MGM puts casino on the block

#1
MGM puts casino on the block
Las Vegas-based owner of Detroit's largest, most-profitable gaming house seeks to reduce debt.
Nathan Hurst / The Detroit News

DETROIT -- MGM Grand Detroit, the city's largest and most profitable casino, is up for sale.

It's just one property across Las Vegas-based MGM Mirage's multinational empire being pitched to buyers as the debt-ridden company seeks to shore up its balance sheet, two sources familiar with the matter confirmed Sunday.

The specter of a sale of MGM Grand Detroit and other profitable properties like Bellagio on the Vegas Strip comes as MGM Mirage is seeking to erase tens of billions in debt, much of it financing the company's $8.6 billion CityCenter venture in Las Vegas.

MGM Grand Detroit, completed in late 2007 at a cost of $800 million, is by far the city's most successful, commanding 42.5 percent of gaming revenue taken in by all three Detroit gambling halls this year, making it particularly attractive for potential buyers.

In confirming the potential sale of MGM's Detroit property to The Detroit News, the two sources requested anonymity since neither is authorized to speak on the record about possible corporate transactions made by MGM Mirage.

It's unclear how much any of the properties up for sale, including MGM Grand Detroit, could fetch, given the recession and tight credit markets potential buyers would be working in. But the company's sales overtures in a market with few obvious buyers show MGM Mirage's desire to clear debt as revenues are falling, even if that means a possible breakup of its network of 17 casinos throughout the United States.

The company, majority-owned by billionaire Kirk Kerkorian, has seen its debt ratings and stock price plunge in recent months as the gaming giant has faced serious questions about its ability to continue operating under roughly $13.29 billion in debt. The debt was taken on during the real estate boom earlier this decade, as the land housing many of its landmark Las Vegas Strip properties ballooned in value and credit was easy to obtain.

MGM Mirage took on the extra debt to expand its footprint in Las Vegas and with joint-venture partners around the globe.

Its biggest project, CityCenter -- a condominium, hotel and casino complex on the Vegas Strip -- broke ground just as the real estate and credit markets deflated, bringing the company's stability and stock price down.

MGM and its partners have slowed construction on the project and downsized the condominium portion, though industry observers have questioned CityCenter's viability, given the troubles facing the industry in the down economy.

Since hitting a high of $96.40 a share on October 12, 2007, MGM Mirage stock plunged to $3.53 at market close on Friday. News of a potential sale of MGM Grand Detroit reported over the weekend buoyed shares another 2 percent to 3 percent in after-hours trading.

Kerkorian -- no stranger to Detroit with well-known bids for influence at General Motors Corp. and Ford Motor Co. -- has seen his fortunes fall as a result of MGM Mirage's debt issues, from nearly $15 billion at the company's peak in October 2007 to roughly $500 million today.

Experts said a sale of profitable MGM Grand Detroit would make sense for MGM Mirage.

"Revenues aren't likely to increase soon with consumers pulling back," said Bill Thompson, an industry expert and professor at the University of Nevada Las Vegas. A sale of a profitable property would fetch the best price, he said, "and help get some debt off the books."

Thompson said bond and interest payments due this year are weighing heavily on MGM Mirage, just as gaming revenues in MGM Mirage casinos in states such as Nevada and New Jersey continue to slip.

MGM Grand Detroit's profitability is likely to catch potential buyers' attention: The casino is MGM Mirage's fifth-most profitable. The company's signature Bellagio complex in Las Vegas is the most profitable, sources said.

Keeping MGM Grand Detroit profitable hasn't been easy.

In recent months, it has trimmed staff and operating hours at the casino's three upscale restaurants, and shuttered two retail stores and one of two Starbucks coffee shops.

Whether that profitability is enough to coax a deal from other major casino operating companies remains to be seen. Harrah's Entertainment, which operates Caesars Windsor for the Ontario Lottery and Gaming Corp., and Las Vegas Sands Corp. are saddled with debt and may not invest in a market riddled with years-long recession and population losses, said Bill Eadington, an industry observer and professor with the University of Nevada Reno.

"There could be interest from somebody local," Eadington said, "but the credit markets are tight."

MGM Grand Detroit is also facing cross-town competition on the sales market.

Greektown, the city's smallest and least-profitable casino, has been pitching itself to potential buyers in recent weeks as part of its bid to exit Chapter 11 bankruptcy, filed last May.

The casino is pursuing parallel paths out of bankruptcy and hasn't yet chosen which route to take: an outright sale or a reorganization of debt that would keep the Sault Ste. Marie Tribe of Chippewa, the casino's owner, in charge, or a combination of both.

You can reach Nathan Hurst at (313) 222-2293 or [email protected].
 
#2
What was the MGM company thinking putting up a big new gambling complex on the Las Vegas strip during this housing crisis? And why are they selling this place after pumping 800 million into it?

It's kinda sad, though. MGM Detroit's really a nice casino. The Blackjack is nothing to write home about, but it's the best of the three D-town casinos. It's got some great restaurants and night clubs, too. Being in there, it's easy to forget you're in Detroit, one of the economically hardest hit cities in the nation.
 
#3
Slick

Slick Vic said:
What was the MGM company thinking putting up a big new gambling complex on the Las Vegas strip during this housing crisis? And why are they selling this place after pumping 800 million into it?

It's kinda sad, though. MGM Detroit's really a nice casino. The Blackjack is nothing to write home about, but it's the best of the three D-town casinos. It's got some great restaurants and night clubs, too. Being in there, it's easy to forget you're in Detroit, one of the economically hardest hit cities in the nation.
Detroit is the cause of its own problems :( Let it not try to put the blame elsewhere.

CP
 
#4
creeping panther said:
Detroit is the cause of its own problems :( Let it not try to put the blame elsewhere.

CP
I never understood the need for 3 Casinos in downtown Detroit...plus the one in Windsor. Seems like one or a max of two would have been more sustainable.
 

EasyRhino

Well-Known Member
#5
I don't think I get MGM trying to sell its satellite properties (Beau, Detroit... Foxwoods?) when they're already over concentrated in Vegas.

Assuming the the hail mary to finish Citycenter is the right way to go, I'd try to jettison several other Vegas properties in preparation, but keep the outliers as a minimal form of diversification.

And I'd burn Circus Circus to the ground.
 

KenSmith

Administrator
Staff member
#6
EasyRhino said:
I don't think I get MGM trying to sell its satellite properties (Beau, Detroit... Foxwoods?) when they're already over concentrated in Vegas.

Assuming the the hail mary to finish Citycenter is the right way to go, I'd try to jettison several other Vegas properties in preparation, but keep the outliers as a minimal form of diversification.

And I'd burn Circus Circus to the ground.
Heh, I agree, I agree, and everyone agrees. :grin:
 

johndoe

Well-Known Member
#7
I don't think MGM owns the MGM/FW outright, I heard FW (or the FW/MGM group) just licensed the name, though they are run somewhat separately.
 
#8
Wolf said:
I never understood the need for 3 Casinos in downtown Detroit...plus the one in Windsor. Seems like one or a max of two would have been more sustainable.

Maybe you would understand that they all are profitable. It's goverment that forced them to expand and take on extra debt. These were conditions forced on them from the local and state goverments. Their is no shortage of customers at any time of day. The problem is servicing the debt for the cost of building these hotels.
 
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#10
Inplay

InPlay said:
Are you talking about the casino or the city of Detroit itself ?
I will defer commenting on the casinos at this time. Detroit, Americas Mogadishu.

You are right as to the Gov. forcing the casinos to build hotels and take on the debt.

CP
 
#11

KOLAN

Well-Known Member
#12
InPlay said:
http://blogs.ubc.ca/ross/2009/03/detroit-americas-most-epic-urban-failure/

It's not as bad as people think. But then I don't live in the city. I only go into the city for the casino and sporting events and other forms of entertainment.
It's not as bad as people think. But then I don't live in the city. I only go into the city for the casino and sporting events and other forms of entertainment.
only!!!! .you got nice life! :laugh::laugh::laugh:
 
#13
KOLAN said:
It's not as bad as people think. But then I don't live in the city. I only go into the city for the casino and sporting events and other forms of entertainment.
only!!!! .you got nice life! :laugh::laugh::laugh:

Pizza Boy or what ?
 
#14
KOLAN said:
It's not as bad as people think. But then I don't live in the city. I only go into the city for the casino and sporting events and other forms of entertainment.
only!!!! .you got nice life! :laugh::laugh::laugh:

I could probally buy and sell you a couple of times over ? What do you think ?
 

ChefJJ

Well-Known Member
#15
Urban Farms

After having worked in and more recently, been a visitor to Detroit, that link had another link talking about clearing a lot of urban blight to use as urban farms. Interesting. Detroit deserves a lot better than what is going on there now...only time will tell though. Economics makes the world go round :joker:

But in tune with the thread, I'm surprised that MGM is trying to cash in on their Detroit property after not a whole lot of time of enjoying the fruits of the new facility. :confused:

The success of the Detroit casinos is not that surprising to me. Besides the Detroit metro area, they do pull from places like Toledo (1 hr away) and Cleveland (2-3 hrs).

good luck
 
#16
ChefJJ said:
After having worked in and more recently, been a visitor to Detroit, that link had another link talking about clearing a lot of urban blight to use as urban farms. Interesting. Detroit deserves a lot better than what is going on there now...only time will tell though. Economics makes the world go round :joker:

But in tune with the thread, I'm surprised that MGM is trying to cash in on their Detroit property after not a whole lot of time of enjoying the fruits of the new facility. :confused:

The success of the Detroit casinos is not that surprising to me. Besides the Detroit metro area, they do pull from places like Toledo (1 hr away) and Cleveland (2-3 hrs).

good luck

Lots of people from Ohio. The casinos are packed most of the time. There is no shortage of players in the area. The MGM casino in Detroit is a first class class casino. If you are looking for upscale you have found the place.
 
#17
Upscale Yes

InPlay said:
Lots of people from Ohio. The casinos are packed most of the time. There is no shortage of players in the area. The MGM casino in Detroit is a first class class casino. If you are looking for upscale you have found the place.
I have friends from Ohio that will not go to the Detroit casinos any longer for safety reasons. They go to WV or New Buffalo and I am sure the new Battle Creek casino in the summer will draw well.

CP
 
#18
creeping panther said:
I have friends from Ohio that will not go to the Detroit casinos any longer for safety reasons. They go to WV or New Buffalo and I am sure the new Battle Creek casino in the summer will draw well.

CP
People that lead sheltred lifes are afraid of their own shadow. People like that miss out experiences in life. It's to bad !
 
#19
creeping panther said:
I have friends from Ohio that will not go to the Detroit casinos any longer for safety reasons. They go to WV or New Buffalo and I am sure the new Battle Creek casino in the summer will draw well.

CP
Well, it's their loss, really. MGM Detroit's just as luxurious as any casino on the Vegas Strip. MotorCity's got a pretty ritzy atmosphere, too. And I've driven through Detroit quite a few times and I've never really felt unsafe enough not to do it again. Sure, there are places in the city that even the cops are afraid to go in, but overall the city's safe enough to at least drive through.

I wonder who would buy the place?
 

shadroch

Well-Known Member
#20
creeping panther said:
I will defer commenting on the casinos at this time. Detroit, Americas Mogadishu.

You are right as to the Gov. forcing the casinos to build hotels and take on the debt.

CP

Strangely, Tunica used to be known as America's Somalia. Time Magazine even featured it as such in a cover story. casinos worked there.
 
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