Dubai World invests again

Dubai World is entering a second joint venture on the Strip with gaming giant MGM Mirage.

Dubai World subsidiary Istithmar Hotels FZE, MGM Mirage and Kerzner International Holdings entered a definitive agreement for a joint venture to develop 40 acres on the southwest corner of the Strip and Sahara Avenue, the companies announced Tuesday.

The yet-to-be named multibillion-dollar resort is scheduled to begin construction in early 2009, and it is expected to open in 2012.

MGM Mirage announced plans in June to develop the land in a 50-50 partnership with Kerzner International Holdings.

The new agreement calls for Istithmar and Kerzner to contribute a combined $600 million cash for a 25 percent equity investment each.

The Las Vegas-based casino giant will contribute 40 acres valued at $20 million per acre, for a 50 percent share of the project. The gaming company will also receive $200 million cash distribution from the partnership.

The Bahamas-based Kerzner will lead the project's planning and design.

MGM Mirage Chief Financial Officer Dan D'Arrigo said the group will take its $1.2 billion in equity to finance the remaining construction cost through third parties sometime in late 2008.

"We have enough time with this particular project to focus our attention in the short term on development planning," D'Arrigo said. "Once we can pencil paper on the cost side we will then have a reasonable approach to take out to the market."

Some of the 40 acres set aside for the project were part of a $575 million land purchase in April by MGM Mirage from Gordon Gaming Corp., former owners of the Sahara, and Concord Wilshire Partners.

This is Dubai World's second investment with MGM Mirage.

In August, the gaming company's board of directors approved Dubai World's $2.7 billion investment for a 50 percent stake in CityCenter, a $7.4 billion mixed-use project under construction on 76 acres on the center Strip.

Dubai World, the investment arm for the Persian Gulf state Dubai, also plans to invest another $2.4 billion to acquire approximately 28.4 million shares of MGM Mirage.

If successful, the investment group would own 9.5 percent of the gaming company.

D'Arrigo said Dubai World is a long-term strategic partner as opposed to a private equity investor.

"They have much larger aspirations, as do we, on a more global platform than just trying to see what a couple years' return is on a financial perspective," he said. "We are looking at these projects from a long-term sustainability perspective."

MGM Mirage shares rose $1.32, or 1.6 percent, Tuesday to close at $83.92 on the New York Stock Exchange.