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Thursday, April 26, 2012

Son of City Center...

MGM: Riding the crazy train; Rendering unto Caesars

When you're $13.5 billion in the hole, what's another $6 billion, more or less. MGM Resorts appears bent on repeating its failed experiment in social engineering, CityCenter, on the Toronto waterfront. http://dmckee.lvablog.com/?p=8873
 
If somebody loaned you a few hundred million, unsecured, you want to come to Las Vegas and lay some big wagers, right? MGM Resorts International has been there, done that. So it’s looking elsewhere to place its bets. And why not? Wall Street is returning to its profligate ways of 5-7 years ago and when banks are practically throwing money at you, who’s MGM to say, “no.” Of course, there’s that little matter of $13.5 billion in long-term debt, if you want to be a party pooper. To that end, it behooves MGM to open new markets like Florida, where the price of admission will be $500 million, if casino-expansion legislation is revived in the next Lege. Then there’s the $600 million or so the company is willing to spend in Massachusetts … although the proximity of Foxwoods Resort Casino creates a certain redundancy and conflicting agendas threaten the heretofore complimentary relationship between MGM and Ameristar Casinos. Ditto the great city of New York, where MGM wants a second bite at the Big Apple, having lost to Genting the first time ’round. New York City’s one of the few East Coast locales that could support a $1 billion-plus casino, although the current, 44% tax rate is going to put some strain on profitability.
So far, so good. Then MGM took a header off the deep end, offering to pony up between $2 billion and $6.1 billion USD for a metaresort in Toronto. As described, the proposal would encompass “hotels, restaurants, spas and convention facilities.” Sounds a lot like a second iteration ofCityCenter. (Perhaps, in deference to Canadian sensibilities, this northern knockoff will be called “CityCentre.”) Seriously, folks: Only one casino in the world — Marina Bay Sentosa — has approached the $6 billion mark in spending and Toronto, my friends, is no Singapore … especially in the winter!
“We’d be prepared to invest an awful lot,” understated company spokesman Alan Feldman. If the primary beneficiary of the project weren’t state-run Ontario Lottery & Gaming Corp., one might squint at that $2 billion figure and say, “Yeah, OK … maybe.” But $6 billion? It sounds to me as though CEO Jim Murren is still astride his new-urbanism hobbyhorse, determined to prove that, by golly, you can make an Insta-City. Just built and throw people at it. I’m guessing that when the subject of Brasilia arose during Murren’s college studies, he thought, “Someday I’m going to have me one of those!”
Better MGM, however, than Mr. All-Hat, No-Cattle himself, Donald J. Trump. The snake-oil peddler was in Toronto recently and Mayor Rob Ford ‘fessed up to talking casino with the Trumpster before fleeing out the back door. Just what Trump is proposing to use for money is unclear. He’s contractually tied to Trump Entertainment Resorts, which not only has its hands full maintaining its Atlantic City beachhead, it’s identified its expansion strategy as being one of acquiring “distressed properties” … although it has not risen to the bait when any such devalued assets have come on the market. Anyway, opposition in Ontario seems to be running pretty high at the moment and few things could stiffen the opposition than a reminder of Trump’s empty promises and history of casino decrepitude.
Trump’s a chump but his dumping of Penn Jilette from clownfest Celebrity Apprentice gave Caesars Entertainment a chance to cover itself with glory. And, for once, Caesars didn’t fumble. Since Jilette’s quest on behalf of local nonprofit Opportunity Village fell short of its ultimate goal, Caesars ponied up $250,000 — equivalent to the Celebrity Apprentice grand prize. It’s one of the few times we can be grateful that Trump’s asinine TV show is still on the air. (My wife would strongly disagree: She watches Celebrity Apprentice, whilst I catch up on back numbers of Babylon 5 and Mission: Impossible.)
Unlike most industry big shots, Jilette is very much of the Las Vegas community, rather than simply treating Sin City as a stopover between limousine rides to the corporate jet. Hail Penn, hail Caesars. And speaking of things named “Penn” …
Correction/clarification: In my previous coverage of the General Services Administration scandal involving overspending at M Resort, I carelessly conflated the casino’s then-ownership with its current boss, Penn National Gaming. So the kudos go to Anthony Marnell III for luring the GSA away from the Strip and getting it to drop big bucks on M’s front door. At his most recent conference call, Penn CEO Peter Carlino made a pro forma huff about the GSA’s “outrageous” spending … but he didn’t offer to give the money back. I doubt that Carlino’s shareholders feel comparable faux-umbrage.

By David McKee ~LVABlog (click here).

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