Monday, March 17, 1997 | 11:59 a.m.
Buoyed by sustained overflow business, New York-New York executives are planning a massive expansion of the Strip's newest resort.
The project reportedly includes a 50 percent increase in room inventory, more casino space and additional themed restaurants. The property has drawn an estimated million visitors a week since opening Jan. 3.
A joint venture of MGM Grand Inc. and Primadonna Resorts Inc., New York-New York sits on a 20-acre site at the Strip and Tropicana Avenue. The area already boasts about 24,000 hotel rooms, including 2,034 at the resort that replicates the Manhattan skyline.
The expansion is planned for a thin strip of land nestled between New York-New York and Monte Carlo, the Mirage Resorts-Circus Circus Enterprises venture that opened last year. The two-acre site currently houses a La Quinta Inn and Carrow's Restaurant.
Executives from New York-New York's parent companies negotiated the purchase of the land from La Quinta and will discuss options with Victoria Partners, which has a leasehold interest in the restaurant. Terms weren't disclosed, but it's believed the price for the land was around $20 million.
Victoria Partners, the Mirage Resorts-Circus Circus entity that operates Monte Carlo, paid about $6.3 million for the lease that reportedly runs through 2008 and includes an option for a five-year extension. Barring changes in the lease agreement, Victoria would become a tenant of New York-New York through that period.
New York-New York officials declined to comment on the plan, and executives at MGM and Primadonna are keeping details about the expansion under wraps.
They're also being close-mouthed about New York-New York's performance, hinting that a financial report issued after the resort's first 24 days of operation was a one-time event sparked by Wall Street's incessant clamoring for information.
The next official release on the new resort's operations will be included in first-quarter earnings reports. MGM expects to announce its results during the third week of April, and Primadonna's will come out about the same time.
But the early report far exceeded Wall Street analysts' predictions. It said New York-New York registered $19.3 million in revenue -- $12.8 million from gaming -- and cash flow of $9.5 million in just over three weeks' of operation.
At that rate, the resort would record annual cash flow -- a key factor in the valuation of a gaming operation -- of about $145 million, sharply higher than the $80 million to $100 million analysts had estimated before the opening.
Because of an accounting lag, the early release reflected only minimum lease payments from restaurant and retail operations. Since actual payments are tied to volume, final results are expected to be even higher.
In addition, room rates have climbed because of overwhelming demand. Prior to opening, New York-New York pre-booked blocks of rooms with tour-and-travel operators to ensure full capacity. But with the summer vacation season approaching, higher-paying independent travelers are flooding the hotel's switchboard with reservation requests, driving prices higher.
Finally, minimum-bet limits on table games are edging up, especially on weekends.
All these factors are causing analysts to raise their cash-flow projections for the property in an attempt to predict future stock prices for its parent companies, MGM Grand and Primadonna.
Many have issued recent "buy" recommendations on those two stocks, even though the analysts remain skeptical about the outlook for gaming industry stocks as a whole. Until the first-quarter results are released, though, they're still somewhat in the dark.
Nevertheless, Las Vegas-based gaming analyst Dave Ehlers, a SUN columnist and chairman of Las Vegas Investment Advisors, says New York-New York may produce the highest cash-flow margins ever generated by a Nevada resort.
If it does, he says in a detailed analytical report, Primadonna's stock has tremendous upside potential from New York-New York's success.
archive
