The partnership also entered into a guaranteed maximum pricecontract with M.J. Dean Construction that covers the majority ofwork to be performed on the expansion project. The estimated totalcost of the expansion project is $760 million.

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Finally, the partnership amended their joint venture agreementto reflect DLJMB's commitment to make up to $144 million ofadditional capital contributions for the expansion and up to anadditional $110 million to fund the satisfaction of minimum salesprice or amortization payment requirements under the loan facilityrelating to the approximately 15 acres of excess land held for saleby Hard Rock.

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"Construction is underway and we have taken the steps to helpensure that the project is completed on time and on budget," FredKleisner, president/CEO of MHG says in a prepared statement. "Weare quickly moving forward to transform this legendary Las Vegasproperty."

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The 11-story Hard Rock Hotel & Casino sits on 16.7 acres onthe burgeoning Harmon Avenue corridor. The popular music scenedestination was built in 1995 and expanded in 1999. Amenitiesinclude a 30,000-sf casino; a beach club; the Body Englishnightclub; the Joint concert hall; five restaurants; three cocktaillounges; several retail stores; and an 8,000-sf spa, salon andfitness center. The adjacent land was acquired with plans andentitlements in place for a $1.2-billion hotel expansion andcondominium development. Only the hotel expansion is moving forwardat this time.

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The hotel expansion will bring 875 additional rooms, 60,000 sfof meeting space, 35,000 sf of retail, a new spa and a newnightclub. The new hotel rooms will come in two new 15-storytowers, one on the existing casino-hotel property that will have500 rooms and one 400-room, all-suite tower on a piece of theadjacent 23 acres that were included in the sale. The project alsoincludes a renovation of the existing facilities including and anexpansion of the casino and pool.

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Recent renovations to the existing property include upgrades toexisting suites, a new Ago restaurant and the new Wasted SpaceLounge Bar. Other improvements to be completed in 2008 include theexpansion of the Nobu restaurant and a new poker room. The hotelexpansion is slated for completion by mid-2009.

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New York City-based Morgans and DLJ Merchant Banking Partnersacquired the gaming resort here early last year for $770 million.It immediately took over hotel operations but had to farm out thecasino operation until it gained an operator's license from theCommission. Morgans began operating the casino this pastFebruary.

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Morgans agreed to acquire the assets of Hard Rock Hotel Inc.from Peter Morton in May 2006 and added DLJMB as an equity partnerprior to closing the deal. MHG put up one-third of the acquisitionequity, which is approximately $57.5 million, and DLJMB is fundingthe remainder, which is approximately $115 million. The remainderof the purchase price consists of a $760-million loan for theacquisition. The initial term of the loan is three years, with apossible extension of up to two terms of one year each undercertain conditions.

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The interest rate on the loan will be 415 basis points above30-day Libor, subject to increase if the completion date of theexpansion project is delayed and under certain other conditions.The security for the loan includes the hotel & casino, the HardRock Cafe property, the adjacent parcel, the intellectual propertyand certain reserve funds and accounts.

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