As Echelon Hits Brakes, CityCenter Cruises

LAS VEGAS-While Boyd’s $4-billion Echelon project is being put on ice due to financing concerns the $9-billion CityCenter construction project here continues unabated and appears to have its financing under control, according to comments made by company executives on a conference call with analysts this week. The 19 million-sf development–rising all at once on 67 acres between the Monte Carlo and Bellagio casinos–is slated to open in late 2009.

MGM Mirage executives told analysts that both it and its JV partner in the project, Dubai World–a conglomerate that owns the company developing the manmade islands off the coast of Dubai–each put up another $300 million in the second quarter to keep the project on track. MGM Mirage CFO Dan D-Arrigo said CityCenter has received to date well over half of the financing commitments from banks and it expects the rest of the financing to be finalized this quarter.

The partnership is working with several relationship lenders regarding a $3 billion financing package and to date CityCenter has received commitments totaling $1.65 billion from the lead banks: Bank of America, Royal Bank of Scotland, UBS, BNP Paribas, and Sumitomo Mitsui. Beyond that, MGM Mirage says CityCenter has received additional, smaller commitments from Deutsche Bank, Morgan Stanley, and the Bank of Nova Scotia.

Robert Baldwin, MGM Mirage chief design and construction officer, told analysts that once the financing is in place the JV will have spent approximately $4.2 billion of the estimated $9.1 billion of gross cash construction and preopening costs, leaving approximately $5 billion needed to complete construction. Minus the $3 billion in bank financing, that leaves an additional $2 billion in costs that will be split evenly between MGM Mirage and Dubai World.

The bulk of the $2 billion will be funded over the remainder of 2008 and into early 2009. The remainder will be funded toward the end of construction as needed. “We have ample capacity to fund our share,” Baldwin said.

With regard to construction, Baldwin says six of eight guaranteed maximum price construction contracts related to CityCenter have been signed and executed. The two others will be signed on Aug. 20, he said.

“Everything is on schedule,” he told analysts. “Most of the buildings are approaching their full height and, in fact, all buildings will have reached their full height by February.”

The 4,000-room main hotel-casino will top out later this month. The Mandarin hotel tops out in September. All the structural steel for the Crystals retail component is in place, Baldwin said, adding that some of the spaces will start being turned over to tenants in February.

As for the for-sale residential component Baldwin says 54% or 1,421 of the 2,700 condominiums have been sold for $1.75 billion, which represents 59% of total expected sales volume. Thirty-six units were sold in the second quarter, down from 56 units in the first quarter, but early third quarter sales have executives hoping to equal or better first quarter results.

“We sold 32 units in July alone, 17 that came from the new sales office in Dubai,” Baldwin said. “We look forward to future success in that sales channel.”

In July, MGM Mirage revealed the headliners for the 500,000-sf retail district. The Crystals retail district will be anchored by Louis Vuitton, Ermenegildo Zegna and Tiffany & Co., as well as two new dining concepts by Wolfgang Puck.

All told, CityCenter will be home to a 61-story, 4,000-room resort casino; two 400-room, non-gaming hotels; and 2,700 for-sale residential units, including the 1,500-unit Vdara. Shopping and entertainment offerings will include the Crystals and an Elvis-themed Cirque du Soleil show. The development also will include its own monorail to move people around the site and to the neighboring developments.

The actual gross cost of CityCenter is $11.2 billion. In its first quarter report, MGM Mirage pegged the net project budget at $8.5 million–after an expected $2.7 billion in residential sales. The gross project budget includes $9.2 billion for construction costs (including capitalized interest), $1.7 billion for the land, $200 million for pre-opening expenses and $100 million of “intangible assets.”