Casino giant MGM Mirage last week said it has increased the size of its CityCenter project currently under construction, which resulted in an increase in its estimated cost.
MGM also reported it is acquiring additional land parcels on the Las Vegas Strip, further enhancing its portfolio and increasing its future development possibilities.
At project CityCenter, gross construction square footage has increased by 670,000 square feet, although the mix of facilities remains the same. Officials said the revised costs are now projected to $7.4 billion, up from an initial estimate of $7 billion.
"In a project of the magnitude and complexity of CityCenter, variances are to be expected," said Terry Lanni, chairman and chief executive officer of MGM MIRAGE. "Our revised estimate of costs and revenues represents the increase to the overall development size as well as the tremendous public response to the residential offerings. Unit sales have been robust, and CityCenter continues to track to an on-schedule opening in November 2009."
The increase in revenues Lanni alluded to include an estimate of expected gross proceeds from the sale of residential units, from $2.5 billion to $2.7 billion.
Lanni added that sales of -residential units began in January and have been exceptionally strong. Through April 19, contracts for the sale of residential units have been executed representing over $800 million in sales proceeds at average sales per square foot above original projections. These contracts are accompanied by non-refundable deposits equal to 10% of the purchase price at signing, with a second 10% deposit due in six months from contract signing.
MGM Mirage officials said last week that it has begun converting reservations to sales contracts for parts of CityCenter.
Several analysts put the new figures in line with the size of the project, noting that condominium sale proceeds and construction costs were higher and the project was closer to completion.
CityCenter is being built in the heart of the Las Vegas Strip between Bellagio and Monte Carlo resorts. The development combines into a single urban core approximately 2,700 private residences, two 400-room non-gaming boutique hotels (one of which will be managed by luxury hotelier Mandarin Oriental), a dramatic 60-story, 4,000-room resort casino, and a 470,000-square-foot retail and entertainment district.
The update on the CityCenter project came a day after MGM Mirage announced it had agreed to buy several pieces of land on the north end of the Las Vegas Strip for $575 million. The parcels will be used to assemble a 78-acre site for another "major integrated resort destination."
The purchase includes a 26-acre parcel from Gordon Gaming Corp. for about $444 million located at the southwest corner of Sahara Avenue and the Las Vegas Strip, just north of Circus Circus. Another eight acres is being bought from Concord Wilshire Acquisitions for about $131 million.
When combined with existing holdings, MGM will have a 78-acre site for future development.
"These transactions secure critical Strip access, which will greatly increase the development possibilities for the 44 existing acres in our portfolio," Lanni said. "We see this as an opportunity to not only harness the power of our portfolio, but also as a means to expand and enhance the operations of our valuable Circus Circus property for years to come."
Long-term master planning for the land will now begin, with expectations the company will identify one or more development partners.
"These new additions to the MGM Mirage real estate portfolio create many new possibilities which we believe will ultimately lead to much greater return from under-utilized holdings adjacent to this new acreage," said Jim Murren, MGM Mirage president and CFO. "We have received significant interest by third parties wishing to partner with MGM Mirage on Las Vegas development. We believe this property is ideally suited to exploring the opportunity to master plan with partners a major integrated destination resort."