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Sam Morris / Las Vegas Sun
The sweeping forms of Aria are visible from a two-bedroom apartment at Veer Towers at CityCenter.
Published Tuesday, Aug. 3, 2010 | 6:05 a.m.
Updated Tuesday, Aug. 3, 2010 | 12:11 p.m.
MGM Resorts International Financial Information
| 2Q 2010 | 2Q 2009 | % Change | 1Q 2009 | |
|---|---|---|---|---|
| Revenue | $1.54 billion | $1.49 billion | 3% | $1.46 billion |
| Net income | ($883.5 million) | ($212.6 million) | N/A | ($96.7 million) |
| Net income per share | ($2) | (60 cents) | N/A | (22 cents) |
Jim Murren
MGM Resorts International posted a hefty loss today to write down the value of its investment in the $8.5 billion CityCenter resort complex, which is now valued at $2.65 billion. But the company also reported some encouraging numbers about hotel room rates on the Las Vegas Strip.
The Las Vegas Strip giant lost $883.5 million in the second quarter ended June 30, mainly because it took an impairment charge -- on paper -- of $1.12 billion against its investment in CityCenter, which failed to turn a profit in the second quarter.
MGM took another charge of $29 million against the value of CityCenter's residential inventory -- that was its half of a $57 million charge to write down the value of the CityCenter condominiums.
The impairment charges, or writedowns, are required by accounting rules. When an asset declines in value, it's expected to produce less revenue and profit than earlier anticipated. That decline in value must be reflected in the income statement of the asset's owner.
It's the third time the company has written down the value of its CityCenter resort, which opened during the worst recession in Las Vegas history. The complex reported an operating loss of $128 million.
MGM Resorts lost $2 per share vs. a loss of $212.6 million or 60 cents per share in the second quarter of 2009.
Net revenue of $1.53 billion was up from $1.49 billion. This increase was significant since in the first quarter, MGM Resort's net revenue was down on a year-over-year basis, despite the December opening of CityCenter.
The Aria at CityCenter reported net revenue of $157 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $17 million.
Unlucky play at the casino -- a low table games hold -- for the company reduced Aria's adjusted EBITDA by about $24 million.
Aria’s occupancy percentage was 80 percent and average daily rates were $178, resulting in significant revenue per available room improvements from the first quarter of 2010.
Aria's hotel occupancy percentage was 63 percent in the first quarter with an average daily rate of $194, indicating that by lowering rates the company boosted occupancy in the second quarter.
Crystals, CityCenter's luxury mall, was 62 percent occupied in the second quarter and will be 72 percent occupied by the third quarter with the arrival of such high-end retailers as Prada and Gucci.
CityCenter overall reported net revenue of $401 million in the second quarter, which included $218 million related to residential operations like condominium sales, of which $56 million related to forfeited residential deposits.
The half-owned CityCenter venture generated an operating loss of $128 million, including the $57 million impairment charge for its residential inventory and a loss on sales of residential units of $17 million.
MGM Resorts expects to finish paying subcontractors owed money for their work on CityCenter by the end of this year. General contractor Perini Corp. sued MGM and partner Dubai World in March, saying construction firms are owed nearly $500 million. MGM has spent weeks negotiating final payments with subcontractors.
Despite the problems at CityCenter, MGM Resorts reversed a slide in room rates at some of its big Strip resorts.
The average daily room rate at Bellagio of $209 was up from $200 one year ago, with occupancy of 94.7 percent down slightly from 95.6 percent. The MGM Grand generated an average daily rate of $116, up from $114, with occupancy of 96 percent vs. 97.3 percent a year earlier.
Revenue per available room of $198 at Bellagio was up from $191 while it increased $1 to $112 at MGM Grand.
June marked the first month in which the company's revenue per available room figures on the Strip had improved, reversing a slide that began in 2007, executives said.
They attributed much of the increase to returning convention business, which is up from a year ago. Groups are paying higher rates than leisure travelers, with groups paying 15 to 20 percent more for rooms in 2011 than convention-goers this year, MGM Resorts CEO Jim Murren said during a conference call to discuss earnings.
A $1.2 billion convertible bond offering in April and efforts to refinance chunks of the company's bank debt have raised $2 billion in cash - more than enough, Murren said, to cover debt payments for the next two years. The company reported debt of $13.3 billion as of June 30.
"The Las Vegas operating environment remains difficult, but as we expected, we are seeing a gradual recovery. Our adjusted EBITDA improved compared to the first quarter, despite low hold percentages," Murren said in a statement. "CityCenter is seeing improved business activity. Aria is gaining brand awareness, which led to a 17 percentage point sequential occupancy increase in the quarter and higher non-casino revenues."
Deutsche Bank analyst Andrew Zarnett noted that unlucky play and reduced business volumes overall at its Las Vegas hotels and casinos reduced EBITDA for MGM Resorts, with Las Vegas Strip revenue per available room overall declining 2 percent.
The 2 percent decline was a marked improvement from the first quarter, when Strip revenue per available room decreased 8 percent compared to 2009’s first quarter; and from the 16 percent decline reported in the fourth quarter of 2009.
The company's Las Vegas Strip adjusted EBITDA of $243.7 million in the most recent quarter beat Zarnett's estimate of $221 million.
Sun reporter Liz Benston contributed to this report.
Debt is where its at now days. Package it and sell it MGM! Get with the program.
Thanks Harry!!!!
What a money pit this place is! Murren's follies!!! He deserves what he gets on this collosal mistake!
Like the pyramids, future generations will say. Why were they built!
Come to Vegas twice a year to gamble. Have never set foot in CityGraveyard and never will.
Looks like the resort fees will be going up
at MGM properties to cover the unexpected
losses. I'm sure Ruffin is in talks with
Murren for the Mirage. Other properties
will have to be dealt. Them condos are
sinking them. No more life line from Dubai!!
Here is a fun fact,so now rich bozo at MGM spent hundreds of million on a Nortel phone system,and the company is gone,even when they broke ground they where being sold off.
Spin, spin, spin. Keep it up, Mgmt. Thousands more to be laid off. Never should have opened in this economy. Was a way for upper level and unions to make money at taxpayer expense while trying to create smoke and mirrors that Vegas "was doing better". As long as credit is tight, people can't afford $500 Japanese dinners, $200+rooms, lousey service, and a town geared towards young non-working kids using their parents credit cards at pricy hedonistic niteclubs that bring in zero gaming revenue. If they don't start catering to the overseas clients and locals, they are all going under.
These new accounting rules, although designed to make asset valuations more up-to-date, appear in this case to have permitted MGM RESORTS to avoid paying income taxes. This doesn't help either the spendthrift federal government or the cash-strapped state government.
The new rules also may inject unexpected volatility into corporate financial reports. Booms and busts happen. Will they now cause unrealistic swings in corporate finances?
So how long will all these Casino's last with continuous loses every Quarter?
Can you imagine if MGM Resorts goes banko and is forced to close its casinos? Bye bye vegas...!
Remember what Murren said when they opened CityCenter. He said it would prosper without local patrons. I and my wife once visited City Center but we will not visit again because it's an ugly looking place like a graveyard as one writer described it. Murren should thank Big Brother Harry because if it weren't Harry' help, they would have probably lost $2 billion instead of nearly $1 billion. Nevada has highest unemployment rate in the nation, but Harry says it would've been much higher and worse if he hadn't wield his influence in Washinton. Keep up the good work Harry until November.
Yet millions in bonuses will be awarded.
Won't be surprised to see them sell several properties to solve their debt problems.
@ cinderelladream-
Let me guess...your just another selfish person that chose to default on the house loan and contributed to Nevada's foreclosure rate. No. The rules haven't changed, there are just always people that want to exploit the system at the expense of everyone else. Why don't you take opinions and go. Leave Las Vegas for those who want to make the city better.
I foresee CityCenter selling off their buildings one by one in the not-too-distant future.
MGM loses 883 million and they still try to put a phony spin on it saying we are "seeing improved business" to appease their sucker stock holders....so sad.....
Pure greed,they should have never built it in the first place. Do I see a 'for sale' sign on Circus2,Excalibur and The Mirage??
"Despite the problems at CityCenter, MGM Resorts reversed a slide in room rates at some of its big Strip resorts." BUT AT THE EXPENSE OF OCCUPANCY!
Implode it and write it off all at once, instead of quarter by quarter.
Bought some shares today. The bottom is in!
Guys, its all about accounting...I don't care how much money you have..when you loose close to a billion dollars (on paper), you run out of money...accounting rules are just that...you don't honestly think they REALLY lost close to a billion do you? Not a chance..Uncle Sam allows companies to loose money on new investments, etc..so for the next 5 yrs, CC will be in the tank (on purpose)..
Market expectations: Loss of 24 cents/share
Actual loss: $2/share
For short-seller John Paulson, this must be mf priceless.
It's on to Libertarian Paradise in Macau for Murren, Shelly, and Stevie Boy!
Tom Shermspun
Great Ruins of Las Vegas Tours
Vegas should have invested in lobbyists to keep all those Indian casinos from opening up. Also, it should have stopped casinos from opening up in major cities like Detroit, Cleveland, from what I hear, and other places.
How is this the right property at the wrong time? The right property would've at least had a fighting chance. They opened a shopping mall, a casino, and 4 hotels, and it only increased revenues by $500,000 a day? At that rate, the mortgage will be paid in just 47 years!
Like a few people said, these are "paper losses" and it does help them avoid paying taxes and reduce the overall debt. I went to Crystals the other day to show my kids and the place was empty. I didn't see one person with a shopping bag from a purchase they made there! These execs need a new business plan, the current "let's fleece everyone while they're here" isn't working.
So Jim Murren said that CityCenter would prosper without local patrons.... I live in Florida and visit Las Vegas yearly. I was there in June and visited CityCenter. I never plan to go back to CityCenter. The Crystals looks like an airplane terminal and the casino is dark and depressing. The overall design is cold and imposing and it lacks attention to detail.
was just in vegas drove right by it twice. Not even really trying to avoid it just never really wanted to go in Ive been to big cities...the casino is to far off the strip nothing to catch me and make me think " i have to gamble there".....The whole town is dying... its sad i hope somthing changes but i dont see it.. they just want the old days to return where they can fleece us for every soda and water.....its not going to happen the indians are giving good value
I read an article a few weeks ago where the 5 casinos in Pa. paid more in taxes to the state than the 260 casinos in Nevada paid to the state.
Why is this? Do the casinos have such a big lobby in state government?
PGelsman...yes the casinos have powerful lobbyists. They were able to successfully avoid the clean indoor air act and allow smoking to continue in the casinos despite the federal law!
In 2065, MGM will bounce back and show a $345,000 profit.
Until then, they will show $19,502,000,000 billion In losses.
Time to invest in this company....LOL
Vegas is the new detroit, you cannot run an economy on only one source of income, it is fatal , there needs to be diverse industries, shops, etc
Large casinos, supermarkets, giant corps, they all eventually implode under their own weight in debt, they grow on debt, it just doesnt work..
Bring in small businesses which are diverse and actually make something.
Flapsychdoc -- What FEDERAL law are you refering to. This is NO FEDERAL LAW prohibiting smoking indoors. This is one thing the fed has done right and left it up to the states.
Hard Rock in FL looking better and better all the time, great comps, great value. But I still miss Mecca, Please make me want to come back Vegas.
When BYD and MGM are down to 5 dollars per share, I'll buy. Not before.
From Switzerland
I sure wish the IRS would allow me to write down the declined value of my home and show a loss on my tax returns so I didnt have to pay taxes.
after all these blunders of billions of dollars how can this "management" team still be in charge????? Where is mr K ?????? why is baldwin still on the payroll??????
What a complete disaster for MGM. On one hand they have this beautiful hotel and casino (Aria) which by itself should be successful or at least on the road to being successful. On the other hand is rest of the CC with its unsold condos (Veer and Vdara) and empty Harmon Tower.
How can this ever work? Aria can carry the project for only so long until this house of cards collapses.
What is the solution? Dump all the condos at 20 cents on the dollar? Keep the condos empty for years until the market recovers? Turn the condos in hotel suites? What about the Harmon Tower?
I would suspect the only near term solution is the sale of some of other MGM properties to offset the debt load of CC. Shareholders of MGM will not stand for these losses much longer...
Check out my LV blog:
http://jimmyhoofa-lv.blogspot.com/
No one does more......
Chunky says:
Mr. Murren is still playing his Wall Street Monopoly games like it's not real money... because it's not real money, it's all just paper and too many Excel spreadsheets.
What's real are the people who work for MGM Resorts and what is most important are the customers.
There's no clear leadership nor a guiding vision for MGM Resorts or if there is no one is sharing it with the staff who spend most of their days wondering where this ship is sailing! Going "International" is a bit vague and frankly they have no choice to go there because Americans and bankers can still taste the bitter sting of the CityCemetary deal!
MGM needs a plan, a vision and a leader to inspire and enable their many able employees to grow the company instead of guessing and reading the tea leaves of the rumor mill.
That's what Chunky thinks!
Who would name themselves Chunky?
My prediction is Crystals will continue to be a complete bomb.
You go up an escalator and start walking in one direction and there's no place to go, it just ends.
Maybe that's a function of not being fully leased.
It's very uninspiring, bland and expensive.
What were they thinking?
I'm going to take a wild guess that #1: The land was purchased at least 10 years ago. The site plan and permits were approved 7-9 years ago and the building starting construction, with loans made at rates and schedules based on the economy of about 2004...about 6 years ago, yes?
So those that come in here and spout that 'they never should of built it' --- and base that on TODAYS REAL ESTATE MARKET, are basically clueless.
You have a lot of very short-sighted, rear-view glasses people in here. Unfortunatly, the MGM management team didn't have your view from today. They had to make decisions during the early 2000's when the economy was booming!
This may be a case of all-time bad timing.
It may be a case of a lousy design.
It may be a case of a bad business plan.
But City Center in itself is a great venue.
Wife and I just stayed Aria for 3 days (as a comp) -- and I admit I ate all of 2 meals in the hotel, but we loved the room and the ambiance.
I used to come with 20k, now I come with 2k and enjoy Vegas just as much. Free rooms, but no more limo, gift baskets, food and other comps are gone,gone, gone.
I'll keep coming and helping your economy despite the doom and gloomers. FYI: Hawaii's just a bad as Vegas is, the same type of 'one-economy - toursim - and except for real-estate where we are #1 again, for the highest prices in the nation, we have no economy, either!
God Bless the Pork Barrel $$$ that our Senator's bring us. Harry brings it for you and Inoye brings it big time for Hawaii.
js
To say they couldn't see this coming is just plain wrong. First to have 10 properties in one market is just plain stupid. wynn and adelson have to be given credit on moving into macau and singapore so quickly--but then they have good management. Mgm was outbid in both cases, and now only has 1/2 of a casino outside the united states. Building this monstrosity into a saturated market where you are competing mostly against yourself is just a bad call. This market had topped in 2005 and it was very clear to many of us that property was going to tumble--it was starting to tumble while they were selling to the last group of condo suckers at the turnberry towers behind mgm. Many months before the cc project started--it was very clear that things were heading south. I guess in their defense--no one expected it to get this bad, this quickly. Kudos to the boyd group for stopping the stardust project--that would have also been a disaster. I don't know if mgm would have been better doing the same and just not built city center---they probably would have been better. Now that they have written down the value by nearly 75%--can it get any worse????? im afraid to ask!
The article states CC lost $128 million in the quarter. That means it is eating over a million dollars a day. Hard to sustain forever. I notice they didn't release average room rates for the other CC (Circus Circus), Luxor, Excalibur, etc. Those are the real "value" properties in the MGM fold from a customer point of view. Personally, I'll stick to Harrah's "resorts" and avoid the resort fees. Always a great rate at the IP.
The IP has great rates but that is about it. We're sticking to MGM where the service is great and the rooms are decent and fairly priced.
It is going to take time for everyone, everywhere to climb out of the recession.
What's telling from this article is that people were willing to walk away from $56 million in condo deposits. If that does not prove that there is no recovery to the LV market and to CC as a whole, I don't know what does. LV has survived difficult tomes in the past, but this time it may be too wounded to recover, sadly
Smoke and mirrors. MGM is down the tubes with Chitty Center. No presence in Macau or Singapore. If you own the stock, sell it and buy Sands or Wynn.
But, hey Harry Reid saved city center, 22,000 jobs according to the high priced commercials he runs. The placee is a loser and will eventually end up costing the entire valley. Thanks MGM and Harry Reid. I guess 22,000 people did get a couple more months of pay though.
There are just so many things wrong with this project. In school it was called 'group think'. Everyone sitting around a table telling eachother what a great idea and how clever they all are. Never bothering to look at the whole picture.
While I hate the unfinished projects, Venetian, Echelon, and Caesars all had the foresite to STOP before they went too far. It comes down to leadership, which MGM is sorely lacking.
Cosmo, the next big one to enter the market, with a 'real' strip entrance and easy access will eat Aria for lunch.
The word "visionary" takes on a new meaning.
I suppose MGM will still be able to buy out a couple more Strip casinos anyway.
I'm assuming MGM's original plan was for the casino to be the major amenity for the condo owners. Hence they did not design the complex for it to have easy access from the strip.
Martin9, I had quite a chuckle reading your post :=D Up , down, all the way around, through the mall, up the elevator, down the escalator,...bla bla bla , the hidden password, then through the door, all the way down again, around the corner, wait for the traffic light , and then another password and you're in.... :))))
Matter of fact, I came by car, and had enough troubles finding the main entrance of the casino. I was guided to the mall valet ("it's free"), and then I ended up with Armani, Louis Vitton, and all the other shops , I had to ask somebody how to find the casino, and then I finally made it. After 30 minutes or so I was out again. I decided to never come back again. However, it was a monster piece of work to find the mall valet again. To my biggest surprise the valet boy brought me my car quickly. But he was probably more suprised than I was about the complicated facility. He got a tip from me but obviously expected a 5 dollar bill. I don't tip 5 dollars for free parking. I thought it's free? Free is not free or what?
Anyway, ARIA casino is probably something for the people that stay there or even live there. And for all the walking-looky-Louies , this is not as convenient as Bellagio or Ceasars Palace.
From Switzerland
All you people who say it's just a paper loss--let me explain what is a paper loss. Imagine you bought MGM stock in Oct. 2007 when it was $92. Now your stock is worth $10. You have a paper loss of $82. No problem--you just have to wait until it goes back up to $92. If you need your $92 now--too bad. If you sell your stock you get $10, and it's not a paper loss anymore--it's a very real loss. And you may not be able to deduct the entire loss on your income taxes, because there's a limit how much capital losses you can deduct each year.
http://money.cnn.com/quote/chart/chart.h...
bring back the boardwalk casino and carrows restaurant. What a joke this place is. You really fVccked up MGM. Especially you baldwin. You took the charm of Vegas away and brought this ugly cold piece of you know what.
Have any of the businesses within Crystals close up shop yet?