MGM’s $7 Billion Gamble

Spearheaded by MGM MIRAGE (NYSE: MGM). Spread over 66-acres, the project is being billed as a “master-planned urban complex defined by a variety of avenues, places and experiences.”

With a development of such magnitude, it will be built out in multiple stages. The first phase will include the construction of a 60-story, 4,000-room hotel/casino, three 400-room non-gaming boutique hotels to be operated by hoteliers not currently represented in Las Vegas, approximately 500,000 square feet of retail shops, dining and entertainment venues, and 1,640 units of luxury condominium, hotel/condominium and private residence clubs. It is rumored the five-star brand Mandarin Oriental will manage one of the hotels.

In all, phase one will see the development of 18 million square feet of space and create 12,000 new jobs once construction is complete. The site is approximately the same size as three major New York City landmarks combined: Rockefeller Center, SoHo and Times Square. It is hoped by MGM-MIRAGE that Project CityCenter will propel the urbanization of the Las Vegas valley and complement previously announced plans for continuing redevelopment in Downtown Las Vegas.
"The [Project CityCenter] urban metropolis at the center of the Las Vegas Strip will raise the bar for Las Vegas development and will forever change the resort experience as we know it today," MGM Mirage President Jim Murren recently said at the company's annual shareholders meeting.
When initially announced, the project was set to cost $5 billion, but the estimated costs have been soaring ever since. More than $2 billion has been tacked onto the project during the last 18 months.

To bring this vision to life, MGM MIRAGE is partnering with leading architects, residential developers, hotel operators and retailers in designing, financing and operating the project. They include: Cesar Pelli and Associates as the lead architect on the 4,000-room hotel and casino; Rafael Vinoly Architects designing a 1,000-unit residential/hotel tower at Project CityCenter; James KM Cheng designing a 100-unit residential tower as well as Kohn Pedersen Fox Associates and Tihany Design  who are designing the non-gaming hotels.

Project CityCenter is also being designed with green technologies including garden roofs to regulate building temperatures, a water reclamation system and an on-site power plant. MGM MIRAGE hopes to achieve a Leadership in Energy and Envioronmental Design (LEED) Green Building Rating System certification.

According to Robert Baldwin, President and CEO of Mirage Resorts, Inc. MGM MIRAGE has already reached a $100 million agreement with Siemens to design and build a central energy plant to help power and cool as well as delivering other building and communications technologies to improve operational efficiencies and conservation.

"Designing Project CityCenter with sustainable elements reinforces its permanence and creates a healthier environment for our future tenants and guests, as well as for the 12,000 people who will ultimately work at Project CityCenter," said Baldwin during the shareholders meeting.

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It was also intimated that the groundswell of interest for this project could very result in the creation of a sister property in Atlantic City. Terry Lanni, Chairman and Chief Executive Officer of MGM MIRAGE said the company is likely to build another iteration of Project CityCenter on 55 acres of empty land it owns next to the Borgata Casino Hotel and Spa. Located in the marina district of Atlantic City, Borgata is a 50-50 joint venture with Boyd Gaming.  Borgata is commonly credited as the first Las Vegas casino in New Jersey.

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