Murren: ‘The Mirage is not on the market’

MGM Resorts International did not announce a real estate investment trust structure for the company Tuesday and top executive Jim Murren shot down reports that The Mirage was about to be sold.

But a “seminal internal transformation” of the casino giant is underway that Murren said will increase annual cash flow by $300 million through various corporate initiatives.

During a conference call with analysts to discuss MGM’s second quarter earnings, Murren, MGM’s chairman and CEO, unveiled plans for a “Profit Growth Plan” initiative. The efforts have been under way for 10 months and Murren said the focus is now on a “sub-set of high-value initiatives.”

In addition to corporate and property operations, MGM is looking at maximizing the value of its real estate. The company operates 10 resorts on the Strip, regional properties in Detroit and Mississippi, and is building hotel-casino projects in Massachusetts and Maryland. MGM Resorts has been evaluating some type of REIT structure for its properties.

“We thoroughly plan to vet all opportunities and narrow the field as to what is the best fit to maximize short term, medium and long term benefit to our shareholders,” Murren said. “This plan will redefine the way we operate in critical areas and position MGM Resorts for future growth for the benefit of our company as a whole and our shareholders.”

Murren said the company plans to “announce its real estate plans” by the end of the year and meet the cash flow projections by the end of 2017.

“We’re not opposed to the structure,” Murren said of a REIT potential.

He also told analysts The Mirage was “not on the market.” Murren said he and Chief Financial Officer Dan D’Arrigo will often “meet with interested buyers” for the company’s resorts, “as a fiduciary responsibility.” However, reports were wrong that the iconic Strip resort — built by Steve Wynn in 1989— was heading to a new owner.

“It’s an outstanding property we covet and respect dearly,” he said. “We don’t put a ‘for sale’ sign on any property.”

Results from the quarter that ended June 30 were far from anyone’s mind after MGM announced its growth initiative.

“To us, the big news of the earnings release was MGM’s new profit growth plan,” J.P. Morgan gaming analyst Joe Greff told investors.

Shares of MGM Resorts, traded on the New York Stock Exchange, closed at $21.75, up $1.90 or 9.57 percent, primarily on news of the developing profits plan. The closing price was MGM’s largest figure in three months.

As for second-quarter earnings, a nearly 33 percent decline in revenue from its Macau casino drove down results.

MGM said its net income for the quarter that ended June 30 was $97.5 million, a decline of 11 percent compared with $110 million in the same quarter a year ago. Earnings per share of 17 cents compared with 22 cents per share a year ago. Still, MGM Resorts beat Bloomberg analyst consensus projections of 11 cents per share.

Total revenue for MGM Resorts was down 7.6 percent in the quarter, to $2.3 billion. However, if results from MGM Macau are excluded, total revenue from MGM’s Strip and regional properties grew 4 percent.

“The second quarter results prove the operating leverage inherent in the MGM model,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors.

MGM Macau revenue in the quarter was $556.9 million, compared with $827.9 million a year ago. Macau’s gaming market as a whole has experienced 14 straight monthly gaming revenue declines and is down 37 percent for the year.

The company announced an interim dividend from MGM Macau of $77 million. MGM Resorts, which owns 51 percent of MGM Macau, will receive $39 million from the dividend.

MGM Resorts in the second quarter closed the sales of both Railroad Pass and Gold Strike Jean, and announced an agreement to sell Circus Circus Reno and its 50 percent interest in the Silver Legacy Reno.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

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