美高梅國際酒店集團 (MGM) 2006 Q1 法說會逐字稿

Good morning, and welcome to the MGM MIRAGE first quarter conference call.

Joining the call today from the Company are Terry Lanni, Chairman and Chief Executive Officer, MGM MIRAGE, Jim Murren, President, CFO and Treasurer, MGM MIRAGE, Bobby Baldwin, President and Chief Executive Officer, Mirage Resorts, Gary Jacobs, EVP, General Counsel and Secretary, MGM MIRAGE, and Gamal Aziz, President and Chief Operating Officer, MGM GRAND Las Vegas.

Participants are in a listen-only mode.

After the Company's remarks, there will be a question-and-answer session. [OPERATOR INSTRUCTIONS] Now I would like to turn the call over to Mr. Jim Murren.

Well, thank you, Crystal.

We are excited about being here with you all today to talk about our first quarter and our outlook for the rest 2006 and beyond.

As you know, as is our case, we are broadcasting this call on our website, mgm-mirage.com, as well as on companyboardroom.com.

A replay of this call will be available on our website.

We filed an 8-K today with all the press release information, as well as all the supplemental information we like to give to you to further detail our results.

I'm obligated to read the following safe harbor disclosure as I do every quarter.

Information that we present on the call may contain forward-looking statements as defined by the SEC.

Such forward-looking statements are protected by the safe harbor amendments of the Private Securities Litigation Reform Act of 1995.

You can identify such statements by the use of the words "we expect," "we anticipate," and similar phrases.

These forward-looking statements may include information about future earnings, expected business developments, anticipated capital expenditures, future financing alternatives or other statements made about future periods.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from estimates.

Listeners should also refer to our disclosures about risks and uncertainties made in our filings with the SEC.

That's the best I've done on that one, Terry, I think!

You're getting very, very good.

I'm getting good at reading.

With that, I'm going to turn it over to Terry Lanni to talk about our overall results.

Thank you, Jim.

Good morning, ladies and gentlemen.

You notice they Gamal Aziz's name was mentioned as he was introduced as the President of MGM GRAND Las Vegas.

Gamal and his team have done a spectacular job of re-energizing that resort over the past several years and the resort's numbers have certainly affirmed that particular work.

He's here on behalf of John Redmond who could not be with us this morning because of a commitment that he just couldn't get out of.

Earlier today we reported diluted earnings per share of $0.49 for the first quarter and that's an increase of 29% from the $0.38 per share we earned in the first quarter of 2005, and a new record for quarterly earnings.

In fact, it's a record for any quarter in the Company's histories so e are very pleased with those results.

Overall this was a very satisfying performance for us.

Many market observers were wondering if we could continue our rather robust earnings growth and we did as a result of strong operating results at all of our major properties.

Our operating results were also once again positively impacted by the acquisition of Mandalay Resort Group, including our strategy of increasing occupancy at the Mandalay resorts.

And for the quarter, four of those properties had significant increase in occupancy and we are pleased with that and one was pretty much equal to where it was before.

That was Circus Circus Las Vegas.

A very strong convention and events calendar in maintaining our operating margins through very strong financial discipline by our people.

On the development side of life, I want to talk to you a little bit about that.

Detroit Casino is on schedule and on budget for a late '07 opening.

Macau remains on schedule and on budget for fourth quarter opening in the same year of 2007 and we are pleased with developments in both of those areas.

Singapore, I think you are aware that there were 11 bidders for the marina site.

It's down to four of us now, and Minister Lim, the Senior Minister of the government of the Republic of Singapore, indicated that they thought a decision could be rendered as early as the end of May, certainly no later than June of this year.

And we're hopeful there, and we have a strong position and we feel very confident about that.

But it's obviously not our determination.

Foxwoods was announced yesterday.

We're very excited and very committed to this partnership with the Mashantucket Pequot tribal nation and there are several aspects to the arrangement.

The most immediate and concrete is our assistance with the development of an expansion of Foxwoods' already highly successful casino in Ledger, Connecticut.

That will carry our brand name of MGM Grand and there are a series of fees for these different activities that we're going to be performing on behalf of the Mashantucket's Pequots.

In fact, we have taken this as an opportunity, we think, for similar arrangements with other entities, and have taken one of our senior executives, Scott Snowe, and made Scott the president of a new company that will be a division dealing with these types of opportunities and investments and potential opportunities for the Company.

So we're very excited about that as an additional avenue of business for us.

We are obviously seeking other opportunities related to future development.

In combining the expertise that we have and in this case with a very powerful name of the Mashantucket Pequots, a very successful organization.

We look at the others, we are going to talk about some details in our other projects, the Beau Rivage, the rebuilding of that.

Bobby will cover that, along with Project CityCenter and more details on MGM Grand Detroit from Gamal.

With that, I would now like to turn the meeting back to Jim with additional comments on our financial results.

Thank you, Terry.

As we said, we reported GAAP earnings per share in the quarter of $0.49.

We also incurred in the quarter $0.07 per share of items that we would have added back under our previous presentation.

So obviously, we easily exceeded our guidance for the quarter, pretty significantly.

Our guidance was $0.50 and you can do the math.

Slot revenues were up in the quarter, versus 2005.

We had particularly strong performances at MGM GRAND.

If that's why you're here, Gamal, you're going to talk about that a little bit, and at Treasure Island, and all the properties did well, but those are highlights.

Table game volumes and revenues were also up.

Table game revenue was up 4% and our hold percentage was right in the middle of our range for both periods.

From a standpoint of cash flows, and on hotel revenues, hotel revenue was up 7% in the quarter on a same-store basis.

We had very strong occupancy, good increases in rates and we had more room nights available and that's a good combination.

On a same-store basis, strip REVPAR was up 3% against a really tough comp.

We were up 15% year-over-year in the 2005 quarter.

We had 60,000 more hotel room nights available in the current quarter, and that, of course, is the benefit we had in revenues there as well.

We had a particularly good activity at the MGM GRAND Las Vegas and I'm sure we can talk about that as well in terms of the room activity there.

On a pro forma basis, strip REVPAR was also up 3%.

Moving to EBITDA, of course, EBITDA is -- as we are defining it here, same-store EBITDA was up.

It was $396 million, same-store, of course, is the legacy MGM properties, versus the year ago period to give you a good comparison on that.

Obviously we've added the Mandalay properties on top of that and other presentations in the release.

Property transactions and if you adjust for that, property transactions and preopening, obviously we did even better, much better in the current quarter and our same-store property EBITDA would have increased 4% on an apples-to-apples basis.

Also on a same-store basis, if you were to look at it adjusting for the items we just talked about, our margins were 36%, very high, and consistent with last year.

As relates to Mandalay, we will get into this more, I'm sure in the Q&A.

We're very proud of the integration of that fine company into MGM MIRAGE.

Those properties performed extremely well in the quarter, combined cash flows or EBITDA, they were up 8% on the Las Vegas strip, after adjusting for preopening and property transactions.

We promised to give you a cost savings revenue enhancement; in other words, like a synergy update every quarter.

We have implemented so for on an annualized basis $145 million of synergies.

The last number we gave you was 135.

So I like the trend.

We continue to find opportunity there.

And we're working on a lot of initiatives, including many purchasing and information technology initiatives, which we believe will make that number continue to grow.

So that's it for me for right now and I will turn it over to Bobby to talk more about Mirage resorts.

Thank you, Jim, and good morning, everyone.

I will report on the first quarter results for Mirage Resorts and beginning with Bellagio.

Bellagio's first quarter EBITDA was $110 million, after adjusting for the writeoff expense of $11 million relating to the demolition of the tram between Monte Carlo and Bellagio, and, of course, in preparation for CityCenter.

This was the single best quarter in Bellagio's history, up 4% on an apples-to-apples basis versus last year.

Hotel revenue increased $4 million or about 5%, and -- on a 5% increase in REVPAR.

In March 2006, Bellagio hotel revenue averaged $1 million per day, setting an all-time monthly record.

Bellagio was successful in continuing to reduce its operating expenses.

Payroll expense decreased by $4 million as the spa tower normalized its operation this year.

Total expenses decreased by 2%, compared to the first quarter of 2005, resulting in 120 basis point improvement in profit margin at the Bellagio.

For The Mirage Casino Hotel here in Las Vegas, the recent investments at The Mirage are having a very strong impact on its operating results.

The Mirage experienced its best quarter ever since the opening of Bellagio.

EBITDA for the first quarter was $66 million compared to $53 million for the first quarter of last year, resulting in an EBITDA margin of 37% or up 380 basis points versus last year.

Gaming revenue increased 16.5% due to a strong Chinese New Year's and Super Bowl and, of course, it benefited from the addition of the new high limit rooms, both in slots and table games at The Mirage.

And non-gaming revenues increased 5%.

The Mirage experienced its highest quarterly hotel revenue ever on a 3% increase in REVPAR.

The new food and beverage outlets at The Mirage are performing very well.

Overall food and beverage revenue is up 14% compared to last year.

Revenue from the remodeled Kokomo's increased by 23% in the first quarter.

FIN, our new contemporary Chinese outlet, has been a big hit with the high-end customers.

The new Stack restaurant has proven to be as popular as its sister restaurant Fix at Bellagio.

Still to come is Japane, a gourmet combination of Japanese and European cuisine, which is scheduled to open in August.

Finally, Jeff's, the new night club at The Mirage, has quickly become one of the top clubs in the Las Vegas Strip.

Also Revolution, a Beatles CDS, or Cirque du Soleil Ultra Lounge will be opening in the fourth quarter of this year.

Ticket sales have begun for "Love, " the highly anticipated new Cirque du Soleil and Beatles collaboration.

Initial ticket sales are very strong, and the show will open to the public on June 2nd of this year.

The combination of the new show and other high-end amenities will help to propel The Mirage into the must-see status, must-see status on the Las Vegas Strip and we are excited about its initial results from all of these improvements.

As it relates to New York, New York and Treasure Island, just a couple of notes.

New York, New York had its highest EBITDA ever at $39.2 million.

The ADR was also an all-time record at 146 compared to 140 in last year.

TI had its best quarterly EBITDA in over ten years at $31.6 million.

As it relates to Beau Rivage, Beau Rivage has made tremendous progress during the first quarter of this year.

It remains on track for its August 29th re-opening.

The interior of the facility is being transformed daily from a construction site into a beautifully redesigned luxury resort.

The property has an online work force now, or on site work force of 1,700 men and women.

Tower furniture and fixture installation began April 17th.

Slot machine delivery is scheduled for mid-May.

The new food and beverage outlets have taken shape and are developing distinct personalities.

The gourmet dining outlets will have all new concepts and designs at Beau Rivage.

Room reservations will open soon, on May 3rd.

Beau Rivage hotel sales have been booking convention groups, of course, since January.

The market mix is primarily comprised of Mississippi, Alabama, Louisiana, and all indications of the market is very strong in that region and that the customers are awaiting the reopening of this wonderful facility.

On April 17th, Beau Rivage successfully opened its employment center, processing over 2,000 applications in the first four days of operations.

This demonstrates the community response is extremely good, and that Beau Rivage continues to be the employer of choice on the Gulf Coast.

The Biloxi market has remained steady throughout the first quarter, with reported gross gaming revenues of over $186 million, which is 54% of the prior year's results, in spite of the fact that only three casinos were open versus 12 casinos in 2005.

CityCenter, schematic design is complete for the Caesar Pelly hotel casino.

And of course, this design continues for all the buildings within CityCenter.

Several renowned interior designers have now joined the team for CityCenter, including Adam Cahani, BBGM out of New York, and David Rockwell out of New York.

The interior designers will complement the contemporary building themes established by the design architects.

The Boardwalk hotel and casino, as you already know, closed on January 9th and the demolition of this building is scheduled for May 9th.

What you may not know is that 90% of the demolition for this Boardwalk Casino is being recycled as part of our lead or leadership in energy and environment efforts for CityCenter.

Excavation work for the Caesar Pelly hotel casino has already begun and foundation work will begin in May.

The new Bellagio employee parking garage, which is adjacent to Frank Sinatra Drive, is progressing on schedule with seven floors complete of the ten floors.

Bellagio employees will begin parking in this garage in mid-July, of course, in preparation to clear the entire CityCenter site.

Site work has begun for the construction of CityCenter's residential center.

The sales center will be located on Las Vegas Boulevard, between New York, New York and Monte Carlo.

Construction groundbreaking is scheduled for the first week of May, and this facility is expected to open to the public in the fourth quarter of this year.

Design development has begun for the residential preview centers to also be located in the lobbies of Bellagio and The Mirage.

These discovery centers will build interest and excitement and connect our resort guests with the residential sales opportunities at CityCenter.

We continue to receive multiple calls and e-mails of interest each week and expect to begin taking sales reservations in the third quarter of this year.

And that concludes my report, and I will turn it over to my colleague, Gamal Aziz.

Good morning.

Thank you, Bobby.

I would like to begin with the MGM GRAND.

In Q1, MGM GRAND had another great quarter, despite the fact that the whole percentage was down approximately 260 basis points from prior year.

EBITDA was $80.8 million, versus $85.3 million in Q1 prior year.

The impact of the lower hold percentage was approximately $8 million in EBITDA.

The property continued to see strong momentum across the board, hosting record room revenue, ADR, and food and beverage revenue, and near record volumes in slot and table gain.

Room revenue is up approximately $11 million or 20% from prior year, driven by higher ADR and occupancy.

The impressive improvement in occupancy and rate was achieved even though there was approximately 60,000 more available rooms in Q1 this year versus Q1 prior year, as a result of the west wing tower being out of service during the first quarter of 2005.

A quick update on The Signature at the MGM GRAND, formerly The Residences.

Tower One and Two are sold out and available for occupancy, May and December, respectively, of this year.

Tower Three is 80% sold and is expected to be completed in December of 2007.

The average sales price per square foot for Tower Three continues to grow, reaching $1,057 per square foot, compared to $1,033 per square foot in our last earnings release.

With respect to Tower One, our share of the joint venture gain is expected to approximate $36.4 million in Q2 and $18 million in Q3.

With regards to the convention market at MGM GRAND, the convention demand remains strong with ADR up approximately 6% in Q1 and expected to be up approximately 11 to 12% in Q2.

Mandalay Bay.

Q1 was the highest EBITDA quarter in the history of the property with EBITDA of $78.2 million versus $73 million in Q1 prior year.

The catalyst for the impressive improvement was an increase in occupancy from 85.7% to 91.2%.

The increase in occupancy of approximately 24,000 room nights led to record revenue in rooms and food and beverage.

Additionally, both table games and slots realized double digit growth in wins.

With regards to the convention market at Mandalay Bay, the convention demand also remains strong with ADR up 1% and expected to be up approximately 2 to 3% in Q2.

In April, we opened the first phase of the full remodel which included increasing the number of cabanas by 30%, as well as refurbishing the existing cabanas and improvements to the Mauna Lea Beach Club.

The initial response has been exceptional and the performance has exceeded our expectations.

Phase II of the pool project will begin in November and will consist of a bungalow and villa complex which will include poolside gaming, rentable sun villas and bungalows, a new restaurant bar, new retail and new entrance and a larger beach area.

At Luxor, Luxor had an outstanding record quarter with EBITDA of $43.3 million, versus $38.5 million in Q1 prior year.

The management team at Luxor did a great job driving occupancy, booking 44,000 more room nights while maintaining a flat ADR, leading to the highest room revenue quarter in the history of the property.

Our previously stated strategy for Mandalay Bay, Luxor and Excalibur of driving occupancy and focusing on getting the proper product mix on the slot floor has been successful.

To date, we have replaced over 2,100 slot machines at the three properties for the first quarter.

Slot revenue growth between the three properties increased 24%, with Luxor and Excalibur growing by 29% and Mandalay Bay by 16%.

And at the Excalibur, we also achieved its highest EBITDA quarter ever with EBITDA of $35.8 million, up approximately 16% over prior year.

MGM Grand Detroit.

In Q1, Detroit continued its strong performance with EBITDA of $37.1 million versus $38.9 million in Q1, prior year.

The current quarter EBITDA was negatively impacted in the amount of $2.4 million by the increased gaming tax of 200 basis points that was effective January 1, 2006.

Construction on the permanent MGM Grand Detroit continues to be on time and on budget with expected opening of late Q4 '07.

And with that, I will turn it over to Jim Murren for additional comments.

Well, thank you, Gamal.

Let's get into the quarter a little bit more and then we'll talk about the outlook.

Interest expense, gross interest in the quarter was $214 million.

Cap interest was 17 to give you a net interest of 197.

As it relates to preopening and start-up, that was primarily related to project CityCenter as Bobby talked about it, MGM Grand Macau, and the signature MGM GRAND Las Vegas.

The property transaction number of 24 million, most of that was the tram that Bobby talked about.

I think that's the second time we have written off this tram isn't it?

We are getting good at writing off the tram and that will be the last.

So that was a major portion of that.

And obviously, that was related to CityCenter as well.

On the financial side, we bought back 1 million shares in the quarter for $38 million.

Our remaining authorization is 13.5 million shares.

On a capital side, we spent $380 million of capital at the existing resorts and also on development initiatives.

Excluding Beau Rivage, the investment amount was $260 million.

That's lower than the guidance that we gave you, approximately 350, 350 million, as we spent less on CityCenter than our forecast and we'll catch up on that later this year. 170 million of the CapEx was on development projects, MGM Grand Detroit, CityCenter and on MGM Grand Macau.

The remaining 90 million of the capital spend in the quarter was on the existing resorts.

I'd look at the theater at The Mirage as a good example, the restaurants at The Mirage and some good spending, as Gamal talked about, at Mandalay to enhance that property.

Burt really across the board, capital was lower than we had forecasted and we'll catch up on that and that was primarily the Deltawood CityCenter.

From the stand point of our balance sheet, at the end of the quarter, we had $1.8 billion available under our credit facility but right after that, we issued $750 million of fixed rate debt.

That's actually two traunches.

We did a 7 and a 10-year, both under 7%.

We hit the market well on that.

So now that you take that into account, we actually have about $2.6 billion available under our credit facility and our fix-to-floating rate is 65% fixed, 35% floating.

I would like to talk a little bit about the outlook before we get to your questions.

We gave guidance in our release of approximately $0.50 a share on a GAAP basis.

That includes stock option expense of around $0.04 a share in the quarter.

It also includes approximately -- well, let's say $0.06 to $0.08 of preopening expenses and property transactions.

It further includes approximately $0.08 a share related to our share of the estimated profit, net of tax, of Tower One that Gamal talked about at the MGM GRAND.

We expect that cash flow will increase nicely in the quarter, up in the mid to high single digit range.

In other words, accelerating off the first quarter results on a pro forma basis, including Mandalay for both periods and excluding Beau Rivage.

Obviously, it's closed.

Other income statements, forecast, we expect corporate expense to be in the $40 million range and that includes the stock option expense related to corporate employees.

Interest expense, we think will be slightly higher than the first quarter.

On a gross basis, gross interest, we are looking for between 225 to 230 million.

Cap interest would be between 20 and 25 million, we believe.

Depreciation in our forecast is in the 160 to $165 million range, and our tax rate, we estimate to be in the quarter of 36%.

As it relates to other guidance, we expect to spend in the quarter, on CapEx, around $350 million.

That, again, excludes Beau Rivage as the same presentation we gave to you last time and our full year guidance is still the same that we gave you last year in the $1.3 billion range, also excluding Beau Rivage.

So with that, we have exactly a half hour for questions and I'll turn it over to Crystal so we can get right to it.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS] We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Lawrence Klatzkin with Jefferies.

Hello, guys.

Good results.

A couple of questions here.

One, Aqueduct, any timing on that?

No word on lower taxes possibly.

Well, Gary Jacobs is our specialist on New York Racing Association.

And before Gary gets that, I have a question for you, Larry.

How are you always first?

How do you do that?

You have to teach me how you get there.

I'm dating all the operators at all these services! [ LAUGHTER ]

All right.

Nice.

All right, this is Gary.

We are dealing with New York.

We have all the papers.

It's all in the hands of the lottery.

Everything that we are supposed to have done, we have done.

We are prepared to go forward and we are waiting for the many approvals that need to come out of New York.

As for timing, it's New York, so I can't predict.

Okay.

Okay.

But there's no word they are trying to lower taxes?

No.

They don't support that.

They don't lower taxes in New York.

All right.

No, no.

Some other operators are claiming it will happen.

The Foxwoods deal.

What kind of value are we talking about for MGM Connecticut, MGM Grand Connecticut, what do you kind of get out of it and the $200 million investing, what do you get for that?

Well, I will take a stab at that, Larry.

The arrangement we have with the tribe is an excellent one for both parties, we believe.

We are going to provide consulting services to the tribe in the areas of development, management, marketing operations and for that, we're going to receive fees.

We haven't disclosed those fees yet and we will do so in due course.

We are excited about working with them and obviously having a flag in Connecticut and MGM Grand will be of great value to us and we believe to them from a cross marketing opportunity.

So on one level, we will be receiving fees for helping them build out further this destination resort in Connecticut.

On the second level, we're entering into a joint venture.

And that joint venture's job is to go out and look for deals that could be high return deals that, perhaps are too small for MGM MIRAGE to look at, since we're involved in a lot of deal flow and we have a lot to go, and a lot to do right now and perhaps are not of the type that Foxwoods currently can tackle, both from a management or financial perspective.

And so that joint venture strengthens and we'll go out and look at deals.

To the extent that we find deals that we like, MGM MIRAGE has agreed to invest into the joint venture up to $200 million.

So you haven't put 200 million in yet?

No, we haven't funded it at all.

That will come in due course and only if we find opportunities that we mutually believe to be acceptable and excellent.

And frankly, there are a lot out there, in a consolidated industry, there may be new casinos, there may be existing casinos, there may be things overseas or here in the U.S. that may be Native American opportunities where their relationships are extraordinarily strong.

It may be opportunities that we have looked at and would liked to have done but we don't feel like we have the return on effort in terms of the personnel available to do it.

And we, as Terry mentioned, we have deployed a very senior executive that has the skill set to maximize these opportunities.

So we like the arrangement.

We signed an MOA with them.

We have been working with the regulators.

Everyone seems to be very excited about this opportunity, and we'll be moving forward.

Will you be involved with their Mississippi casino or is that totally separate?

It will be determined.

So you might be able to help them with -- with development and management of the $400 million Biloxi property?

We might do anything.

Okay.

As far as --

This will be the last question, Larry.

You were only supposed to get one.

Okay.

Just your outlook for Las Vegas in the next quarter and such.

Well, it's raining this morning.

But outlook obviously for the current quarter is better than the last quarter and last quarter was pretty darn good.

We're expecting to have a strong quarter in the second quarter and the momentum is likely to carry on through the balance of the year.

Fantastic.

Congratulations on the results.

Thank you.

Your next question comes from Robin Farley with UBS.

Great.

Thanks.

Two questions, one is -- well, first thanks for the level of disclosure.

I don't think other companies give this level of disclosure.

I did just want to clarify, there was a lot of property-by-property color.

You mentioned hold overall was in the normal range for both periods but it sounded like it was below normal at the Grand.

I don't know if you specified which other property may have been above -- above normal hold percentage.

Well, that, Robin, was the one that was the greatest delta year-over-year.

In most every other case, we're up and down, but within a few hundred basis points.

That one, a couple hundred basis points.

That one was, as Gamal mentioned, a more significant delta.

That's why we called it out.

Is there another property where the delta was up a little bit more than the others?

Yes, The Mirage was up.

We had nice baccarat play there and good hold there versus a year ago.

And then in terms of the opening and transactions, can you give a little more guidance?

I know normally you only give guidance out in a quarter but it's tougher to estimate those types of costs.

Can you give a little more color sort of for the full year, rough level of the opening, transactions, maybe even for next year as well, just a range to think about?

Well, more guidance on the current quarter, if you'd like, and then I'll give you a little bit in the third and fourth quarter.

Primarily on the preopening side in the quarter that you will see some at -- obviously the preopening you will see some at The Signature and, of course, at The Mirage casino hotel, when you open up a big new show, you're going to have preopening and we'll have that in the quarter at The Mirage.

Those are the big items.

There's some little bits and pieces like Macau and Borgota, but those in the quarter were the principal ones.

As it relates to property transactions, the larger numbers of that number that we gave you would be at Mandalay Bay as we get rid of the wedding chapel and we're going to do some restaurant remodeling there as well.

As it relates to the balance of the year, the numbers are more insignificant.

We'll be able to fine tune those as we move forward, but a company our size, always doing things, you're going to have property transactions which are primarily writeoffs of existing parts of our building.

So expect to see them at some of the properties that we are spending money at like the Mandalay resort properties.

Expect to see that probably also at Mirage a little bit more, and probably also at Luxor -- well, Luxor we already mentioned.

As it relates to preopening, preopening numbers would be obviously CityCenter would be a big component of that on a going forward basis and I would say that's the biggest number and Detroit.

Dan just mentioned Detroit as well.

Is there a run rate for CityCenter and Detroit that we can think about for the next 12 months?

About 600 a month.

Yes.

Rick said we'll be able to do a better job next quarter on that but Bobby you're saying around -- 600 on CityCenter.

So we'll give you a better one for the third and the fourth quarter going forward.

I don't anticipate collectively the numbers will be as large as what we're estimating in the second quarter for the balance of this year, quarterly.

Okay.

Great.

Thank you.

You're welcome.

Your next question comes from Harry Curtis with JP Morgan.

Good morning.

A couple of quick questions.

First of all, you gave us some color on the forward demand for group bookings for convention demand.

I think that was at MGM.

Could you give us a better sense of that overall as we get deeper into the year, particularly for Mandalay Bay, and then the second question relates to Pennsylvania.

With your alliance now with Foxwoods, does that open up an opportunity for you in Pennsylvania?

Harry, this is Bobby Baldwin.

Gamal mentioned what his was and it looks like the second quarter bookings are very strong for the Mirage component of the Company.

We are up 5.5% looking at the second quarter over the second quarter last year.

And is that 5%, 5.5% in volume?

Can you give us a sense of what kind of pricing you might see on those rooms?

Yes, we're up 3% in rate and 2% in occupied convention rooms.

Okay.

All right.

Do you want to add anything to that, Gamal?

Well, basically, ours, for the second quarter, we are projecting about 16% in room nights and also we're looking at an increase of about 2% in ADR.

Okay.

I'm sorry, that 16%, was that overall across the Mandalay Bay or just Mandalay Bay?

Across the Mandalay Bay resorts, yes.

Okay.

All right.

So and as it relates to Pennsylvania, well, the joint venture will -- we'll take a look at Pennsylvania.

Okay.

Thanks a lot.

You're welcome.

Your next question comes from Bill Lerner with Prudential Equity Group.

Thanks.

Hey, guys.

Given general concerns about capital intensity on the strip, can you talk a little bit about how you'll at this stage think you'll buy down that project cost at CityCenter?

I think you'll have somewhere in the 2.3 million square foot range of residential once it's up and running.

Should we -- can we assume, given the types of revenue per square foot, or what you are getting per square foot at The Signature, can we assume that -- that given those rates, we can extrapolate that to those 2.3 million or so square feet and be able to buy it down at least on a gross basis volume, like a tremendous amount?

Well, I will tackle the current environment and then Bobby will talk about CityCenter.

The profit numbers that we're seeing here on the Towers at MGM are greater than we gave you last quarter.

The reason for that is that the tower construction costs have come in below what we had thought, and therefore, our profit is going to be greater.

And we're seeing good pricing from our perspective in terms of controlling construction costs on the residential product at the MGM GRAND so therefore you should see better profitability in Tower Two and Tower Three and we are excited about reporting those results to you in the future.

The point here is that if you have good contractors, good construction people, and you manage the properties well, you can do extraordinarily well on residential, if you have the right location.

Obviously CityCenter's location is the best, we believe, on the strip.

And therefore, we should probably see very good spreads between overall costs and what we sell them for, especially since sales prices continue, as Gamal mentioned, continue to go up.

So maybe I will -- a broader question, maybe Bobby you can talk about CityCenter's construction's procurement.

Well, Bill, it's about 2.4 million square feet in residential component.

As you know, CityCenter's entire cost is budgeted to be around $7 billion.

The total proceeds from the residential component of the CityCenter is about $3 billion.

So obviously, we would net that against the overall development costs for CityCenter.

Okay.

And where are you at on the other facets of buying it down?

I know that your thinking has been evolving on the retail front and what might you do as it relates to the other hotel towers?

You are asking how much -- like how much steel have we bought, concrete -- ?

Yes, what we have done, obviously with -- Parini is our general contractor.

Tishman, who is riding herd from our perspective correct in terms of --.

We are looking at direct sourcing globally on a lot of these materials.

We are looking at changing our budgets to hard numbers and I don't want to speak for Bobby, but I will, and then correct me if you think I'm wrong, that we feel like the numbers we have given you, we feel very comfortable with, because as we convert our thinking from estimates to real numbers.

Right.

That's helpful.

Thanks, guys.

Okay.

Thank you.

Your next question comes from Joseph Greff with Bear Stearns.

Good morning, guys.

Jim, a quick question on your outlook, your guidance of mid to high single digit pro forma property EBITDA growth rate.

Within the different properties, should we expect a higher growth rate from the Mandalay properties and Mirage and something a little bit lower than that for the balance of the property?

And then looking out through the back half of the year, are there any projects or investments at any of the Mandalay properties that might cause some disruption?

Well, as it relates to the year-over-year performance, it's pretty much across the board.

Legacy, I guess.

After next quarter, we won't say that anymore, right?

Because we've lapped the merger with Mandalay Resort Group.

But it's really much across the board in terms of growth.

We see good up and down market activity at every price point that we cater to and that's -- that's good news for us.

As it relates to the second part of your question, in terms of construction disruption at any particular property, you know, it -- we are doing quite a bit of work at Mandalay.

I picked that as one that would be potential possible.

Any other properties that we could say that?

No.

We will be done with Mirage.

Bellagio is perfect.

Any other -- no.

I would say Mandalay Bay.

The GRAND is done.

TI is done pretty much, right?

No.

If there was any at all -- and we don't use it as an excuse ever, but if there would be any at all, it would be at Mandalay Bay.

Okay, great.

And then one other question.

I know you don't give guidance beyond the current quarter, but I think you gave out a number for profits for I guess Tower Two to be recognized in the fourth quarter, which was somewhere between 50 and 60 million.

Is that still a good number to use, both the absolute number and the timing?

It will probably be the fourth quarter and the first quarter of the following year but most of it probably in the fourth quarter, and the profit number will likely be as the first tower was, likely be greater than we gave you last quarter.

Got you.

Great.

Thank you.

Your next question comes from David Anders with Merrill Lynch.

A few questions.

First, Jim, just kind of a housekeeping one and then one for Bobby and Gamal.

With respect to the $0.50 guidance, that includes roughly a $0.06 to $0.08 hit from property writeoffs but also includes an 8% gain from the tower sales -- the condo sales.

Is that correct, Jim?

Yes, $0.08, not 8%.

$0.08, right.

So it's kind of a wash as far as one time.

And then Bobby or Gamal, could you comment, gaming revenue, even excluding wins, has been just outstanding on the Vegas strip.

Is there anything that's changing out there, that you guys are picking up on in slot revenue, table revenue?

Any kind of big trends that you are seeing?

I will start, Dave.

As far as we are concerned, table gaming revenue has increased in our properties primarily because of all the amenities that we have added.

Our properties have become a must-see destination.

We are seeing great traffic increased throughout all of our properties, and it's driven by these exceptional shows that we have added, the restaurants, the new nightclubs, bars, and it's just adding more attractions.

There are more people that are flying into Las Vegas.

There are more people that are driving into Las Vegas and it's just a net result of our properties being significantly better than others.

And that -- that is primarily why we've seen this increases.

Bobby?

And David, I think -- I think that Gamal is right, that competition is alive and well in Las Vegas.

All of our buildings are continuously in the process of being brand new with concepts and ideas and restaurants and clubs and new entertainment in the form of shows.

And I think that the public is excited more about Las Vegas than ever.

And we don't see that trend changing.

And the other point I make, David, going back to your first question, is the consensus in the quarter -- of course, as you know, we don't give guidance on consensus out beyond the current quarter but the consensus, I believe, Dan, was $0.49 in the quarter but several analysts, and a couple on the call here, included the profit from the Tower A into their numbers.

So you have to be a little bit careful on that, because if you take that out, of course, the guidance we're giving today is substantially above consensus.

Got it.

Thank you.

Your next question comes from Jay Cogan with Banc of America Securities.

Yes, hi.

Good morning.

I have a few questions for you.

I apologize, Jim, I missed the official presentation, so if you commented on a couple of these already, my apologies.

But I was wondering, could you talk a little bit about the corner of Tropicana and the Las Vegas Strip.

I was kind of wondering what your thoughts are with respect to the Aztar potential transaction here and also I think if I remember correctly, you have 15 acres of land pretty much adjacent to that property, just separated by a street.

What's your thoughts on that?

Well -- [ LAUGHTER ] I will tackle that.

I think we could all say in this room, we are happy that we acquired Mandalay Resort Group a year ago and not today.

The implied price -- I guess I'm seeing, you guys do this more than we do, for Aztar's acreage is like in the mid 20s, like $24 million an acre for the 34 acres.

Now we, as you know, own 831 acres on the strip.

So that's fun math to do, if you ever want to do it. 350 acres of which is un or under-developed for us so there's a lot of opportunity.

Specifically on the 15 acres you are talking about, yes, it's just to the south of Tropicana, separated by Reno.

I think that's Reno Drive, isn't it?

Yes.

And it's currently a surface parking lot and it's probably a higher and better use for acreage at 20 plus million than a service parking lot.

We get a lot of calls on that land and other land.

There's nothing in the hopper right now but obviously the value of that has gone up substantially and it got our attention.

And how do you think about the -- the potential on who the winner is here for the development of that asset and timing or --it obviously is kind of an important corner for you and I'm wondering how you think about that strategically?

Well, we are excited about that.

Any development there would be of great benefit to the other three corners which we own.

So, you know, we hope that whoever ends up with it doesn't run it like it's being run today because that doesn't help us much, and instead builds something compelling, which would help us.

So we're rooting for people that are going to invest in it.

Okay, and a couple of quickies.

I think the question of monetizing opportunities at Project CityCenter came up but I think it was primarily focused on the condo opportunities.

Can you talk a little bit about where your heads are right now with regards to possibly monetizing the boutique hotels, the retail, any other aspects of it, and also, just on the kind of hotel or condo development, could you -- I don't know if you mentioned the potential for a fourth or fifth tower or other excess land that you might decide to develop on.

Thank you.

Thanks for bringing up that again, because I don't think we answered the question exactly right.

CityCenter has been designed, in fact, we are spending extra money on CityCenter so that if we choose to in the future, we could compartmentalize CityCenter and buy down our risk.

I think that's what Bill was talking about.

I don't think I answered it correctly.

By selling pieces of it, we could sell the retail over time if we wanted to.

We could sell a hotel or two if we wanted to.

We could bring in partners on residential, if we wanted to.

We don't want to right now.

And so -- but we're designing in such a fashion that they could be easily separated, especially on the retail side.

As it relates to other residential development, obviously, the success of The Signature product at MGM GRAND and our confidence in the marketplace, as long as you are aligned with a good brand and a good location, would imply that we would be looking at other properties and other residential developments outside of MGM and CityCenter and we are, and if and when there's something to announce, we will do so.

Great.

Thanks a lot.

Thank you.

Your next question comes from Dennis Forst with KeyBanc.

Yes, good morning.

I wanted to ask Gamal if he could give us a little primer on how you plan to handle the rooms at the towers, as hotel rentals.

How should we think about that in terms of modeling and how are you going to handle them in terms of marketing?

Dennis, well, this is obviously a model that's been employed elsewhere in other cities.

With us, it's just a little larger.

So once we close the sale on these condominiums, we are going to ask the owners to participate in a rental program.

We're promoting it as an extension of the MGM GRAND.

Our strategy with the MGM GRAND has always been to spin off some brands that benefit from the umbrella brand of MGM GRAND.

So The Signature at the MGM GRAND has already been promoted to all the meeting planners out there.

We have got some extraordinary responses about a property that has -- that is entirely non-smoking, that is away from the casino, which is very attractive to this profile of customer.

Obviously this will be a percentage, as far as profitability with the owners.

So we look at The Signature of the MGM GRAND as an extension of the MGM GRAND and we will promote it accordingly.

The rates, obviously, will be higher, much higher, than the MGM GRAND product, because of the square footage that is supported there and all the other amenities.

So as I said, in our trips marketing to our meeting planners, they have been very enthusiastic about it and I expect it to be very successful.

About what percentage of the rooms do you think will be included in your base?

What percentage?

We're expecting so far, our surveys tell us about 80% of the owners will put their product, their condominiums, into the rental pool.

So that is obviously what we're hearing.

It could be more or less, once we do close these sales.

Okay.

And that would -- by the end of this year, that would bring you up to over 6,000 rooms or pretty close to 6,000 rooms.

Can you sell 6,000 rooms on a weekend?

Well, the perfect example, Dennis, is when we brought back the 60,000 additional room nights in the first quarter, not only did we sell them, but we sold them at a higher rate and we increased the occupancy.

The demand is out there.

Obviously, this is a new product and how the market would respond to it remains to be seen.

But we're very, very excited about the response we have seen from a lot of the meeting planners that have seen the product and walked it and visited it.

And the first tower will go into your rental July?

Is that a reasonable time frame?

Dennis, we begin closure on the middle of May and obviously the closure takes time.

So obviously, we're -- we're going to be closing all the way until the end of August, and then you have the selection process.

So really the third quarter is when you are going to start seeing some of these occupancies take place.

Okay.

Great.

Thank you.

Thanks, Dennis.

Operator, I think we have time for one more question, if there is one.

Yes, sir, you have a follow-up question from Lawrence Klatzkin with Jefferies.

First and last, Larry.

Oh, boy that's fun.

Just accounting for our models.

Are you going to do a separate line item for the rentals of The Signature, or are you just going to throw it into the rooms but you are only going to get a portion of it so it kind of messed up the room rate.

How are you going to structure that in the financials so we can just model it properly?

The profit of it, obviously is income from unconsolidated affiliates and we'll break it out and then the revenue will be in other revenue.

Okay.

And do you know how the fee structure is working with them, or are you still negotiating that with the condo owners?

We know but we have not disclosed that to you yet.

Could you?

Nope.

Okay.

And then the last thing, just Atlantic City Land.

I know, Terry, you have been quoted a couple of times in the papers about -- talking about CityCenter West or whatever.

Could you guys say anything about that?

Actually it would be CityCenter East.

Did you move Atlantic City on us?

It's been a long couple of days.

It's a significant piece of property.

We are very interested in developing CityCenter, as you know, here and it's going to be developed in Las Vegas.

We think it will be a modified form of that, on reasonably close acreage, 55 acres compared to the 66 acres we have here, would be a perfect and fitting responsibility for that.

As I indicated on our earlier telephone call a couple of quarters ago, we couldn't have found a better partner than Boyd Gaming.

They are great people and they're doing a wonderful job on our behalf and their behalf at Borgata but frankly, the enhancement of the value of Renaissance Point is such that we have indicated to them that we've decided we want to move ahead and when we do move ahead on our own with that particular piece of land.

That is our intent and I think as we get further down the road here in the next year, year and a half, we get get far more serious than CityCenter East.

And Larry, I mean, just to help you a little bit, the industry standard on these type of condo/hotel deals.

You basically split the economics with the owner of the unit.

Generally they are a 50/50 kind of deal.

That's as good a guess for you as any, I think.

With that, I think we can wrap up this call.

We want to thank you all for participating and as always, if you have any follow-up questions, please give us a call and we look forward to chatting with you again in three months.

Thank you very much.

Thank you for participating in today's MGM MIRAGE first quarter conference call.

You may now disconnect.