower density than what we see in most Vegas hotels these days. The big trend of the past three years that only a few players have gotten to move on, is looking at the property from an eye in the sky view and see how well you're using your acres.

Mike_ch wrote, "If Mirage is for sale, I can't imagine Steve Wynn will watch that one go by without extending an offer."
The property as a whole is great, and there is lots of space, both inside and outside, but the hotel is sorely lacking. It was Steve's first big development (1989) and he made the rooms too small with not enough soundproofing between walls. As he has said himself, each property has been improved based on his previous efforts.
The Mirage has roughly 3,000 rooms averaging 400 sq ft each.
Steve could make remake The Mirage into a spectacular property if he could profitably increase room size to 500 or 550 sq ft. This would bring the number of rooms down to 2,000-2,500. I have no idea if the numbers would work, but he could have another great central Strip location to complement Wynn and Encore. The casino is 107,000 sq ft, and there is 170,000 sq ft of meeting space. It could be a terrific boutique hotel/casino/resort.

Merry Christmas, eveyone who loves Las Vegas 24/7/365.
Regarding possible sales. Wynn has his hands full. He always says he does not look back. Speculation on this board re:Wynn and Mirage is sentiment, pure and simple. Circus-Circus and Excalibur make tremendous amounts of money. We may not like the clientele, but both properties are incredibly reliable performers, which equals probably not for sale and certainly not viable for bulldozing and replacement. How much would they have to make to replace them? I recall Circus' EBITDA # is $800 grand a week.
My sale money is on Mandalay. MGM currently owns 4 companies "premium properties" (MGM Grand, Mirage, Mandaly Bay, and Bellagio). Mandaly is not the baby of anyone currently at the top of MGMM, it's not next to any core asset, it is redundant, AND the exterior is not outstanding. Can anyone tell why they should keep it, so I can shut up about this, and move on:).
Merry Christmas, again. I love this board!!!

In the year ahead, I believe the economy will be the dominant issue. I don't think you can underestimate the impact easy credit, especially easy home equity credit, had on the growth of Las Vegas over the last 10-12 years. When you consider that Southern California comprises 30-40% of the city's visitors on any given day, it is easy to understand why occupancy levels have fallen to the dismal levels we see now.

The next year will be a struggle for all operators, and I would not be surprised to see at least one major failure, LVS being my top pick for that dubious distinction. In the near-term, the city has tremendous over-capacity, and I just don't see how everyone can ride out what looks to be a prolonged and severe downturn.

I suspect that a year from now, the gaming business will look dramatically different than what we see now. Phil Ruffin provides a hint of what we can expect: the major players (specifically MGMM and Harrahs) will shed pieces of their empires to stay alive, providing the opportunity for independent operators capable of funding a purchase without Wall St. money to enter the market on favorable terms. Long-term, this may be a good thing, but it will definitely be a tough year for everyone.

Posted by Mark D

Well, if we're making predictions which companies are in trouble next year, I think Station Casinos will go under before LVS does. LVS now has enough of Sheldie's cash to last several quarters, but Station has only until next Wednesday, new year's eve, to renegotiate with their banks, or file for bankruptcy. I don't think that the Fertittas or Colony have enough cash to bail it out by themselves, and I doubt Packer is in any mood to invest more. Maybe the banks will cut them some slack, but the bond holders already said no deal.
http://www.lvrj.com/business/36681324.html

Posted by mike_ch

Jeff: Lots of rooms, a popular nightspot venue in MIX, an incoming show that's practically guaranteed to make money, and a whole bunch of land south and across the street?

Aside from "lots of rooms," MGM Grand has none of these things and that's why after the TI sale was announced I marked it next. That idea was knocked down a peg by Jeff Simpson in his interview with Ruffin, but Ruffin was claiming a lot of things MGM refused to verify or outright contradicted so who knows what is up.

Though I hoped the Ruffin thing would mean competition, it really looks more and more like a strategic partnership (no doubt due in part that so much of the facility lies on the Mirage side.) I'm starting to think that MGM is expecting to buy TI back at a later point when times are better, for about $1.2b or so, keeping the place under a friendly manager who seems to be more interested in wheeling and dealing than long-term strategic ownership. It's unlikely with all the contracts and clauses that Ruffin could find another buyer to flip TI to other than back to MGM.

It could be the other way around, and that their reasoning for selling TI on it's lonesome and putting together contracts to cooperate is to come-on him into buying the rest of the enchilada, but it just doesn't seem as likely to me now.

As far as I can see, all MGM Grand has going for it to the company's interest is the MGM name and some great restaurants, particularly 5-star Joel Whathisname. Since they've begun licensing the name MGM Grand to other people's hotels in overseas markets, doing so at home isn't a HUGE leap. The corporate offices moved to Bellagio, anyway.

Posted by Mark D

MGM has sold hotels with the MGM Grand name twice in the past.

The LV Sun followed up on Mark D's comment about Station Casinos:
http://www.lasvegassun.com/news/2008/dec/26/infusion-cash-key-stations-viability/

I know anything can be bought for the right price. But, I just don't see how MGMM could sell the Grand for enough money to make up for the loss in value of the entire company after its standard bearer is gone. Seems like investor confidence would take a real hit, creating a mindset that the company is being sold off.
Mark D. I know they sold what is now Bally's, but what else has been sold with the MGM Grand name? I can't think of anything in Las Vegas, was it in a different market?
Just out of curiousity, anyone got an idea of what the Grand would sell for? 3 Billion?

Posted by Jason Robar

Mike, MGM Grand also has the Grand Garden Arena, which has been housing basically all of the concerts and big fights that have been in the MGM family. Giving up the MGM likely means giving up all of the big concerts that draw in crowds as well.

I still think that if MGM Mirage is going to sell anything, it will be the Mirage. It's really out on it's own in MGM's world, but would be attractive to many potential buyers because of both the location and the cache it still has as being an upscale property.

The crazy thought that keeps on running through my head is that MGM will make a play for the Trop once CityCenter is up and running. They might not have a desire to do any more development (beyond the Circus Circus/CityCenter North piece), but renovating the Trop could at least be done while not being completely devoid of revenue.

Posted by Mark D

Jeff, yeah, it was in a different market; MGM Grand Reno. Bally's bought it at the same time they bought the Vegas hotel. Then Hilton bought it and sold it and now it's called the Grand Sierra Resort.

Posted by mike_ch

Jason, I think a lot of events would probably move to Mandalay Bay.

Under the original CC/MRG ownership, Mandalay Bay was becoming known for it's boxing matches, and some time ago that all moved to Grand Garden Arena. I'm not sure how the deal is hammered out, but MBay's arena has become pretty much abandoned for Grand Gardens. In the past two years, the only hyped event I can remember happening at MBay is the Spice Girls reunion concerts.