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twitterDAILY MEMO: GAMING:
MGM’s Murren unwavering in defense of CityCenter
Monday, May 4, 2009 | 2 a.m.
Jim Murren
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- Jim Murren, MGM Mirage chairman and chief executive, on how a shortfall in CityCenter financing led to the partners putting in more cash.
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- Murren describes how the budget for CityCenter fell from more than $9.2 billion to $8.5 billion.
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- Murren explains why MGM Mirage still has bullish prospects for CityCenter.
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- Murren on why property sales aren’t necessarily going to solve the company’s financial woes.
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Sun Archives
- The rescue of CityCenter (5-1-2009)
- CityCenter deal sends MGM Mirage stock soaring (4-30-2009)
- CityCenter deal sends MGM Mirage stock soaring (4-30-2009)
- MGM Mirage, Dubai World working on CityCenter funding plan (4-17-2009)
- Report: MGM, Dubai World reach deal on CityCenter (4-17-2009)
- Report: Icahn, equity fund push for MGM bankruptcy (4-16-2009)
After engineering last week’s rescue of CityCenter from the brink of bankruptcy, the urban planning major who created the concept for the resort complex — and has shouldered the blame for the way it has imperiled MGM Mirage — defended the company’s investment in the $8.5 billion project.
MGM Mirage CEO Jim Murren said in an interview that CityCenter’s critics, including competitors, “just don’t get it” and will be proven wrong when it attracts new visitors to Las Vegas.
MGM Mirage would be more secure had it taken a safer route, building, say, a hotel tower addition or a single gaming resort. Many investors and other MGM Mirage stakeholders, including local residents whose livelihoods are tied to the company, feel betrayed by its sorry fortunes.
Although few would expect Murren to join those calling CityCenter a financial albatross, fewer would have expected him, in announcing a financial guarantee to complete the project, to come out swinging.
“We didn’t get here at MGM Mirage because we were bought out and investors made a bucketful of money,” he said. “We got here because we had a vision for Las Vegas that included a never-before-attempted type of development. We were building the largest development project in the United States right in the middle of skyrocketing construction costs, which no one envisioned, and then during a severe recession, which nobody predicted.”
Murren doesn’t believe Las Vegas’ “build it and they will come” business model is dead. At least not as it applies to CityCenter, which will fight for business alongside resorts offering half-price rooms when it opens this year.
“You have to differentiate between capacity that’s going to bring people to our community and capacity that’s going to absorb existing tourists,” Murren said. “The consumer here is extraordinarily spoiled and we love that. They want something that they haven’t seen before, they want something different, and they’re not going to come if it’s just more of the same.”
Murren, who began his career as a Wall Street analyst after graduating from Trinity College, where he studied art history and urban planning, remembers analysts who lost their jobs for incorrectly predicting the downfall of Las Vegas resorts, including the expensive Mirage in 1989, the cluster of new properties that opened in the early 1990s and another boom in the late 1990s.
Even in hindsight those predictions seem logical. It was Las Vegas and its development-fueled growth that seemed to defy logic.
“We’re all getting weary of stories around the world about the demise of our town,” Murren said. “I think the people who are counting us out as a community are going to be wrong.”
Murren doesn’t think CityCenter will open in the same economy Las Vegas finds itself in today. He cites scattered bright spots on the Strip, including Saturday’s sold-out Hatton-Pacquiao fight and improved booking trends at some properties.
Anecdotally, some casinos have indicated that April rebounded somewhat from a depressed January through March.
Like many pundits, Murren predicts improvement in 2010, adding he expects visitor traffic in Las Vegas to rise by 4 or 5 percent next year. CityCenter will end up “catching the upswing in the global economy and the U.S. economy,” he said.
Consumed by a recession, Las Vegas still can’t escape the fact that new attractions are needed for some visitors to return. Las Vegas, for better or worse, needs momentum.
“We could have easily sat back ... and said, ‘That’s enough for now’ and maintained our buildings. But what would that have done? What would we be anticipating in 2010? A hoped-for global recovery that all ships rise with the tide? That’s not a very good story.”
Discussion: 21 comments so far…
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Draconian as it sounds Mr. Murren has the ability to look across a broad range of industries and see the black swan as it entered the horizon in the spring of 2007. Hopefully, MGM follows Mr. Murren's example and acts anew and thinks anew as it continues to deal with the changing winds that have come around the corner and blown the boat off course. In this new world MGM needs a new corporate culture where people are actually treated with respect so that they can create a better city in which people actually live. WHO'S INVESTMENT IS IT ANYWAY
Hey all. Tune in to today's Face to Face with Jon Ralston. We are talking with Jim Murren about CityCenter, the company's future and much more. 5:30p, 6:30p, and 8p on Las Vegas ONE, Cox Cable channel 19.
What would you expect him to say? He hit the jackpot after liar Lanni left, and now his comments are nothing but PR spin. And now MGM is sleeping with the devil. If you want to see what Dubai is really like, go to the following link:
http://www.independent.co.uk/opinion/com...
You sleep with the Devil, you wake up with a hangover. And the problems with money at MGM are far from over.
Jim you don't get it.
"We were building the largest development project in the United States right in the middle of skyrocketing construction costs, which no one envisioned, and then during a severe recession, which nobody predicted."
Why were you paid so much more than everyone else?
Because as the guy in charge of MGM MIRAGE finance you were supposed to see things that others missed.
Why pay you so much if your ability to predict the financial future is no better than anyone else?
Face it, they (MGM and it's investors) are totally committed to City Center. If it doesn't get complete, they all go down. Even if it is completed, they all may go down anyway. But if it's completed, they might stand a chance.
Proof that Las Vegas is a brick and mortar ponzi scheme:
"They want something that they haven't seen before, they want something different, and they're not going to come if it's just more of the same."
Why won't they come for the Las Vegas you already built? What did you do wrong? Is the casino gambling fad fading? Are LV casinos nothing but see-once phenomena?
Gamble, gamble, gamble. Drink, drink drink. Smoke, smoke smoke. Celine Dion. Sooner or later, people get bored with this.
So you borrow more and more to build bigger and bigger and ever more lavish to pay off or upstage the others that were the biggest and most lavish of their time, but have lost their shock-and-awe.
How does this end?
In a pile of unfinished concrete glass and steel called "city crater?"
Thanks, Thumper. My story is different, yet similar. I worked for Big Bechtel all over the country, and then decided to retire in Vegas. I like the desert. But I had been through all the good and bad times, so I never got caught up in the Vegas boom. One story-I called Countrywide in 2004 to refinance my mortgage. Just wanted a lower interest rate, nothing more. Got a 20 year, 5.5% rate. But in the process, the talking head says "Hey, want another house?" I said no, I was retired, and had little income except Soc Sec. Of course, I have retirement funds, but he didn't know that. So he says "Hold on a minute." He comes back 2 minutes later, and says "Wow I just got you approved for another $300,000!" All based on my high credit score. I told the thieving rats what they could do with their offer. My point is that Vegas went nuts with all those stupid loans, and the residents were fooled by the boom on the Strip. It had to end, and it sure did. With 25,000 foreclosures, half built tombs like Echelon, work stoppages at Fontainebleu, Trumps empty joke etc, City Center is looking down a deep tunnel-and there ain't no light at the end of it....
"The mixed-use development will be composed of a "skyline" of two 400-room boutique hotels, one 4,000-room hotel and casino, four towers of 2,500 residential units." Piece of cake, the place will be mobbed. Why would you ever buy a condo? The maintenance fees will be outrageous, and it's not like you'll be able to rent it out when you're out of town.
This town is full of empty condos already-Can you say Trump-And how many sold in the month of March? Can you say 36? In the entire city. Murren should wear a mask when he goes on Jon's show, because he'll refuse to say the words "Who knew?" And that's the fact, Jack....
"Murren, who began his career as a Wall Street analyst after graduating from Trinity College, where he studied art history and urban planning, remembers analysts who lost their jobs for incorrectly predicting the downfall of Las Vegas resorts, including the expensive Mirage in 1989, the cluster of new properties that opened in the early 1990s and another boom in the late 1990s."
Does anyone else think Kerkorian's next CEO should be someone with a business degree instead of art history and urban planning? This guy sounds like Steve Wynn without holding title to a property."
Also, where does Murren mention what City Center will offer to bring in visitors? No mention of innovation or doing things differently: just another overgrown carpet joint.
"You have to differentiate between capacity that's going to bring people to our community and capacity that's going to absorb existing tourists, Murren said." He then goes on to describe his optimism that CC will start "catching the upswing in the global economy and the U.S. economy."
Nobody's going to come to LV to see the CC monstrosity. I still don't get what they think differentiates them in the market. CC will be lucky just to absorb visitors already in LV.
The article cited by nednougat is truly remarkable. There are parallels with Vegas, but the real issue is whether Americans should patronize a company in partnership with a medieval dictatorship slave society such as Dubai and the Sheikh Mohammeds of the world. Clearly, no.
Nednougat says that MGM is sleeping with the devil. I can't tell who's on top.
Nednougat--thanks for the article post about Dubai. City Center is like a ponzi, except we are dealing with buildings and not just numbers on a ledger. In a ponzi you assume the money will come in when you need it. That's similar to social security, the Calif. State Budget, Bernie Madoff, etc. MGM is assuming that customers with money will be there when the buildings are finished. That's a bold assumption, when LV casinos are once again offering penny slots to the guests.
Those who can build, build. Those who can't, criticize.
There are two kinds of people in the world; those and dream and achieve (and sometimes fall short), and those that sit around and do nothing other than hope for those that attempt anything to fail.
Fortunately for those that wish failure upon others, there's always breadcrumbs from the successes of the achievers that they can eat (while complaining about the flavor and quality of the crumbs, of course).
I love reading these posts. That last one is the best. But hyperbole besides there's a great deal of rational commentary in all of this. To begin with it seems that MGM Mirage has been for years now "defending its decisions". Perhaps we all may recall how the Detroit auto makers spent decades doing the same thing over and over again; making a mess out of their own brands and disregarding the public repsonse. I don't need to point out what kind of shape those companies are in.
For the last few days the Sun, no doubt in response to nasty phone calls from the blowhards at MGM, has been painting a rosy rise-from-the-ashes for a company that reported a billion and half dollar loss in its last quarterly statement - see the Sun's own article from this afternoon http://www.lasvegassun.com/news/2009/may....
Jealously and name-calling and what have you, simply do not apply. The facts are plain - this is, and has been, a company of lack-lustre "executives" who inherited a legacy from Steve Wynn via a merger or two and slowly made a mess of the entire city by stripping away everything that made it fun. Murren rants in this piece about people not "getting it". Well isn't the people who will decide what flies and what doesn't? If people "don't get it" they won't patronize it and it will fail. Who is this man to think that he knows what we all want?
And lastly, I wonder how much that pile of canoes that is the "crown jewel" of the CityCenter art program cost? MGM executives must have gotten Vegas kitsch confused with bad taste. But in the end, I suppose, that sculpture sums up the logic of the entire corporation: anything goes so long as we like it and it if fails it's simply because people "don't get it".
Is everyone now convinced that the CityCenter will be immune from becoming a "financial albatross?"
LOL
Just as soon as the company is liquidated Harley :)
too many of you people sound like doomsday machines get a grip CITY CENTER is an awesome project all you have to do is drive by the freeway and you can see that....this project WILL BE well recd by the world and the ELVIS show will be 1 of the greatest shows in this town...MGM will not fail take my advice buy MGMMIRAGE stock you will thank me later it might be a minute but you WILL thank me i remember when the MIRAGE was built they said this town was overbuilt yeah right......they even said it when MGM built there first hotel here which is now called Ballys....VEGAS WILL LIVE ON TRUST ME......
...you mean the MGM July call option isn't going to move 5500% in 2 hours like it did on Apr 30, '09 after the successful debt restructuring is announced on june 30, 2009? I sure hope you doomsdayer ARE WRONG! I've already got my money in. Go MGM team!