MGM Mirage’s City Center is slated to open in November of this year. This huge project cost around $11 billion and links together several hotels and condo on the Las Vegas Strip. It encompasses 68 acres between the Monte Carlo and the Bellagio. Phase I is nearly finished slated to open at the end of 2009. When finished it will be a city within a city and have its own power plant and fire department.
The project will provide a shopping area called Crystals that will supply residents with anything they could need without going out of the area including a grocery store. There will be a 4,000 room hotel and casino along with several small hotels a condo hotel. This is one of the world’s largest environmentally sustainable environments. The project will use reclaimed water and plans to acquire LEED certification.
This project has been particularly troublesome for the Casino giant. They partnered with Dubai World, a company run by the government of Dubai, who reneged on half of the $200 million payment and are suing MGM. MGM had to get special permission from banks to pay contractors the entire amount owed to them.
Because of the drain on the company from this project and the recession that is causing stocks to plummet MGM decided to sell some of its holdings. They sold Treasure Island Hotel and Casino in Las Vegas and also put up on the market the MGM Grand in Detroit and Beau Rivage in Biloxi, Mississippi.
MGM hired Morgan Stanley to evaluate the offers it received on the two properties yet never admitted publicly that they put them up for sale. Apparently bids were nowhere near the price the properties were worth.
MGM offered stockholders the opportunity to swap their $782 million in notes that are due to mature next year for up to $500 million notes that will yield a higher rate when they mature in 2016. Those that cash in the current notes and do not swap will receive $1,175 for each $1,000 of the notes. The deadline was September 24th and there is still no news as to how many notes were cashed in or how many were swapped.
MGM Grand in Detroit opened in a temporary building, the old Internal Revenue Building in downtown area. They spent about $800 million to build a new structure across the street and moved in and opened in 2007. It has been doing well despite the slowdown in the economy. Beau Rivage casino was rebuilt after Katrina at a cost of about $500 million and opened a year after the hurricane went through. It also is doing well in the economy.
If an entity wanted to purchase MGM property for a decent amount of money, the company would be beholden to stock holders to entertain the idea. But for now the MGM Grand in Detroit and Beau Rivage in Biloxi appear to be off the market as debt continues to rise for MGM. It is said that selling either of the two casinos that are doing well in the down economy would cause a definite cash flow problem form MGM.
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