Tuesday, Oct. 13, 2009 | 2 a.m.
In another economy, CityCenter might have opened with the kind of pageantry befitting royalty.
Instead, the $8.5 billion resort complex — billed as a redefinition of the resort experience for future generations of tourists — will open in December in a manner more appropriate for troubled times.
Managing partner MGM Mirage isn’t revealing its opening strategy for CityCenter, but it’s clear that the plan, finalized after much debate, will be a toned-down version of what could have been.
“We struggled to find the right tone,” MGM Mirage spokesman Alan Feldman said. “To do something grandiose doesn’t feel right with the economy.”
How to be extravagant without seeming wasteful?
One scenario the company rejected was put forth by a company that helped create the opening ceremony for the Beijing Olympics, for example. Not that the festivities will be solemn. There will be fireworks, thousands of invited guests, hors d’oeuvres and champagne. But the real money, Feldman said, will go into marketing rather than an over-the-top party.
Thanks to a tourism economy built around giant, expensive buildings, Las Vegas — which grabbed headlines earlier this year for being No. 1 in home foreclosures — also has more distressed assets as a percentage of total property investment volume than any city in the nation. That’s according to Real Capital Analytics, a New York firm that tracks troubled assets, including those with loans in default, projects that have sought bankruptcy protection or buildings foreclosed on by lenders.
Through September, Las Vegas had 234 troubled assets valued at $17.3 billion, up from August’s 168 troubled assets valued at $9.2 billion. Already included in previous reports was Station Casinos’ bankruptcy in July (Real Capital values those assets at $7.5 billion) and Fontainebleau Las Vegas’ bankruptcy in June (valued at $760 million, roughly in line with a large chunk of its financing).
The monthly pace of assets falling into default, foreclosure or bankruptcy fell sharply in August — to just under $9 billion from $15.8 billion in July, Real Capital said. But resolution has come slowly, with only 15 percent of sales associated with distressed properties. That’s “far below any point of equilibrium that investors may hope to see,” the company said in its October report. New to the list: Planet Hollywood, which defaulted on its mortgage loan in August and is valued by Real Capital at $1.3 billion.
It’s been more than a year since a federal judge in Nevada sided with a group of shareholders who sued Archon Corp. — a small, publicly traded company controlled by Paul Lowden, former owner of the Santa Fe (now Santa Fe Station) — for undervaluing 4.4 million shares of preferred stock by more than $7 million when the company redeemed the shares in 2007.
In the lawsuit, shareholders said Archon owed dividends of $8.69 per share of stock, with dividends compounding on the original principal, rather than the $5.24 per share Archon paid at the time.
The judge ordered the parties into mediation to determine damages according to the company’s latest quarterly report in August.
In the report, Archon — which has sued the attorneys who drew up the preferred stock redemption documents — said it intends to appeal the decision if mediation is unsuccessful. Company representatives couldn’t be reached for comment.
In June a group of independent shareholders voted against issuing 250,000 additional stock options to company executives. Lowden, who owns more than 60 percent of the company, voted his shares for the plan. Executives had 741,500 exercisable options as of June 30 with an average exercise price of $28.09. Archon stock now trades at about $14 per share, down from about $29 a year ago.
Archon, which reported a second-quarter profit of $1.2 million, has pocketed millions in deposits to secure its major asset, the 27-acre site of the former Wet ’n Wild water park south of the Sahara.