Las Vegas/Nevada's future may depend on CityCenter
December 01, 2009 3:57 AM
by Ray Poirier
In the eyes of a Nevada gaming regulator, the success of CityCenter, the $8.5 billion project funded by MGM MIRAGE Inc. (MGM) and financially-troubled Dubai World, will affect not only the investors but also the entire state.
Said Dr. Tony Alamo, a long-time member of the state’s boxing commission who now serves on the Nevada Gaming Control Board, and who also is the son of one of Las Vegas’ best known gaming executives: "We’re in a 12-round fight. The first six rounds, you guys got beat up. We’re putting all our eggs in the grow-the-market basket. I would be lying to you if I said I wasn’t concerned – that’s a reality."
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Yet, enthusiastic MGM officials, led by Chairman and CEO Jim Murren, believe the glitzy new 6,000-room CityCenter on the Las Vegas Strip will grow the market and help the gaming Mecca turn around the recent downward spiral in tourism. The four-hotel, one casino development begins opening this week.
Nervousness increased late last week when Dubai World asked its lenders to "standstill" and delay interest payments for six months. The news caused a near financial crash around the globe.
Analysts felt the financial response to Dubai World’s debt problems had nothing to do with the sharp downturn in the trading price of Sands China, the initial public offering made by Las Vegas Sands Corp. (LVS) of their Macau holdings.
At one point in Hong Kong trading Monday, Sands China shares were down some 15 percent but ended up falling 10 percent for the day. Chairman and CEO Sheldon Adelson dismissed the sudden drop in share price as a temporary "bump on the road," adding that his company was in for the long term.
Adelson also suggested Las Vegas Sands is eyeing further expansion in Asia, specifically in countries such as Japan, India and Thailand.
Over the weekend, financial reporters by the dozens flocked to Dubai to assess the impact of the Dubai debt.
One reporter for Fox Business News asked: "What would happen if the lenders agreed. Wouldn’t other borrowers around the world seek the same delays?"
Although few analysts couldn’t foretell whether the Dubai World news would trigger "a second bombshell," MGM officials were quick to point out that Dubai World’s share of the CityCenter project was fully funded and the weekend news would have no impact.
For that matter, said Murren in an interview with CNBC, the financial failure of either party – MGM MIRAGE or Dubai World – would not affect CityCenter since it is fully-funded as a separate entity.
As for the impact CityCenter will have on other Las Vegas resorts, billionaire Phil Ruffin, who purchased the TI Hotel/Casino (formerly known as Treasure Island) from MGM earlier this year, was quoted by the Associated Press as saying, "We wish them all the success in the world because it would help the whole city of Las Vegas, but I can’t think of a worse time to open up 7,000 rooms."
Question? Comment? E-mail me at: Ray Poirier