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Howard Stutz
 

MGM Mirage says M Resort has lost its value

18 August 2009

LAS VEGAS, Nevada –- MGM Mirage told Wall Street its investment in the $1 billion M Resort has lost its value.

When the Strip casino giant released second-quarter earnings Aug. 3, one factor contributing to the company's $212.6 million loss was a noncash impairment charge of $188 million, or 34 cents a share, related to the company's convertible note in M Resort.

"Given the current economic climate, the operating environment is certainly challenging," MGM Mirage Chief Financial Officer Dan D'Arrigo said. "We've taken the position that we need to write down that note."

D'Arrigo said the write-down was an accounting adjustment. Financial reporting rules require a publicly-traded company like MGM Mirage to evaluate investments quarterly.

MGM Mirage hasn't written off M Resort completely.

"Right now, where the market is at, the valuations are unpredictable because of cash flows," D'Arrigo said. "Clearly, we see value in the property going forward. But it's just hard to pencil that out right now."

In April 2007, MGM Mirage financed $160 million of the then-under-construction M Resort's building costs through a subordinated convertible note. MGM Mirage has the right to convert the note into a 50-percent equity in the property at some point if M Resort has not paid back the loan.

The 390-room hotel-casino opened March 1 near the corner of Las Vegas Boulevard South and St. Rose Parkway, attracting large crowds fueled by a massive promotional effort. The heavy business forced M Resort to hire another 250 workers in its initial week of operation.

By May, once the newness wore off, business slowed. M Resort laid off about 5 percent of its work force. Property Chief Executive Officer Anthony Marnell III said, "The market is very choppy right now."

D'Arrigo said M Resort officials were informed about MGM Mirage's write-down.

"They knew we had to do this," D'Arrigo said. "We support the Marnells but this is the prudent position we had to take today. It's tough out there for everyone. It's a beautiful resort and we look to move forward in the future."

***

CityCenter's fleet of 26 stretch limousines will be powered by compressed natural gas, in keeping with a commitment developers of the $8.5 billion project have made toward sustainability.

The Lincoln Town Cars will serve Aria, CityCenter's 4,004-room centerpiece hotel-casino, and the nongaming 1,500-room Vdara Hotel. Both projects are expected to open in December.

Krystal Enterprises, the world's largest manufacturer of stretch limousines; Clean Energy Fuels; BAF Technologies; and Ford engineers are developing the limousine fleet.

Aria President Bill McBeath said compressed natural gas was selected because of the abundant U.S. natural gas reserves. It is also one of the cleanest-burning alternative fuels available and is generally less expensive than either gasoline or diesel with greater price stability.

"Just as with every element of CityCenter's design and construction, we're determined to employ the most innovative solutions possible to grow responsibly," McBeath said.

MGM Mirage, CityCenter's primary developer, is pursuing the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) certification for the 76-acre project.

CityCenter's goal is to become one of the world's largest environmentally sustainable urban communities.

***

The conversion of the 40/40 Club is complete. Chef Emeril Lagasse and the Palazzo said the location is now called Lagasse's Stadium.

Renovation of the 24,000-square-foot space began in June. After the 40/40 club vacated the location last year, Palazzo officials turned the site into the Sportsbook Bar & Grill.

The club also features access to a street-level outdoor space bordering the Strip for open-air seating.

Meanwhile, Lagasse's Stadium features lounge- and stadium-style seating and luxury boxes for private events.

Lagasse's Stadium has custom sports-viewing walls with nearly 100 high-definition television screens for nearly every major college and professional sporting event.

"On big game days you'll find me tailgating with friends and supporting my favorite teams," Lagasse said.

Lagasse's Stadium is his third project at the Palazzo and The Venetian. The others are the Delmonico Steakhouse at The Venetian and Table 10 at the Palazzo.

MGM Mirage says M Resort has lost its value is republished from Online.CasinoCity.com.