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For Sale: Half Stake In City Within A City, Bellagio ADJ

By Chuckmonster on Thursday, 26th August 2010 5:36pm
  » filed under Las Vegas  comments: 14


Someone strike up the band and pack up the donkeys, as it is looking like the biggest suckers to ever play the casino game - Dubai World - are on the verge of cutting bait on their $7 billion dollar mistake of an investment in to @jimmurren's Green headed stepchild - The CityCenter.

When we last checked in on Dubai World (aka Infinity World) their purchase of 50% of The (Gateway Requiring) City Center had shriveled by almost 75%. Well, that 75% has shriveled another 75% AND their player partners MGM Whatevertheycallitnow have written down the value on said land/buildings/strategically placed shrubbery to the tune of $2B and change.

At eight months old City Center is worth the same amount of money as what Columbia Sussex paid to buy Aztar Corp in 2006 (owners of Trop LV, Trop AC and a half dozen other smaller casinos), 2X what El Ad paid for New Frontier in 2007, 4X what MGM unloaded Treasure Island for in 2008, 15x how much the Tropicana is spending on its refurb, 35x what Wynn paid to build Encore Beach Club.

When looking at the numbers of Dubai's stock purchase, I'm confident that words will fail you.

Jan 2008: 101906722*80 = $8,152,537,760
Oct 2008: 101906722*21 = $2,140,041,162
Aug 2010: 101906722*9.14 = $931,427,439.07

A remember to breathe difference of -$7,221,110,321.

Sorry for your motherfuckin' luck!


Comments & Discussion:

How does Jimmy still have a job??


Wouldn't it be a hoot if DB/Cosmopolitan bought the other half of CityCenter?

Wow. Amazing numbers. Jimmy won't have a job by year-end, and wouldn't it be great if CityCenter became known as the Gateway To Cosmopolitan.

Maybe they can sell their shares to Geico to relocate their corporate offices there, the place is an office park.

The article you posted doesn't make it clear to me if it was Dubai World that did the write down of properties, or whether it was MGM Resorts. It makes a huge difference in how to interpret the article, especially given your follow-up comment on Jim Murren's odds of success.

I note, somewhat that your logic doesn't follow. I'm not a Jim Murren apologist, but the corporate world is full of examples of incompetent people hanging onto their jobs despite horrendous performance. Was City Center a mistake in the near term? Unmistakably yes. Is Murren at this moment burning little voodoo dolls and spreading entrails around his yard in the hopes the economy recovers? Hell yes.

It's not uncommon to expect a huge investment to pay off in 5 or 10 years. Murren could be trying to duck and hope like the rest of us.

P.S. The odds of us coming out of this economy like before are approaching zero. See: Japan and the lost decade.

Whether they sell their 50% share or lose it through bankruptcy, it is probably inevitable it will change hands. MGM just doesn't have the money to buy it back. They might consider selling off buildings (MO, Harmon, Crystals, Veer) in the hope of raising enough cash for MGM to at least end up owning 100% of Aria.

Kirkorian waits in the wings...

parchedearth: They would only do that if the situation demanded cash flexibility or they needed it to cover the bills. Otherwise, why sell unless you have to? They certainly aren't going to sell to reinvest elsewhere. There is no 'elsewhere' or 'when' to invest to. There's no demand.

Dubai World also lost billions and billions of dollars on their Dubai hotel, commercial, and residential projects. Here's what they built in Dubai in just the last few years: man-made islands in the shape of palm trees, the world's tallest building, an indoor skiing mountain, a Bellagio style fountain that plays Mohammed music, and a skyscraper that has spinning parts. Every douchebag jet-setter had to go check it out. Except that when they got there, the beach was covered in shit because Dubai didn't spend any money on sanitation; and if the douchebag tourists kissed their douchbagette girlfriends in public, they both got a quick ticket to jail. Hell, the Dubai courts were considering life imprisonment for a couple who got drunk and had sex on the beach. Drinking in public is also punishable by long prison terms. They spent all of this money creating a destination resort for rich douchebags, and then they adopted Nazi Germany resort rules. So they lost $7 billion in Vegas. So what, they're broke anyway. Hard to feel sorry for arrogant pricks.

@attica City Center LLC - a joint venture of MGM and Dubai Infinity World - wrote down the value of the property. It was announced in MGM's latest quarterly.

the point re: Murren is that if MGM's 50% partner in CCLLC would rather take a quick and insanely expensive exit 14 months after writing the last check, and barely 8 months after opening demonstrates their confidence in the project and how it will be managed over the short, mid and long term.

CityCenter is a time bomb.

"How does Jimmy still have a job??"

Hell, how does Jimmy still have a head?!!

(Sorry, couldn't resist. But then again, I'd cancel any Middle East travel for a while if I was him...)

You know what they say about the house always winning. Move over Mr. Watanabee, Dubai World has taken your spot as the biggest loser in recent Vegas history.

talk about BOGU

(that's Bend Over, Grease Up for the acronym-challenged)

@chuckmonster Sorry, the accounting / econ geek in me is crying out.

A write-down of assets isn't an exit. It's a one-time charge against the balance sheet, meaning that they decided to eat the loss of value on the assets all in one quarter. Depending upon how they do the internal accounting, they could also reset the depreciation rate on the property which would help stem long term damage on profits from quarter to quarter. But they still own it.

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