This news really shouldn’t come as a surprise because it’s been an open secret that Trump would like to divest of the property which has been a perennial money loser and has quickly lost its luster as new, bigger and more popular venues have come online.

I could see this property fetching very little – similar to what recently happened with the Resorts property that was still sold for only $35 million – even after opening a $110 million tower in 2004 and undergoing a refinancing worth $360 million in 2007. Resorts sold for 1/10th of its value in less than 3 years.. A few years ago Trump Marina was valued around $400 million and from what I’ve heard is in worse shape than Resorts – both cosmetically and physically.

Would $25-30 million be too far fetched?? Depends on how desperate Trump is to sell the property.

One idea that could definitely raise interest in the property is combining it with MGM Resort’s small parcel which sits just to the north of Trump Marina that is also on the block. The only question remains is who would be willing to put that much of an investment into Atlantic City at this time.

andrew@alconic-inc.com

To amend and restate the Certificate of Incorporation of the Company to change the name of the Company from “MGM MIRAGE” to “MGM Resorts International” 

This change, if approved (and it most likely will) will take effect immediately – in fact MGM Mirage already has the new domain name up and running – just redirecting to their current site. (http://www.mgmresortsinternational.com) 

As companies grow and evolve over the years – its sometimes necessary for them to change their name to better reflect the direction they are heading in. Some examples which come to mind are Apple Computer changing to Apple, Inc. in January 2007, or who could forget Radio Shack’s corporate name from 1963 until May 2000 - Tandy Corporation. 

There has been some speculation that the reason MGM is dropping the Mirage name is to distance itself from Steve Wynn, who sold Mirage Resorts to MGM Grand, but that sounds too much like a conspiracy theory when it looks like all MGM is trying to do is better reflect their growing stable of businesses and international footprint. 

When MGM Grand, Inc and Mirage Resorts, Inc first merged, each property contained gambling, and was located within the Continental US. Now, MGM-MIRAGE now has a number of non-gambling properties in the planning stages, and they’ve also started to franchise some of their brands through MGM-MIRAGE Hospitality. Plus their footprint now reaches beyond the shores of America from Dubai, to Vietnam and Macau. 

An example of the MGM brands being franchised can be found in the Dubai Pearl development, where they are constructing Bellagio Residences and Hotel, MGM Grand Hote and a Skyloft Hotel (based upon the Skylofts at MGM Grand in Las Vegas.) Two brands that MGM-MIRAGE Hospitality has not really provided details on is their mx and emblem brands which were mentioned in a profile done by Hotels Magazine back in 2008, but that magazine has since shut down their website. 

While I’m sure the brand recognition will help fill these hotel-only resort properties, I think it will be interesting to see how people will respond to going into an MGM Grand w/o being able to gamble. 

andrew@alconic-inc.com 

MGM Mirage is cutting the price of the condos at its $8.5 billion City Center development by 30% due to the economic downturn..

…MGM Mirage had hoped to sell its condos at top-of-the-market prices, which would have brought in $2.6 billion. However, it ended up getting deposits on only a portion of the inventory. If all of those deposits were to result in sales, it would mean $1.6 billion in revenue.

For such a high profile condo project publically announcing that they have lowered the prices of their condos by 30% demonstrates that even top of the line properties, in the center of the Las Vegas strip, properties that you’d expect would be in high demand, are having to take drastic steps to ensure that those who have placed deposits can close – and hopefully encouraging those who are on the sidelines to jump in.

MGM Mirage’s decision will weigh heavily on the Cosmopolitan, a project whose development started before City Center, and will definitely end after City Center is up and running. Hopefully for all those who have placed deposits at the Cosmopolitan, they will be relieved to hear that price reductions will be coming down the line – if that ends up not occurring, the Cosmopolitan developers will have a much more difficult time closing than they ever expected.

I’m really glad that MGM Mirage  has taken this step – it will help soothe the nerves of those who are looking to close, but are unable to because of financing, and hopefully put a little bit of a jump start into the economy.

I wonder how long it will take to see more of these deals come down the line.

andrew@alconic-inc.com

Here’s why:

The reason I don’t see the Cosmopolitan being branded as any Hilton Family hotel is quite simply because of Hilton’s current lawsuit with Starwood Hotels. One of the main points of the Starwood/Hilton lawsuit was the accusation that in the beginning of 2008, two newly hired Hilton employees, (Ross Klein & Amar Lalvani – formerly of Starwood Hotels) stole confidential documents and knowledge of projects that Starwood was actively developing (among other things).

Around that same time Starwood Hotels was apparently working on a deal to put a W Hotel & St Regis hotel in the Cosmopolitan; but once Klein & Lalvani moved to Hilton, there was complete silence on any possible deal with Starwood and the Cosmopolitan.

It wasn’t until earlier this year that Deutsche Bank was said to be working on a deal in which the Cosmopolitan would be managed by Hilton; although it wasnt ever officially announced, it was pretty common knowledge in the industry that the Cosmopolitan would end up being one of Hilton’s first Denizen Hotels.

I can’t see how Starwood would enable the courts to let Hilton even come near the Cosmopolitan – especially since the individuals who were privy to the W & Cosmopolitan deal went to Hilton and suddenly, the Cosmopolitan was going with Hilton.

I could be wrong – but I think its safe to assume that the news bit that the LVRJ is relying on is old information which may have been correct back in March of this year, but is no longer correct since the Starwood/Hilton lawsuit. I still firmly believe that if one of the major lodging companies are to brand and manage the Cosmopolitan – it will be Starwood with the W Hotel, and perhaps even a St Regis or Le Meridien.

In other good Cosmopolitan news: the joint finally has a General Manager, and has reiterated their planned opening date of late 2010 – still a year away, but since the project has been under continaul construction throuhgout hte past few years, I see that as a realistic date.

I wouldn’t be surprised to see the Cosmopolitan making a big announcement either right before MGM CityCenter opens, or in the beginning of 2010 – after the CityCenter hoopla dies down, because the end of this year will be totally dominated by CityCenter news/announcements/reviews, etc.

andrew@alconic-inc.com

MGM Mirage MX Logo

The first is MX which will be MGM Mirage’s lifestyle hotel brand.

Think: MGM Mirage’s version of the W.

There is very little information about the MX brand, but one of the most forthcoming sources is MMH’s website where a brochure can be downloaded that includes the logo and a few paragraphs on the brand. I’ve cut and pasted the description of the brand below

MX will be the contemporary, design forward, urban-chic hotel of the new century with a young,
edgy and energetic vibe. Created to stimulate the imagination and push the boundaries of art
and design, MX provides an experience filled with novelty, discovery and surprise. In doing so,
MX becomes the clear choice for a distinct and powerful crowd of progressive thinkers. The
bold and edgy surroundings challenge the senses and invite guests to explore the sensory
playground of MX.
MX will delight culturally savvy visitors with a five-star experience built on thought-provoking
design and studded with awe-inspiring details. From the spa to the restaurant to the bar, each
space offers a new twist to discover. Guests are kept in constant exploration, which is in itself
exciting, fulfilling and unique.
To complete the experience, MX is staffed by extroverted and knowledgeable people who
are able to make relevant suggestions and contribute to each guest’s quest for discovery and
conversational content. They achieve this while simultaneously delivering flawless service
and savoir-faire. Those who stay at MX may leave with the impression that they have finally
seen it all, but when they return a few months later, they quickly find that a whole new
experience awaits.

The text above isn’t all marketing speak using big words (very odd in the hotel industry), as it sets some definite goals they have for the brand, and wow – they have set the bar pretty high.

There are three points that stick out to me in the description of the brand: Extroverted employees, different experience upon return, focus on the senses.

Extroverted Employees

W Hotels is famous for having unique employees who believe in the brand and are a major part of the brand, so much that their vocabulary focuses on words that start with “W”.  The Industry Standard is also unique by having some of their employees dress as nerds (in my opinion, others would have another word for it).

But MGM is looking for extroverted people to work here, (for those who need a refresher, the definition for extroverted is: “Marked by interest in and behavior directed toward others or the environment as opposed to or to the exclusion of self; gregarious or outgoing”)

Maybe I’m reading into it a little too much – as every hotel really would like all of their employees to be extroverted, I mean who would want an introverted front desk employee, or bellhop? But MGM is taking it to a new level by actually stating that front and center. It also leaves those who are introverted on the sidelines – should they even consider applying? Not everyone is an extrovert, and that’s ok – not everyone has a Type-A personality. I’m curious to see how that will pan out once something comes of the MX brand.

Different Experiences Upon Return

This point is interesting because from the way its written, it seems as though every few months the hotel will go through a top down renovation – new colors, furniture, smells, artwork, art, etc. Is that even possible? How cost effective would that be? W Hotels once again is the example I’m going to use, every few years each W seems to go through a complete renovation of the rooms and public areas, W Chicago City Center was one, W New York, & Times Square are some examples which just completed their renovations in the last year – but even W only does it every few years, and I’m sure that cost plays a big part in that.

I’m really interested to see what these “experiences” will be, and how will they will integrate into the whole brand and the physical space that the hotel is built in. If MGM is somehow able to successfully and cost effectively change the hotel a few times a year without the hotel’s price point being sky high it’s a hotel industry game changer.

Focus on the Senses

Reading the description of MX reminded me of LeMeridien’s focus on LM100, which was their way of becoming a cultural hotel, having artwork, sculptures, food, music – everything that touches the senses come alive inside the hotel. It seems as though MGM Mirage is trying to do the same for their MX brand, which is great, but I’m curious as to what the marketing speak of “surprises” will entail. Will butlers pop out of the walls with champagne? Will you walk in the room and wonder what music will be playing this time?

Lastly, is it any coincidence that the MX logo (above) slightly resembles a lion, which is MGM Grand’s famous emblem?

Which is once again ironic, because that’s the the name of their second brand..

The second brand is “Emblem”.

I’ve found even less information about Emblem – the last mention of it occurred in May 08 in a blog post from Hotels Magazine, where it was mentioned as an “ultra-luxury” brand. I haven’t seen anything else about it, so its possible that it was canceled due to the economy – its worth mentioning that MGM already has an ultra luxury brand – “The Mansion” which is a part of the MGM Grand in Las Vegas, it has its own private entrance and is completely separate from the main building. Perhaps this was to be a re-branding of The Mansion?

Conclusion

It’s interesting that MGM Mirage is putting so much into their MGM Mirage Hospitality division by coming up with new hotel brands that they can open throughout the world that don’t have a casino component like all of MGM’s current properties do (or at least are closely affiliated with). Once the economy and travel picks up again – MGM Mirage may be a viable competitor in the non-gaming lodging industry, although it will take years for them to get to the scale of any of the majors.

andrew@alconic-inc.com

I touched on this in my last article about the Tropicana, but I thought it was worth mentioning again because unless you read closely, every newspaper article makes it sound like Icahn automatically gets the property once it reaches auction in bankruptcy court – that’s not the case.

Carl Icahn does have a contract with the overseer of the property to purchase the property, but its pending the auction and if he is the highest bidder which will determine its next owner. Currently Icahn is the highest bidder – but remember.. The auction hasn’t even started yet.

Icahn’s bid doesn’t seem to include any actual cash – its simply a reallocation of the existing bonds he owns, being put toward the purchase price. If someone does come in with a higher bid – Icahn also has the potential to put up cash, or use more of the Tropicana’s bonds which he supposedly owns over $1 billion worth.

The only other bidder who still has publicly voiced his interest in the Tropicana property is the Cordish Companies. David Cordish originally was willing to bid $750 million through a combination of cash and financing for the property, or $525 million all in cash – but apparently a combination of cold feet and the continual declining of the real estate market put that bid on hold. It’s very possible that he may come to the table during the auction.

While I’m no expert in bankruptcy auctions – and especially complex auctions such as this one, it does seem as though Columbia Sussex (the former owner of the Tropicana) will lose their entire investment in the property. When the property was first put on the market in late 2007 it wasn’t intended to go into bankruptcy court, but due to the recession and the bidders placing low bids or dropping out – bankruptcy’s hand was forced.

Its still unclear what Icahn will do with the property if he ends up being the winning bidder; in the past he has simply flipped the property for a higher price down the road (eg: the Sands in AC to Pinnacle Entertainment). Although Icahn’s continual interest in MGM Mirage, where he’s essentially doing the same thing with MGM as he is with the Tropicana – but on a larger scale – may signal other plans.

andrew@alconic-inc.com

If the interest payment wasn’t made, the project could immediately have been declared in default, forcing a bankruptcy of the project – putting contractors out of work for who knows how long, and holding up the completion of the project for possibly months.

Fortunately, by the end of the day the Wall Street Journal reported how MGM made the entire interest payment – without Dubai World’s help – and everything is back on track.. For now.

What an amazing turn of events on the project over the past few weeks – MGM even went so far as to hire lawyers to help prepare the project for bankruptcy, I don’t know if they did that as a precautionary measure, or if their intentions were to really let the project fall into bankruptcy.

I’m sure we’ll see more and more news about exactly what went down tonight as the weekend goes on – but it shows just how bad the economic climate has affected Las Vegas. Currently CityCenter is one of the few major projects still under construction in Vegas – some major major projects have been delayed (The Plaza, Trump Tower 2), and even put on hold after construction started (St Regis at the Venetian, Boyd’s Echelon Place).. Except for the Cosmopolitan, CityCenter and FontaineBleau - I don’t believe there are any other major projects currently under construction.

I’m very curious as to how bad MGM’s finances are – I’m surprised they were able to come up with the extra $100 million to cover Dubai World’s portion, but I think with the choice between coming up with an extra $100million or letting the project fall into bankruptcy – they made the right choice. Thousands of construction workers will still have jobs on Monday, and for the time being – the project will continue.

I keep coming back to the line in MGM’s quarterly report which stated that it will not be able to continue as a going concern due to its massive debt and the declining tourism industry.. It hasn’t been said publicly yet – but I wouldn’t be surprised to hear that MGM’s auditors inserted that line – just like the auditors for Las Vegas Sands did the same, then a week or two later, removed it saying they were being too conservative.

Call me an optimist (I do consider myself one) but MGM is not like GM or the other automakers – they are not hemorrhaging billions of dollars every quarter and having their sales volumes decline by 50% even after cutting prices left and right.

I just don’t see MGM just disappearing in its current incarnation. Could it suddenly get taken over? Sure. Could it suddenly announce sales of a number of properties? Sure. Could we wake up on Monday morning with a new name, leadership, and MGMMirage in bankruptcy? I doubt it.

andrew@alconic-inc.com

That recently happened with Dubai World and MGMMirage with the CityCenter Project in which Dubai World is a 50/50 partner with MGM, in addition to part owner of the CityCenter project, Dubai is also a 9.5% owner in MGM Mirage as well.

Dubai World has sued MGM Mirage to limit its exposure in having to spend more money on the project, which is more than a billion dollars over budget and thats even after a number of cost cutting moves have been implemented. Dubai World is looking to not have to spend any additional money ont he project – putting an expected payment to MGM Mirage in uncertainty as well as possibly causing MGM Mirage to default on its debt covents.

What a major turn of events for MGM Mirage!

Its obvious that the economic downturn is hurting MGM tremendously – the majority of their business is centered ont he Las Vegas strip, and the CityCenter Project is considered the largest construction project in the United States today (and even prior to the downturn). Their stock has lost over 95% of its value, and honestly – I wonder if it can go down further. MGM seems to be in a very scary position right now – their only recourse seems to be selling some additional casinos, but then the question arises – who will purchase a casino (Even a profitable one) in this economy?

I wonder why Dubai World is suing MGM – what is their motive? It seems to me that forcing a company to go into default, a company that they own almost 10% of, including its largest property which they are 50/50 partners in would almost be like shooting yourself in the foot. Right? Maybe I’m missing something, or maybe Dubai World is hoping to make a play for MGM Mirage on the cheap if it ends up going into default and filing for bankruptcy. Thats a very good possibility.

MGM’s issue was created by having tied up all their capital and debt into the CityCenter Project – a project which isnt open yet, but when it will later this year, will open in quite possibly the worst economic climate in decades, a downturn that is being amplified in Las Vegas area because of the cutback in corporate meetings and overall decline in travel to entertainment destinations such as Las Vegas. If MGM is able to get out alive in its current state (which is looking less and less likely) they will still be a powerful force in the gambling industry, but the question is – how can they do it?

5 Properties that MGM Mirage Might/Should Sell

1. Mirage - it was built as the sister resort to Treasure Island which was just sold to Phil Ruffin. This property sticks out to me as the most likely to be sold immediately.
2. Borgata - MGM has a 50% interest in the Borgata in Atlantic City, and a few weeks back – I thought MGM would be crazy to sell their interest in it – but times are desperate, and Boyd does have some cash laying around since they stopped constructing the Echelon Place project last year
3. Excalibur - this place is so old and so out of place, it may be difficult to get rid of it, but it doesn’t really keep up with MGM’s high end, luxury, trendy
4. Circus-Circus - This property and the land surrounding it was supposed to be a mega resort (resembling CityCenter) with Kerzner International. At the time the casino was to be completely redeveloped and added into the larger project. Since MGM has stated they want to sell the Kerzner joint venture land, I could see Circus Circus going along with the land. but who is going to be buying land in Vegas these days anyway?
5. Any of their non-MGM Grand properties in Reno or Jean, Nevada. MGM Mirage is really a Las Vegas company and that’s where over 75% of their land and assets are located, except for the MGM Grand projects they’ve built in Foxwoods (CT), and Detroit none of the other properties really seem to be up to par with MGM’s standards. The only saving grace these properties have is their primary clientele being locals, having less of a reliance on tourism from the rest of the country unlike Las Vegas.

I still like MGM, and I think they are a great company – they have some really great properties that made Vegas famous and the CityCenter project will be an amazing asset when its completed. In fact, Dubai World agrees, they still stated that they expect to make many many times their investment back once the CityCenter project goes online.

And thats what I just don’t understand – why hurt your own project?

andrew@alconic-inc.com

It’s about time!

MGM has owned the land next to the Trump Marina for years – and unless its developed as an addition to the Trump Marina (soon-to-be known as Margaritaville Casino) its almost worthless. There is only three ways to access the property, via boat, via Huron Ave (after practically driving through the Trump Marina structure) or Brigantine Blvd – requiring those coming from the North to drive through the Harrah’s structure

.

In essence it’s a very secluded property that requires you to essentially drive through a competing casino – and would be great for a park or the owners of the Trump Marina, or perhaps a luxury condo or apartment development.

One of the biggest drawbacks to purchasing the property (besides it being so secluded) is its location right on the bay – the amount of permits and variances that would be needed to develop property that close to the bay – especially in NJ which recently made it harder for any development to be built within 400 feet of a waterway.

I think we’ll end up seeing this property be sold to the future owners of the Trump Marina as an insurance policy for future growth on the property – either a second hotel/casino or a huge addition to the existing hotel/casino.

In regards to the LVRJ’s speculation that MGM-Mirage is looking to get rid of Borgata and perhaps the 72 acres next to the WaterClub where the MGM Grand Atlantic City was scheduled to be built – I’d be very surprised to see MGM sell both properties. I could see the sale of the Borgata’s 50% interest – Boyd Gaming is the company really behind the operation – MGM is pretty much just there for the money backing – the MGM Grand property is too large for MGM to give up.

A Lot of people love to predict the demise of Atlantic City, with casinos opening in PA, Philadelphia, New York, Delaware and CT – a lot of Atlantic City’s player base is being eroded; what a lot of folks fail to realize is that those clientele were the same group who only went because they were given $30 in free slot dollars and a coupon for a free buffet. That’s not where the money is in Casino/Resorts. The Borgata showed that when after they opened they had the largest quarter over quarter profits – until this economic downturn of course – and is unique because the Borgata does not allow casino tour buses to drop off at the property. Additionally, the Borgata has some destination places within the property – restaurants owned by celebrity chefs and clubs which attract the celebrity set week after week.

Atlantic City isn’t going anywhere – and MGM Mirage would be foolish to sell the 72 acres next to the Borgata. They’ve owned the land this long, and if they are looking to raise cash – they are better off selling land in Las Vegas or perhaps some of their casinos in Las Vegas and surrounding areas (Mirage? Rail Road Pass?).

andrew@alconic-inc.com

The Harmon tower was supposed to contain 46 stories, split between 400 hotel rooms and 187 condo residences, but today MGM announced that the scope of the Harmon towers were being cut back to 26 stories and only contain 400 hotel rooms, the condo portion would be canceled.

Image Of The Harmon Las Vegas as of Dec 2008 at 24 Stories (Courtesy of VegasTodayAndTomorrow.com)

Original Rendering of Harmon Hotel Prior to Change

Rumors have been flying since September/October when it was noticed that construction seemed to have stopped on the site. Then rumors were also circulating that the reason for the stoppage was a contractor error – support beams weren’t placed in the wrong places areas hurting the structural integrity of the building as it rose to its original 46 stories.

MGM finally confirmed those rumors were correct by canceling the condos, and announcing that the building would be topped off at 26 stories, saving $600 million in construction costs and the cost to retrofit the building to enable it to be built its full height. MGM also announced that it will not open the Harmon until mid-2010 due to these changes, but the building will still look complete from the outside – all windows and exterior finishes will be completed by the time that CityCenter opens.

This contractor error is a blessing in disguise for MGM. It’s allowing them to conserve capital in this economic slow down, its also relieving them the pressure to sell almost 200 condos and its bringing down the added costs that the retrofitting would have added to the original estimated completion cost. The only downside to this is CityCenter will be a little smaller and MGM will not be able to begin receiving revenue from the hotel portion of Harmon until mid-2010 instead of 2009.

It amazes me how the building contractors and the project managers did not figure this out ahead of time, its unfortunate that it took so long to find the issue, but like I said earlier – it seems to be a blessing in disguise.

2009 is turning out to be a very good year for MGM Mirage even though the economy and gaming industry is in a downturn. Events are playing out so that MGM’s bottom line will come in better than 2008′s and capital expenditures (construction costs for the Harmon) are coming in at more than half a billion dollars than originally expected.

Not only will CityCenter finally open, it’s becoming a great boon to the Las Vegas economy with the hiring of 12,000 employees and the sale of Treasure Island and talk of a potential sale of the Mirage to Penn National will bring much needed capital back into the firm.

andrew@alconic-inc.com