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Fire loss at Monte Carlo totals nearly $100 million

14 February 2008

by Howards Stutz

LAS VEGAS, Nevada -- While workers readied the Monte Carlo for its return to business this week, MGM Mirage officials said Wednesday that damage at the 3,000-room Strip resort during a rooftop fire three weeks ago will total just under $100 million.

The tally includes the business that was lost when MGM Mirage was forced to shut the resort's 100,000-square-foot casino and other public areas on Jan. 25. The property will reopen 1,200 guest rooms at 11 a.m. Friday in time for Presidents Day weekend. The resort's casino, most of the hotel's restaurants, the property's meeting and convention facilities and the 1,200-seat Lance Burton Theater also will reopen Friday.

Reporters and photographers were given a brief tour of the hotel Wednesday and shown repairs being made to several rooms on the eighth and ninth floors of the resort. The media was not allowed to view the upper floors of the hotel tower where rooms sustained significant smoke and water damage during the three-alarm fire.

MGM Mirage Senior Vice President Alan Feldman said almost every floor in the hotel tower had some type of water damage as a result of fighting the fire.

On some floors, hallway carpeting had to be replaced along with some room interiors, including draperies, bedding and carpeting.

Rooms on floors 27 through 32 received the most damage and some of the top floor rooms had to be stripped to the concrete frames. Feldman said the company couldn't give an estimate as to how many of the Monte Carlo's rooms were damaged.

MGM Mirage carries significant business interruption and fire insurance, but Feldman said it was unclear how much of its losses will be recovered. The damage assessment included the portions of the hotel's exterior facade along the roof that has been removed, water damage to the hotel rooms and interior, and lost business revenues.

"When it is all totaled, we believe the cost for the repairs will not be over $100 million," Feldman said.

MGM Mirage expects to reopen an additional 1,300 hotel rooms on Feb. 22 while the remaining 500 rooms on the upper floors will be out of commission for an extended time period.

The fire, which was contained to the roof and upper levels of the hotel tower, sent thick, black smoke spewing across the valley. County fire inspectors blamed flying molten metal and a lack of safety measures by construction workers for the fire. Welders working atop the hotel were using a hand-held torch to cut corrugated steel for a rooftop walkway when the hot metal, called slag, triggered the fast-moving fire that spread across the top of the hotel, burning flammable foam that was used in the exterior design.

The company blamed for the fire, Union Erectors, disputes the Fire Department's report, saying its workers followed proper safety procedures and had the proper work permit needed for the job.

The fire caused the evacuation of an estimated 5,000 guests and 1,000 employees and led to the temporary shutdown of Las Vegas Boulevard.

MGM Mirage moved its guests to other company resorts the day of the fire and transferred Monte Carlo reservations to other MGM Mirage properties during the past three weeks.

Feldman said Wednesday it was unclear how many of the Monte Carlo's rooms have been booked for this weekend.

"We just opened the spigot on Monday," Feldman said. "We probably won't know until we open the doors."

Gaming analysts said the fire's cost would not affect the overall outlook for the casino company, which has experienced similar disruptions in the past. In 2005, Hurricane Katrina closed the Beau Rivage in Biloxi, Miss., for a year and the company recovered $635 million in insurance proceeds.

"Fundamentally, it's not an issue," said Deutsche Bank analyst Bill Lerner of the fire. He estimated the company would have $20 million to $30 million in lost revenue, but that would not drastically hurt its earnings in the first quarter.

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