VEGAS INC Magazine - Latest Las Vegas business news, features and commentaries about gaming, tourism, real estate and more
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IN BUSINESS GAMING MGM: LAS VEGAS ECONOMY GETTING HEALTHIER By Steve Green senior staff writer MGM Resorts International executives say the Las Vegas hotel-casino market is making a broad-based recovery despite national economic worries. In reporting third quarter results and offering a forecast for the fourth quarter now under way, the company said consumers were paying more for MGM Resorts' Las Vegas hotel rooms and spending more at its restaurants, nightclubs and retail outlets. U.S. consumers are feeling more confident, businesses are participating in more conventions and Las Vegas is benefiting from more international flights to the city, Dan D'Arrigo, MGM Resorts International executive vice president and chief financial officer, said in a Nov. 3 interview. With visitation to the city this year expected to reach 39 million people, a number last achieved during the boom year of 2007, Las Vegas has maintained its position as a top U.S. destination and MGM Resorts was well positioned to benefit with its resorts on the Strip at all price points, he said. "It gets to the allure and attractions of Las Vegas as a market," D'Arrigo said. REAL ESTATE GRUBB & ELLIS PICKED TO PROMOTE LAND SALE By Steve Green senior staff writer National real estate brokerage and advisory firm Grubb & Ellis Co. has been hired by several banks to promote the Dec. 12 bankruptcy auction of 1,340 acres of land in the undeveloped Park Highlands planned community in North Las Vegas — one of the largest such auctions locally in years. The banks, which face steep losses on their $178.9 million in loans to the Park Highlands developers, are trying to gain a better price than the $15.2 million initially offered for the land by an affiliate of the current land owner. The current land owner is bankrupt Park Highlands development company November 2005 Land Investors LLC. Lenders and investors in Park Highlands both face losses because the recession has slashed Las Vegas-area land values and there's little demand by homebuilders for the land, compared to the economic boom years. Grubb & Ellis said portions of the Park Highlands land were zoned for residential, retail, resort, business and office use. Grubb & Ellis said land sales in the Las Vegas area during the past 12 months for parcels 30 acres and larger sold for a median price of $98,000 per acre and a high of $167,000 per acre — amounts far higher than what has been proposed so far for the Park Highlands land. The initial offer for the land to be auctioned during the bankruptcy process came in at only about $11,343 per acre. That offer came in the bankruptcy case of November 2005 Land Investors but was later withdrawn when the banks complained it appeared to be an insider deal in which one Ross Perot Jr. company would acquire the land from another Ross Perot Jr. company. Perot Jr. has a development company in Dallas called Hillwood Communities. In December, a Hillwood affiliate acquired November 2005 Land Investors a few months after November 2005 emerged from its 2009 bankruptcy, which was blamed on the near collapse of the local housing market because of the recession. November 2005 Land Investors then filed for bankruptcy a second time in July. Some of the banks are now litigating with one of the Perot Jr. companies, BOH Park Highlands NV LP, in a dispute over whether the buyer of the Park Highlands land at auction is obligated to pay $3.2 million BOH Park Highlands NV claims to be owed for infrastructure costs at Park Highlands incurred before the first bankruptcy by a predecessor company. The banks dispute that money is due BOH Park Highlands and charged in a Bankruptcy Court lawsuit Oct. 24 that: "The threat of action by BOH against the purchaser of the property is chilling and will continue to chill bidding on the property because prospective third party purchasers fully expect to be able to buy the property free and clear of all liens and will not be enthusiastic about embracing litigation with BOH." Attorneys for BOH, in responding to the complaint Oct. 27, denied that its claim for the $3.2 million is chilling the bidding and said the real issue is that any party buying the land will have a choice to either assume Park Highlands' infrastructure funding obligations or to pay BOH its $3.2 million. BOH attorneys said there's "no negative impact on the bidding process" since the total purchase price for the property would be the same under either scenario. A Nov. 10 hearing is set on the dispute. Through August, 26.2 million people visited the city this year, up 4.7 percent from the same period in 2010, Las Vegas Convention and Visitors Authority statistics showed. In 2010, 37.3 million people visited the city, up 2.7 percent from the recession- weakened year before. MGM Resorts said it benefited from stronger demand for travel to Las Vegas by tourists and business travelers in the third quarter, with its wholly-owned properties on the Las Vegas Strip generating an 11 percent increase in room revenue and a 13 percent increase in revenue per available room. Rooms at the company's flagship Bellagio resort, for instance, sold for an average of $230 per night during the quarter, up from $198 in the year- ago quarter. Occupancy at the resort improved from 94.8 percent to 96.8 percent, MGM Resorts said. CEO Jim Murren told analysts on a conference call that the company had a strong October and that its revenue per available room should be up again in the fourth quarter by 10 percent on a year-over-year basis. "We continue to see consistency in this recovery," Murren said. "We see that in the improving citywide trends when you look at Las Vegas. The third quarter represents the third consecutive year- over-year quarter of increased revenue, EBITDA and cash-flow margin growth for our wholly-owned properties." EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization. Overall, MGM Resorts posted a third quarter loss of $123.8 million, or 25 cents per share, an improvement from the loss of $318 million or 72 cents per share in the year-ago quarter. Both quarters were affected by one- time accounting charges. In last year's quarter, MGM Resorts took impairment charges totaling $357 million related to its half-owned CityCenter and Borgata projects. This year, it took an $80 million impairment charge against the value of its Circus Circus property in Reno. Quarterly net revenue of $2.2 billion was up from $1.6 billion, mainly because MGM China and its Macau casino were included in the calculation for the first time due to MGM China's $1.4 billion initial public stock offering this summer.