“The CityCenter shuffle”; Atlantic City saved … for now

That’s what subcontractors are calling the maze of paperwork they’ve had to negotiate while laboring on MGM Mirage‘s $8.5 billion metaresort. When it comes to real estate and construction coverage in Las Vegas, there’s Tony Illia and then there’s everybody else. Here, Illia breaks down the subcontractor-payment mess and its effect on minority-owned businesses, in particular.

Two other notes of interest: Perini Building makes the hollow-sounding claim that it’s entitled to every dime because Harmon Hotel (left, as photographed by Jeff_in_OKC) “can be repaired.” Considering that the structural integrity of what was to have been a 48-story Sir Norman Foster-designed building was so badly compromised it’s now an unsightly stub, the term “repair” seems deeply inadequate for what’s lacking. Also, both a chat with Gov. Jim Gibbons and a (considerably more important) June 9 summit meeting with subcontractors have been entrusted to CityCenter CEO Bobby Baldwin. I don’t know who’s going to ultimately get credit for CityCenter but I have a pretty good idea of who’s going to take the blame.

$20 million a year may seem a drop in the bucket compared to MGM’s $12 billion debt load, but the company is making impressive progress diversifying into the low-risk business of managing hotels — including eight in China alone. Franchising names like MGM Grand, Skylofts and Bellagio, plus collecting management fees helps counter the Vegas-centric exposure of MGM’s portfolio. (The company’s going where the money is … and it’s Chengdu.) It’s not the sort of “diversity” J. Terrence Lanni used to preach but it looks to be really panning out for the company.

Significantly, one of the MGM-owned brands not being franchised is The Mirage. Why that brand equity is being forfeited makes no sense unless there is some arcane legal reason behind it. However, it’s probably more to do with Murren’s ghastly notion of rebranding the company “MGM Resorts International,” which conjures up the image of timeshares for old duffers in plaid polyester pants … and was probably “focus-grouped” for all of 8.3 seconds. What was the point of buying the Mirage brand if you’re just going to put it out to pasture?

Atlantic City saved again. Wow, the Boardwalk just caught another break. I mean there’s nothing like the prospect of the 2014 Super Bowl to make New Jersey lawmakers meekly quash a bill to permit sports betting. Ditto expansion of slot machines to the state’s horse tracks. It also means at least four-year postponement of the Xanadu entertainment/gambling complex that’s been on and off the docket ever since then-Gov. James McGreevey backed it in 2003. Current Gov. Chris Christie is doing his best impersonation of a tree stump, remaining immobile and silent until the end of the month, perhaps longer, by which time the issue should be safely moot. Thanks to the NFL, the thousand pinpricks of intra-state competition are unlikely to rain upon Atlantic City, at least until “the Big Game” has been played.

Un-fun fact: Exclusive of debt, the Station Casinos LBO was 9.8X cash flow (based on 2007 EBITDA of $549 million). Throw in the $3.4 billion of debt assumption and it becomes a 16X EBITDA deal. A journalist was asking me today how Wall Street could walk into that kind of trap. Beats me. They’re supposed to be the smart guys. Not this time.