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License backed for CityCenter casino

16 November 2009

LAS VEGAS, Nevada -- Gaming regulators on Friday granted preliminary licensing approval for the only casino component inside the $8.5 billion CityCenter project and suggested the revenue mix might be sharply different from the traditional gaming-driven environment.

During a hearing that lasted more than two hours, the Gaming Control Board was told not to expect additional gaming inside the multiple hotel, high-rise residential and entertainment complex.

Aria, CityCenter's 4,004-room centerpiece, was designed as the project's only casino. Vdara and Mandarin Oriental are nongaming hotels, and Veer Tower is strictly residential.

Executives from MGM Mirage and Dubai World, its 50-50 partner in the development, explained the CityCenter concept, using a promotional sales video and previewing Aria's first television advertisement in what will be a $20 million marketing campaign.

Gaming is not the focal point of the 67-acre project. The casino at Aria, roughly the size of Bellagio, will have 145 table games and 1,940 slot machines, half of which will be linked to a server-based gaming platform.

Aria President Bill McBeath said the casino's revenue projections are modeled with Bellagio, but the CityCenter casino has fewer slot machines. He said Aria is designed to have private gambling salons like other MGM Mirage high-end casinos, but the rooms will not be used immediately.

"There will be cross-marketing between the properties," McBeath said. Aria will host MGM Mirage's private Chinese New Year party for high-end customers at the MGM Grand, Bellagio and other company resorts.

McBeath said Aria's slot machines are projected to produce roughly $320 win per unit per day. During MGM Mirage's quarterly earning conference call with analysts, City Center Chief Executive Officer Bobby Baldwin said Aria would produce $1.2 billion in revenue in 2010.

"The (revenue) projections are optimistic," Gaming Control Board Chairman Dennis Neilander said. "But they seem reasonable."

McBeath said Aria might have ratios that mirror Bellagio, where 60 percent of the overall revenues come from the nongaming side and 40 percent are produced by the casino. Neilander said he thought CityCenter as a whole might see 80 percent of its total revenues come from nongaming areas.

MGM Mirage Chairman and CEO Jim Murren told gaming regulators the company did not want to design just another hotel-casino for the site when planning for the project began six years ago.

"The whole idea of CityCenter was to create an environment," Murren said after the hearing. "You can't do that with a casino resort in isolation. Most of what we have developed here has little to do with a casino. The casino is the core, it is the heart of the entire project. It's the anchor tenant. It's one piece of a very integrated puzzle."

Control board members had few concerns about Aria or CityCenter. They did address a financing matter involving Dubai World, in the investment arm of the Persian Gulf emirate, which spent almost $6 billion in 2007 to buy half of CityCenter and a 9.4 percent stake in MGM Mirage.

Neilander said gaming agents raised a red flag on some of the funding for Dubai World, but an independent audit cleared up the matter.

After the hearing, Neilander said the funds coming into the CityCenter joint venture were not a concern, but the overall capitalization of Dubai World brought about the questions.

"Some funding that occurs among the United Arab Emirates is not documented in the way we're used to seeing," Neilander said.

Regulators did not raise questions about Dubai World's surprise lawsuit that was filed against MGM Mirage in March, saying CityCenter had been mismanaged. The lawsuit nearly sent CityCenter in bankruptcy, halting the development. The parties were able to craft a new agreement a month later that kept CityCenter funded. The lawsuit was dropped.

"There were a few bumps along the road, but Jim and his team were able to smooth over those bumps," Dubai World CEO Christopher O'Donnell said.

Neilander said the lawsuit didn't need to be explored.

"While we don't favor seen partners suing each other, certainly business disputes occur," he said. "The partners were able to resolve things to their satisfaction."

The three-member control board recommended unanimous approval for Aria. The Nevada Gaming Commission will consider the recommendation next week.