CityCenter continues to dominate any discussion surrounding MGM Resorts International.
It's a subject company officials won't shy away from -- good and the bad.
With the 67-acre Strip development nearing its anniversary in December, MGM Resorts leadership believes the project is turning the corner.
MGM Resorts Chairman and Chief Executive Officer Jim Murren said operational changes and improvements, OK'd by the joint venture board that owns the development, have begun to take hold and boost results.
On Wednesday, MGM Resorts said CityCenter had net revenues of $413 million during the third quarter and cash flow of $52.4 million, its first positive quarter after losing money during its first six months.
"It was a challenge to open this large of an enterprise, but it's now profitable and growing," Murren said Wednesday as the casino operator officially released quarterly earnings. "It's been a journey."
The company, which operates 10 hotel-casinos on the Strip, including Aria, CityCenter's centerpiece resort, pre-announced earnings in October when it began debt-reduction efforts. MGM Resorts raised nearly $1 billion to shore up its balance sheet.
MGM Resorts said it had a third-quarter net loss of $318 million, or 72 cents a share, compared with a loss of $750.4 million, or $1.70 a share, a year earlier. Analysts polled by Thomson Reuters predicted MGM Resorts would have a quarterly loss of 23 cents a share.
MGM said results from the latest three-month period included impairment charges of $357 million. The charges included $182 million related to the company's investment in CityCenter and $46 million related to CityCenter's residential real estate inventory.
Over the past nine months, MGM Resorts has taken some $600 million in noncash impairment charges related to CityCenter, which had a construction budget of $8.5 billion. In August, CityCenter's equity value was written down to $2.65 billion.
Third-quarter net revenue was $1.56 billion. But third-quarter net revenue excluding reimbursed costs, mainly related to the company's management of CityCenter, was $1.47 billion, a 3 percent decrease from 2009.
The attention, however, is all toward CityCenter, which has nongaming hotels, a hotel-casino, high-rise residential, and a retail, dining and entertainment complex.
Aria, the development's centerpiece 4,004-room hotel-casino, had net revenues of $219 million and cash flow of $41 million during the third quarter. Aria's hotel room occupancy was 82 percent.
Murren said Aria and other aspects of CityCenter were helped by operational improvements, agreed upon this year by MGM Resorts officials and representatives of joint venture partner Dubai World.
"You're obligated, as a board, to look at every option to make an enterprise viable," Murren said. " More importantly, those actions worked. CityCenter and Aria made money in the third quarter."
Casino results at Aria, helped by a better-than-average hold percentage on the amount gamblers wagered, was the primary reason for the hotel-casino's profitability.
Two other CityCenter ventures lost money. Vdara, a hotel and condominium development, lost $600,000, while the Mandarin Oriental lost $3.6 million. Both figures, however, were improvements over prior quarters.
Murren said Aria will drive anywhere from 80 percent to 90 percent of CityCenter's results.
Residential sales at CityCenter have slowed. The project originally had 2,400 condominiums, but only 419 sales to date, which contributed about $361 million in revenue to the development.
About 600 condominiums at the 1,495-room Vdara were taken off the market and placed into the hotel inventory.
"We have several options for the joint venture board to consider what to do with the remaining inventory," Murren said.
During the third quarter, MGM Resorts also took a $128 million impairment charge related to its 50 percent ownership in the Borgata hotel-casino in Atlantic City, which the company said it had sold for more than $250 million.
The company undertook efforts in the past few weeks to restructure a portion of its $13 billion in long-term debt, including selling new bonds and raising $511 million in a stock sale.
"We have made significant progress on our financial position this year and have deployed several programs to better position our portfolio of resorts to benefit from a broader economic recovery going forward," Murren said.
He said the next step was restructuring the $1.8 billion bank loan covering CityCenter in order to extend its maturity beyond its current date in mid-2011.
The company said its MGM Grand Macau property, which owns and operates in a 50-50 joint venture, reported its best quarter ever, earning operating income of $61 million.
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871.