Friday, Feb. 23, 2007 | 7:03 a.m.
What's in a name? For MGM Mirage, Nevada's largest employer and owner of some of the world's biggest hotels, the answer may guide its future.
The company is undergoing a not-so-subtle evolution from casino operator to international resort brand, creating a subsidiary that will focus on joint ventures and management deals aimed at spreading the company's high-end hotel brands into the far corners of the world.
A first for a major casino company, MGM Mirage has recently entered into joint ventures to build nongaming hotels abroad. The deals will lend the company's experience in developing, managing and branding hotels without the expense of building resorts from scratch.
"There's limited financial involvement with potential for a very high return on investment," said Dennis Forst, a stock analyst with KeyBanc Capital Markets. "It's a way for them to leverage highly valuable, well-known brands like Bellagio, MGM and even Mirage and Mandalay. Strategically, they're looking long-term to become more than just a Las Vegas Strip casino company."
MGM Mirage tested the waters a few years ago when it partnered with Florida condominium developer Turnberry Associates to build The Signature at MGM Grand, a series of high-rise condo-hotel towers behind the company's largest casino. Condo buyers and hotel guests staying in recently completed towers have fueled business at nearby MGM Grand while generating sales revenue for the parent company.
MGM Mirage also has entered into separate partnerships with a Connecticut Indian tribe and a pair of Nevada developers.
The company is exploring building casinos in Asia with partners and may submit a bid to develop a resort planned for Manchester, England. Those projects would increase the company's visibility in places where its casino brands aren't well-known, analysts say.
"We are seeking others out and others are seeking us out to develop land we have or land they own in other parts of the world," MGM Mirage Chief Executive Terry Lanni said. "We want to create an entity that would deal with this and into which we'd put all these and future management agreements. It's an evolving thing."
The company also is exploring real estate partnerships similar to its recent arrangement with two real estate developers to build a master-planned community in Jean.
In that arrangement, MGM Mirage will put 166 acres, including the two Jean casinos, into a private company jointly owned by investment partners. MGM Mirage can use its land to finance the project through this separate entity, therefore avoiding taking on more debt directly and shifting much of the project's risk - and reward - from MGM Mirage shareholders to other business partners.
Sharing risk while spreading its brand presence worldwide led to separate discussions with Mubadala Development Co., a government-owned commercial development conglomerate in the United Arab Emirates, and the Diaoyutai State Guesthouse, a government-owned hotel, events center and corporate retreat in Beijing to develop hotels around the world, including the entities' home countries. The company has signed an agreement with Mubadala to create a joint venture to develop luxury hotels in Abu Dhabi, Las Vegas and the United Kingdom.
Similarly, MGM Mirage formed a private company with the Mashantucket Pequot Tribal Nation in Connecticut to jointly acquire or build casinos and nongaming properties worldwide. In a separate arrangement, MGM Mirage will license its MGM Grand brand to the tribe's $700 million resort under construction next to the Pequots' Foxwoods Resort and will serve as a consultant on the project.
Working with outside partners could help MGM Mirage develop unused land in Las Vegas more quickly than it could otherwise, especially now that the company is occupied building its $7 billion CityCenter and is limited in how much debt it can take on, said Bill Lerner, a stock analyst with Deutsche Bank.
Lerner predicts that MGM Mirage could use existing brands as well as create new ones to create feeder markets worldwide for its Las Vegas casinos and others it plans to build in Macau, China - fast eclipsing the Strip as the world's largest gaming market.
Executives say they may use existing partners or cultivate further partnerships to develop vacant land they own on the Strip and in Atlantic City.
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