Maintaining momentum goal of MGM executives

By Liz Benston (contact)

Wednesday, May 4, 2005 | 10:52 a.m.

At the company's annual shareholder meeting, MGM Mirage executives welcomed Mandalay Resort Group into the fold and said the combined company -- the state's largest employer and private investor -- expects to help transform Las Vegas into a "proper city" from simply a tourist playground.

"We plan to break out of the gaming mold and define a company based on extensive holdings in multiple businesses," President and Chief Financial Officer Jim Murren said.

"We would love to reminisce on 2004 forever, given it was our best year so far," Murren said. "But our work is only beginning. New history is still to be made. Records are waiting to be broken and we must vigilantly maintain our momentum."

Chief Executive Terry Lanni said some form of connector between its Monte Carlo and New York-New York resorts is in the works as part of a plan to have a connected string of resorts on the west side of the Strip. The company recently reactivated a tram that connects its Monte Carlo resort from the north side of the property to Bellagio. That tram had been dismantled when Harmon Avenue was rerouted to cross Interstate 15.

The plan would involve the cooperation of Harrah's Entertainment Inc., which is purchasing Caesars Palace as part of its pending acquisition of Caesars Entertainment Inc. MGM Mirage owns 11 resorts on the Las Vegas Strip, all on the west side except MGM Grand. If Caesars Palace were to connect to Mirage, all of the resorts on the west side, from Mandalay Bay at the south end to Treasure Island to the north, would connect via trams or overhead walkways.

Lanni said the company has received numerous offers to purchase Las Vegas properties and must consider them but isn't keen on selling. The company spent too much time and energy with the Federal Trade Commission to ensure that it would be able to keep all of its properties after the Mandalay deal, he said. Even the Boardwalk, which will eventually be dismantled to make way for CityCenter, is making a "strong" profit, he said.

"We are not marketing any properties," Lanni said. "Our interest is in growing this company and investing in this company."

The company expects to eventually build on more than 150 acres of undeveloped land it owns on the Strip -- some of that acquired from Mandalay Resort Group.

"In an age where real estate values are soaring and land is selling for over $15 million an acre, your company now owns 831 acres on the Las Vegas Strip," Murren said. "We have decades of growth at our fingertips."

Since May 2000 -- when MGM Grand acquired Mirage Resorts -- MGM Mirage has invested more than $2.3 billion in capital in its properties, Murren said. Since that time, the company also has repurchased 32 million shares of common stock for $1.1 billion at an average cost of about half of where the stock trades today, he said. The company now has some $13 billion in debt but has repaid about $1.1 billion in debt since May 2000.

Executives also spent time touting their $4.7 billion Project CityCenter, which will feature multiple hotels and condominium towers.

Condo sales will help fund future pieces of the project, generating a higher return on investment than casinos and changing "the way companies develop here in the future," Murren said.

"We believe there is a social imperative, that Las Vegas mature as a city, not just a conglomeration of suburbs," Murren said. "A city deserves a center -- a center for living, working and playing."

While citing the importance of developing downtown Las Vegas, Lanni said his company will focus instead on developing its Strip-front land.

"We like uptown," he said.

At the meeting, stockholders approved the re-election of 17 directors to the company's board as well as the approval of independent auditor Deloitte. In addition, shareholders voted to increase the number of company shares to 600 million from 300 million. In March, the company's board approved a 2-for-1 stock split in the form of a stock dividend to shareholders.

Lanni said the board probably would not issue a cash dividend for shareholders because it could dilute future earnings. A number of gaming companies have begun to use record cash flows for dividends as a way of encouraging investment.

Shareholders did not vote on the expected appointment of former Mandalay board member Rose McKinney-James to the MGM Mirage board because the deal was finalized so close to the annual meeting. James is expected to join the board upon shareholder approval.