The CityCenter casino and entertainment complex pushed MGM Resorts to a third-quarter loss, with billions of dollars wiped off its value.
MGM weighs options on losses at Vegas resort
Billions of dollars have been wiped off the value of the CityCenter casino and entertainment development in Las Vegas, pushing MGM Resorts to a loss in the third quarter.
MGM Resorts posted pre-tax impairment charges of $182 million (Dh668.4m) related to its investment in CityCenter and $46m related to its residential property.
The resort, which cost $8.5 billion to build, now has an equity value of $2.6bn. In the nine months to September, CityCenter made a loss of $963.1m, including $600m in writedowns.
"We are currently in discussions with our lenders at the CityCenter level and believe that refinancing the current facility at CityCenter would provide a long-term capital structure, thus allowing this asset time to continue its ramp up," said Dan d'Arrigo, the chief operating officer of MGM Resorts. "We are actively pursuing our options related to that refinancing."
The development was planned during an economic boom in Las Vegas but as the global financial climate deteriorated the city's fortunes changed. Its economy was hit hard by the downturn and unemployment soared, while occupancy levels and expenditure at hotels and casinos plunged. Dubai World has a 50 per cent interest in the project through its subsidiary Infinity World, as well as a 9.5 per cent stake in MGM Resorts. The company was known as MGM Mirage until it rebranded in June.
CityCenter's jewel is the 4,004-room Aria gaming resort, which opened on December 16 last year. The 27-hectare Las Vegas Strip complex also includes a Cirque du Soleil show called Viva Elvis, 2,400 condominiums and luxury non-gaming hotels including Las Vegas's first Mandarin Oriental.
There is also a 46,450 square metre retail and entertainment district and a $40m fine art collection.
The relationship between the two companies and the fate of the project appeared uncertain when Dubai World last year sued MGM Resorts, citing breach of contract and mismanagement of costs after MGM warned in its annual report that it could default on its debt and be forced to seek bankruptcy protection. But the companies resolved the dispute. MGM posted a third-quarter loss of $318m or 72 cents a share, compared with a loss of $750.4m or $1.70 in the third quarter last year.
But MGM Resorts said the market was starting to stabilise. Jim Murren, the chairman and chief executive of MGM Resorts, said convention business, a sector that is extremely important for Las Vegas, was showing signs of picking up.
"The trend has continued to stabilise and we have finally seen some pockets of absolute strength," said Mr Murren. "We know the customer spend remains constrained."
MGM Resorts has signed agreements to open properties across the world, including in China and Egypt, as well as in Dubai.
The company plans to open hotels under its Bellagio, MGM Grand and Skylofts brands as part of the Dubai Pearl development.