美高梅國際酒店集團 (MGM) 0 Q0 法說會逐字稿

Good morning and welcome to the MGM Mirage fourth quarter conference call.

Joining the call from the company today are: Terry Lanni, Chairman and Chief Executive Officer, Jim Murren, President, CFO and Treasurer, Bobby Baldwin, President and Chief Executive Officer, Mirage Resorts, John Redmond, President and Chief Executive Office MGM Grand Resorts, Gary Jacobs, EVP, General Counsel and Secretary.

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

Thank you, Leslie.

Good morning, everyone.

As you know, we're broadcasting this call today on the Internet on our website, www.mgm-mirage.com, as well as companyboardroom.com.

Replay of the call will be available on our website.

We filed a Form 8K this morning with our press release.

And additional information was posted on our website, which gives you significant additional detail behind the numbers that were included in the release.

Before we begin, I'm obligated to read the Safe Harbor disclosure.

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

Such forward-looking statements are protected by the Safe Harbor amendment, so 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.

So, with that I'll turn it over to Terry Lanni for a general discussion.

Thank you, Jim.

And happy Valentine's day.

I think it's the first time in my 30-years in the industry we've ever had an earnings call on Valentine's day.

Earlier today we reported diluted APS from continuing operations of $0.68 for the fourth quarter.

This is an all-time record for any quarter in the company's history.

In fact, it's record revenues and record earnings for the entire year.

Operational results, the net revenues were increased to $1.8 billion, that represents an 11% increase.

Gaming revenues increased 13% including the contribution from the reopened Beau Rivage.

We had an excellent western New Years and high-end business remained very strong during that period of time.

Beau Rivage has completed its Tom Fazio Fallen Oaks Golf Course.

In fact, that's the fourth Tom Fazio golf course in the company.

We're very proud of this new addition and hopefully the weather will allow us to continue to operate there for a long period of time.

Some of the other aspects of this quarter, we made progress on several growth initiatives.

We finalized the agreement with the Mashantucket Pequot tribal nation.

We entered into a memorandum of understanding with Mubadala, a development company of Abu Dhabi of The United Arab Emirates.

We also entered into advanced discussions with the Diaoyutai State Guesthouse in Beijing, arm of the Foreign Service Department of The People's Republic of China.

And I'd like to emphasize that these agreements are very strategic and very meaningful.

We are focused on maximizing the value of two of our most important assets.

Those are our brands and our significant real estate holdings.

And we're very committed to these partnerships and expect to produce tangible projects resulting from these agreements in the very near future.

On City Center, it's continued progress on the project.

Residential efforts are now underway and Bobby will provide a complete update in his report today.

Earlier this week, we announced our plans for the development of a new community in Jean, Nevada, which is about 25 miles south of Bellagio, on either side of I-15 with our partners American Nevada Corporation.

We believe, this transaction allows to us generate significant value and allows us to address affordable housing needs of our employees.

With the increase in housing prices, it's been difficult for the more modest income level people in this community and we think this will go a long way in dealing with that situation and we're very pleased with this joint venture.

On Macau, the construction of MGM Grand Macau is progressing to a fourth quarter opening.

It's a very exciting time for our company.

We, along with our partner, are committed to this exciting marketplace and are pleased to acknowledge that our second project will be a site in Cotai.

Develop planning will begin immediately on that.

And we look forward to creating another world class resort experience.

I'd now like to turn back over to Jim for a few more comments on our financial results.

Thank you, Terry.

There were several items in the quarter which affected the comparability of earnings year-over-year, so we listed them in the release, but I'm going to highlight them for you again here.

Profits from the unit sales at the signature occurred in the current fourth quarter only.

We earned $0.15 a share from our share of the profits on Tower II in the fourth quarter.

We had closed about 87% of those units as of the end of the year.

That was higher than our guidance of $0.09 to $0.10.

And that's simply due to the timing of closings.

We did a better job of closing them in the fourth quarter.

The overall estimate for Tower II profits was unchanged.

We had said $75 million, that's our estimate.

We'll have a couple more cents here in the first quarter.

We also had a $0.15 share positive impact from preopening and property transactions.

That's versus a negative $0.02 in 2005.

That mostly is due to the insurance recoveries that we received, that we talked about at Beau Rivage.

Stock option expense was $15 million and that was in the fourth quarter '06, not in '05.

Overall, gaming revenues were very strong, they were up 13% in the quarter excluding Beau Rivage.

Table games revenue was up 8% and slots were about flat.

Table game whole percentage was in the normal range for both periods although it was a little higher in the fourth quarter of '06 versus the fourth quarter of '05.

Hotel revenues were also quite strong, up 8% in the quarter and Las Vegas Strip RevPAR was up very strong 8%.

That was against by the way tough comp.

We're also up 8% year-over-year in the fourth quarter '05.

Food and beverage and entertainment revenues were also strong.

Food and beverage revenue was up 2% in the quarter, and was up 2% without Beau Rivage.

That was due to some of the restaurants and lounges that we've added at several of our resorts, and I'm thinking of the Mirage and Mandalay Bay in particular, but really company wide.

Entertainment revenue was very strong up 19%.

That's really attributed mostly to the success of LOVE over at the Mirage, but pretty good revenue overall.

Our property EBITDA or cash flow was $740 million, that was up 38% versus $537 million in 2005.

There were several items that affected that comparison.

Profit from the Signature obviously positively impacted property EBITDA by the tune of $65 million in the fourth quarter of '06.

Beau Rivage had property EBITDA of $106 million, which included the $86 million of insurance recovery.

So you get the net number for Beau Rivage.

And adjusted therefore for these items property EBITDA or cash flow still was up 6% with a margin of 32% in both periods.

Specifically on the strip, we talked about our RevPAR being up 8% on the strip.

So was our EBITDA up 8% year-over-year.

On an apples-to-apples basis, actually it was up more than that, because, of course, we had City Center expenses, more so this quarter than the fourth quarter a year ago.

And we had The Boardwalk Casino obviously in the prior year quarter, but not this quarter.

And if you look at it therefore on an apples-to-apples basis, our strip cash flow or EBITDA was up 10%.

So, with that I'm going to turn over to John Redmond to talk about MGM Grand Resorts.

Thanks, Jim.

Good morning, everyone.

MGM Grand Resorts had a very strong quarter with all four strip properties.

The Grand, Mandalay, Luxor and Excalibur achieving the highest fourth quarter EBITDA in their respective history.

We also saw record revenues throughout many of the departments of all of the properties.

In particular, MGM Grand, Mandalay Bay and Luxor had the highest slot revenue quarters in their history.

The four Las Vegas strip properties had ADR growth of 6.3% and slot revenue was up an impressive 5.9%.

The convention business at MGM Grand, Mandalay Bay in Q1 of '07 continues to be extremely strong with room nights between the two properties and ADR up 21% and 6.4% respectively.

Room renovation started in Q4 '06 at Mandalay Bay and Excalibur.

For the first time since opening in 1999, the original Tower at Mandalay Bay is being remodeled.

The renovation began at the end of November and is expected to last until August of '07, with up to 600 rooms being out of order on a weekly basis.

We expect to lose approximately 42,000 room nights in Q1, 54,000 room nights in Q2 and 11,000 room nights in Q3 '07.

To date, approximately 945 of the Mandalay rooms have been renovated and the initial customer response has been very strong.

In November, 2006, we began renovating 1,000 rooms at the Excalibur.

The project will be completed in April of '07.

The Excalibur rooms have not been renovated in a meaningful way since the property opened in 1990.

Initial upgrade of 25% of Excalibur's rooms will create a test environment to gather further customer feedback on product and evaluate the upper range of ADR within this most important demographic.

As an added data point, the delta in the ADR between the Excalibur and New York-New York for the year 2006 was $42.

In addition to the fact that the properties are connected, the Excalibur standard room is larger than most rooms at New York-New York.

Needless to say, we are very excited by the upside potential of Excalibur room renovation.

We expect to lose approximately 30,000 room nights in Q1 and 1,200 room nights in Q2 of '07 due to this renovation.

As of this Friday the 16th, approximately 413 of those rooms have been renovated and have been extremely well received.

Q1, 2007, we will recognize approximately $10 million on the remainder of the gain on the residents at Tower II that Jim referred to.

The Tower III will be completed in April of '07 with closings slated to begin in May of '07.

Operations on that Tower III are expected to begin in July of '07.

The response to the residents continues to build and we are seeing spends throughout the property from the residence hotel guest consistent with that of the guests staying at the MGM Grand.

Finally in Q2 of '07, MGM Grand will be hosting the Oscar de la Hoya and Floyd Mayweather fight.

This must-see event sold out in less than four hours.

And we expect it to draw significant high-end play in the quarter.

Moving to Detroit.

In Q4 '06, again, another strong quarter.

Detroit continued its very strong performance with the best fourth quarter slot revenue in the history of the property.

With regards to the permanent facility, we're ahead of schedule with an expected opening date in early Q4 '07.

On that note, I'll turn it over to my colleague, Bobby Baldwin.

Thank you, John.

And good morning.

As you can see in the release, Bellagio had a record year, as it benefited, of course, from the improved facilities at Bellagio.

Bellagio in '07 also had some additional capital improvements, including a new high-limit room and a full remodel of all of its hotel suites that hadn't been remodeled, of course, since the hotel opened.

The Mirage, likewise The Mirage Hotel Casino '06 results were considerably higher than in '05 as it benefited from a long list of improvements including the results of the new LOVE show.

Beau Rivage experienced its best fourth quarter in its history.

The fourth quarter included the openings of the Fallen Oak Golf Course, three new restaurants and show room.

All aspects of the reconstruction of Beau Rivage are now complete.

Construction of City Center is progressing quickly and continues to be on budget and on track for the forecasted November 2009 opening.

It's an impressive site with 21 frames and 21 cranes to come.

We'll have 42 total.

Currently, there's about 1,200 workers on the site.

The hotel casino Tower has reached the seventh floor.

We're currently placing concrete at a rate of one floor every nine days.

Foundations for the convention center and the casino podium area are currently also underway.

The construction at City Center has begun on the Mandarin, Vdara, Veer Towers and The Harmon Hotel.

Construction also has begun on the [inaudible] retail experience and therefore all components in City Center are now fully under construction.

We recently completed a cost review of City Center and the project remains on budget and on schedule as I mentioned.

Total cost of City Center is $7 billion with the net investment of $4.5 billion after deducting the projected retail proceeds of $2.5 billion.

The Residential Sales Pavilion opened on January 2nd, located between Monte Carlo and New York-New York on the Las Vegas strip.

We also have City Center residential galleries at the Bellagio and Mirage Casino Hotel.

The residential sales process began in October with Our Friends and Family Program producing more than 1,600 reservations.

The residences at the Mandarin Oriental sales launch was in mid January.

Mandarin sales to date are $613 million with 90% of the residential sold at an average price of $1,584 per square foot.

There are 227 units in the Mandarin and therefore 200 units sold.

The Vdara Condo Hotel sales launch begins January 20th.

I mean February 20th.

There are currently over 743 reservations for the 1,543 available units.

The Veer Towers, their sales launch begins April 2nd, and there are currently 619 reservations for the 674 units available at Veer.

Our final residential release will be The Harmon in June of this year.

And there are 209 units at Harmon.

And that concludes my report.

Jim?

Why, thank you, Bobby.

Before we turn it over to questions, I have quite a bit more financial information as we typically do to provide to you.

Interest expense in the quarter was consistent with our guidance.

Net interest was $187 million, that broke out to be $227 million at gross, cap interest was $40 million and net was $187 million.

Corporate expense was $51 million.

That was higher than our guidance.

We had higher IT expenses, higher payroll and higher legal expenses in the quarter.

Some other items that impacted earnings and EBITDA.

Preopening and start-up expenses were $9 million in the quarter.

That was primarily City Center, MGM Grand Macau, MGM Grand Detroit and The Signature at MGM Grand Las Vegas.

Terms of capital expenditures, we spent $518 million in total in the fourth quarter.

Excluding Beau Rivage, the investment amount was $455 million which was right on our guidance.

Approximately $339 million of that number was spent on development projects, primarily obviously City Center and MGM Grand Detroit.

The remaining $116 million was spent at the existing resorts.

That's a little bit higher than our run rate as we are currently, as John and Bobby mentioned, working on several projects both at Mandalay Bay and room remodels at TI Excalibur and Mandalay Bay.

Overall, our capital expenditures for the year were $1.5 billion, and excluding Beau Rivage it was $1.1 billion for new projects.

In the quarter, we issued $750 million of fixed rate debt.

There was a 10% note.

We used that to reduce our outstanding balance of our senior credit facility.

As of the end year, we had approximately $2.6 billion available under our credit facility.

Our fixed-to-floating ratio at year end was 67% fixed, 33% floating.

We bought back 6.5 million shares in 2006 for a total cost of $247 million, average cost of $38 a share.

Since the Mandalay merger, we have bought back 12 million shares for $464 million, average cost of $39 a share.

Our remaining authorization is for 8 million shares.

We have 8 million shares left to go on our current authorization.

Before I turn over to questions, I want to talk a little bit about guidance.

As you know we typically provide quarterly guidance.

At least guidance in terms of how we think we're going to do in the current quarter.

And we thought about it and we decided to discontinue doing that for the following reasons.

One is, we're going to give you all of the information that we typically do give you in terms of the previous quarter which obviously you have right now.

Two, we're going to give you, and as I will in a minute, quite a bit of nonoperating information, and as we always do.

And also, as Bobby and John talked about, I'll add to it, we'll give you -- use our current trends.

Focus on quarterly EPS guidance I think it's missed what we've been talking about in the overall release.

And really it's ironic this particular quarter because we haven't even started Chinese New Year's yet.

Last year we'd actually finished Chinese New Year's when we were talking about the fourth quarter and had a good idea of what we had earned this quarter.

Chinese New Year's hasn't even started yet.

So, even if we were to continue quarterly guidance, the range would be very, very wide because, although we think lots of people are going to show up, we have very good expectations, we don't know how we'll do.

So, as you know, that's our view on that, and we think a couple of general comments.

One is, we think our gaming volumes will be up.

We think RevPAR trends continue to be strong.

In fact, we think it will be along the lines of the fourth quarter which as we said were very robust.

Specific income statement guidance in the quarter in terms of Tower II profits at Signature, obviously we'll recognized the remaining $10 million of profits in the first quarter.

That's $0.02 a share for us.

That's versus the $0.07 or $0.08 we had previously guided.

Obviously, we got that in the fourth quarter.

So, you have to make that adjustment in your model.

Stock option expense will be around $0.03 as it was last quarter.

Corporate expense we estimate to be in the range of $40 million to $45 million in the quarter.

Net interest expense will be approximately $190 million in the quarter, gross interest about $235 million, cap interest $45 million.

Give you a net of $190 million.

We think our depreciation will be in the $175 million range.

That excludes Laughlin and Primm.

Recall that those properties are now classified within our discontinued operations line item.

And therefore, not been depreciated since they are being held for sale.

In our income tax rate, we're estimating to be around 36% in the quarter.

In terms of capital expenditures for the year, we promise to give you a outlook for 2007, and we expect to spend primarily here at City Center but we expect to send about $2 billion on two major projects.

City Center and the completion of MGM Grand Detroit.

The majority of that is at City Center.

We expect to spend around $300 million on room and suite remodel projects.

The suite project here at Bellagio, rooms product at MGM Grand Las Vegas, Mandalay Bay, Excalibur, Circus Circus Las Vegas.

These are maintenance in nature obviously, but we've had great success in the past in yielding much higher ADRs from these improved room products, so we're hopeful we can continue to do that.

These improvements are, I think, we think, well planned so they'll be executed throughout the year to minimize as we typically have done the potential impact on our operations at any given time.

Other maintenance spending will be around $650 million.

That brings our overall estimated Capex to about, a little bit less, to about $3 billion of which we think that will be spent roughly evenly across the four quarters here in 2007.

So, that was pretty good for us, 25 minutes.

We have plenty of time for your questions.

So I'm going to turn it back over to Leslie so we can get right to it.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Larry Klatzkin with Jeffries.

Hi, Jim.

Good results.

Couple questions.

This additional Macau casino in Cotai, would it be safe to assume sometime in mid 2010 for when you might get that open?

We can't give you the exact date, Larry.

And thank you.

Some day you'll have to tell us how you're the first every call.

I'm intrigued.

But we can't give you the exact date as to when that second casino will open.

We have promised the Chief Executive will get the information over to him first.

Before we do so, it wouldn't be appropriate to mention it here.

All right.

As far as land, you have a whole bunch of land around the country.

You've announced now the Jean deal.

You're doing City Center East in Atlantic City.

There's a rumor that came out of a court case that you may be doing a [inaudible] with Fox Woods on the marina land in Atlantic City.

Two things.

One, could address the Fox Woods issue?

And then, second, any other piece of the land that we might get excited about?

Well, I'll tackle that.

Maybe Terry you want to do it as well.

One is we have no joint venture that is specific with Fox Woods on an Atlantic City site or anywhere else for that matter.

We do have a joint venture agreement with Fox Woods the Mashantucket Pequot tribal nation to explore investments throughout gaming worldwide which could include Atlantic City and Las Vegas.

But -- so, I think they're unnecessarily linking the two.

We did win a court case, and that's good news for us.

As it relates to our land in general, we do have quite a bit of land available to us both here in the Las Vegas valley and in Atlantic City, and I think people are recognizing that we can deploy our resources in a very productive manner through joint ventures and otherwise like we've done in Jean, for example, to maximize the value to our shareholders.

I think there was a first part of that question that I missed.

So I'll turn it over to Terry

Let me add a point to that.

It's Terry Lanni.

Our focus and our board has given us direction.

The focus on Atlantic City is on the 71 acres next to Borgata.

That's our primary focus.

We're going to develop that on our own as a wholly owned entity.

And we have been given approval by our board to move ahead with preliminary work and given us authorization to spend up to $20 million.

For that, that would take approximately a year.

That would put us in a position to reach out to CAFRA about this time this year.

That's Coastal Agency Facility Review Act.

Some at the California Coastal Commission, which needs about another year.

So if we were aggressive and worked as we would want to, it would be the ability to begin construction again.

It's a long way away from that.

It would be about two years from now, but that's our primary focus.

All right.

And then I guess my last question would be, any more insurance proceeds we might be expecting?

We sure are expecting more.

We haven't received any yet this quarter, but, yes, we are expecting more.

All right.

Thanks.

Good results, guys.

Thank you.

Your next question comes from the line of Harry Curtis with JPMorgan.

Hi.

Good morning.

Could you -- can you hear me?

Yes.

Sorry.

We lost Harry.

Bad mike.

Okay.

Your next question comes from the line Joe Greff of Bear Stearns.

Good morning, everyone.

Hey, Joe.

Jim, maybe you can talk a little bit to the extent that you can maybe how active you guys were looking, working on or considering an OpCo/PropCo structure, and maybe within the having a time constraint of having a conference call, highlight the pros and cons of maybe why you'd want to do something like that.

Yes.

We'll lay out our internal plan right here.

Yes.

No.

OpCo/PropCo as most people recognize is the concept of splitting a company or parts of a company into two entities whether they are two C corps or a T corp and a REIT, or there are a varieties of structures for it.

And the interest comes from whether or not you can get -- create better value by putting real estate into one entity and having another entity, which primarily manages the real estate for that second entity.

I, obviously am not going to comment on what we're doing here, but I can tell you there's an enormous amount of interest in gaming in general as it relates to the real estate.

Some companies I am sure are looking at the OpCo/PropCo combination and split off.

Other forces are looking at the forces behind why that is interesting.

The forces for example of the CMBS market, which has a brand now pool of financing, which is very attractive to real estate-based companies like gaming companies.

That is obviously going to be a component to the buyout group that is acquiring Harrah's right now and probably also with stations.

That doesn't necessarily have to mean that that's the only way you can deploy that type of technology.

So, public companies and private have a new source of income, a new source of revenue, a new source of capital to finance projects either on balance sheet or off balance sheet with partners.

The other major emphasis has been obviously with the private equity world.

And again that creates lots of opportunities for public companies and private companies, not just ones that are acquiring.

So, OpCo/PropCo is topical.

We have certainly looked at a variety of capital structures.

We're not at liberty to say what we're going to do at this point, but I will say that the options available to MGM today are far greater than had they've ever been as it relates to partnerships, joint ventures and other recapitalizations or capital structures.

I think the Jean joint venture gives you a hint of that.

Jean makes $6 million a year for us right now.

We obtained a value of $150 million for those assets.

That's a good multiple on cash flow.

So, in other words, over $900,000 an acre.

So, we put the Jean assets into a joint venture.

We own 50% of it.

We have partners that have the other 50%.

And we can go out and finance the growth of that marketplace off balance sheet with a variety of capital sources.

So, it gives you a hint as to, I think, the opportunities companies have that have a lot of real estate.

Good stuff.

Thanks, Jim.

Thank you, Joe.

Your next question comes from the line of Steve Kent with Goldman Sachs.

Hi.

Good morning.

Two quick questions.

One, Jim could you talk about the land that you're looking at for the second project in Macau, maybe a little bit more specific as to where that would be or how that would work?

Then the second question is, maybe Bobby, we could talk about the demographics of those showing interest in the condos broadly of project City Centers, essentially domestic versus foreign, California buyers.

Who's really showing the greatest interest in these properties?

Well, I'll tackle the first.

Maybe over to you, Bobby, on the second.

We have identified a site with a Chief Executive.

We've been asked not to specifically name where that site is, so of course we're going to honer that wish and not tell you exactly where it is.

Although we can say there is a site that has been identified.

It is in Cotai and it's a site of sufficient size to do something quite wonderful on.

And when we're ready to present that to the Chief Executive and once we get to that process, we'll make it specifically available to everyone else.

As it relates to residential, I'll turn it over to Bobby.

Good morning, Steve.

The demographics roughly are about 30% are California buyers, 30% of the buyers from Nevada, and then the international buyers are kind of split.

The people that international is about 8% from overseas and about 20% are people that have international people have considerable assets and for the most part live in the United States.

So, it's about 33%, 33% and 33% and 10% miscellaneous.

Bobby, is it dramatically different that you saw at Signature or is it attracting a different customer?

John can answer that.

Most definitely.

Signature was for the most part all domestic buyers, but significant out of California.

Not as much other than the investor population in Nevada.

Okay, thanks for the call.

Your next question comes from the line of Robin Farley with UBS.

Great, thanks.

I wonder if you could give a little color on the table drop in Las Vegas.

You mentioned the revenues and the whole percentage to get a sense of volume?

In the fourth quarter, Robin?

Yes.

Let's take a peek at it.

Table drop was -- it up a little bit.

I'm trying to get more specific.

Las Vegas in general on the strip -- was that down a little bit?

Yes, down a little.

It was down a touch on the strip.

Up a little bit overall in terms of drop.

Year-over-year, we had a lot of drop as you recall in the fourth quarter last -- the prior year, our whole percentage.

I think we talked about it in the prior year release was a little bit lower.

It was in our normal range in both years, but it was the lower end of our range in '05 and then kind of more in the midpoint of our range in '06.

When you look at -- I know you have a number of room remodel projects going on, can you quantify what percent of rooms were in Q4?

That may help put in context the table volume thing down a touch and the 1% increase in slot volume.

That's against I assume some kind of decline in rooms available?

Sure.

The big component of rooms in service or available year-over-year was the fact we didn't have The Boardwalk this year versus a year ago.

So, The Boardwalk was around 60,000 rooms.

So, we had 69,000 rooms less available in the fourth quarter of '06 versus '05, so we had rooms available of $3.3 million, right, basically, versus rooms available $3.39 million in the delta.

So specifically it's $3.318 million, basically versus $3.388 million. 69,000 less room nights was primarily The Boardwalk.

The $9 million was throughout the company and that's room remodel.

Alright.

And lastly, can you talk a little about time line in the exact terms of Nevada and New Jersey approval of your Macau partner?

Yes.

I think it's the same as what we typically did.

You want to take that, Terry?

Gary Jacobs may want to amplify on this.

But we're continuing to cooperate with the regulators in both those jurisdictions.

Their timing will be their timing.

And when they propose it they will propose it.

And we'll learn it probably at the same time you do.

Great.

Thank you.

Your next question comes from the line of Jake Cogan with Banc of America Securities.

Hi.

I've got a couple for you here.

First, as it relates to the residential sales thus far at project City Center, Jim or Bobby, could you just tell us how firm, for example, the sales are at the Mandarin just so we're clear?

Is that $613 million or so in the bag?

And also, on a relative basis, are there any firm sales at the other projects or -- I didn't get all of the dates that you outlined.

Then I have another question or two after that.

Okay, Jake.

As it relates to the Mandarin sales, of the $600 million or so, those are contracts for sale.

And the buyer has to put down 10% of the purchase price nonrefundable at that point in time.

Six months later, or six months from January, they have to put down the other 10%, which would make it a nonrefundable deposit of 20% in total.

And the other 80% is due at the closing, which would be the summer of '09.

That's how the money rolls out.

And to how solid the sales are, all we can do is tell you that the deposits are nonrefundable and they are contracts for sale as are typical.

We did look at Signature, who had 1,500 unit range of sales, and they had about 10 or 12 of those contracts default.

As a buyer, Bobby, you should also point out it's not interest bearing.

It is not interest bearing.

I'm not buying one.

We've got Terry's money locked up.

That's a good start.

As it relates to the future releases, the sales release, as I said for Vdara is February 20, and it will take a little over a month to work through the Vdara sales release.

And then the Veer sales release is April 2nd.

Which are the Helmut Jahn Towers.

Then finally The Harmon in the summertime.

The important thing is that the sales program residential sales program at City Center is 30 months in length, which actually began in October of last year and concludes in the summer of '09.

We, of course put Mandarin on the market first.

It was the most advanced product that we had.

Also we thought was going to be the most eye popping of all of the offerings.

We wanted to process Mandarin first.

That's why we led with Mandarin.

Then the other three products rolled out in the order we discussed.

On the nearly $1,600 a foot you got on the Mandarin, how did that compare relative to the internal budget, so we're clear how much better things are going on a project by project basis.

The internal budget was $1,400.

Okay.

As it relates to, Terry, you mentioned in your initial remarks about how was the joint ventures.

They would be very significant in maximizing both the brands and the real estate.

I think it's clear to see how the brands would get maximized.

I was wondering if maybe we should expect opportunities as far as the real estate goes with some of those partners, because that's a little bit less clear to me, except maybe there were maybe some opportunities to do some other projects on your existing real estate, for example Las Vegas if not elsewhere.

I think Jean was a perfect example Jim already gave. $900,000 an acre is unheard of for property in Jean, Nevada, for 150 acres.

And the ability to develop that and we expect it will be a mixed use development.

I think you'll see retail components through there.

Midrise and apartments, probably some timeshare.

A lot of other factors.

So I think that's what the factor is.

We're going to enhance the value of the existing real estate we have.

Along the strip, Jim has pointed out and I have a number of times, of the 800 or so acres we have along the strip, at least 300 acres of it is either undeveloped or underdeveloped. 25% of that is represented by City Center.

But there's a heck of a lot of property and front and Frank Sinatra side of Excalibur and Luxor and Mandalay.

And we think there's some great real estate developments there that will afford us two alchemies.

One, to monetize some of the land there, but also create traffic, which will be beneficial to all those hotels.

So, it's a significant factor.

And if I could add, Terry, for example, Mubadala, as an example, which in the press release, an extremely strong partner of ours moving forward as we work for a joint venture with them, has expressed an interest in a variety of locations that we're already in.

So, from a standpoint of bringing in partners into existing real estate, I think you're correct in your assumption that is likely to happen, and I think that is the template for other type of joint venture arrangements that would probably have at various stages of development.

A final question, as we all try to figure out what this company's going to look like maybe a few years down the road from a structure standpoint.

Can you talk a little bit about how much the management side of the equation is going to mean in regards to cash flow significance?

You've obviously, through these joint venture announcements, has made progress there.

How many more of these opportunities?

How significant will they be?

Do you have some kind of internal target?

I just wonder how that's going to play out potentially?

We've actually spent quite a bit of time on this.

And it's evolving as a business unit within MGM Mirage, but it's clear that as we evolve our company we have substantial projects which are capital intensive, which we believe that will yield great returns for us.

City Center would be a classic example.

Terry mentioned Atlantic City.

That would be another great example of that and there would be others.

Also as we are focusing our company on these major projects and divesting of some of our smaller resorts like Primm, for example, and Laughlin.

There's an opportunity to replace those cash flows with management cash flows.

Development in management of gaming and nongaming hotels really worldwide.

We believe there is great potential in that business for us.

We know how to develop.

We know how to manage hotels.

We do that a lot all day long.

And we feel like with our brands, or with brands that we develop, finding right partners globally would be a great way of diversifying our cash flows and building a big business.

Cathy Santoro here, is in the room, has been working on this project with Terry and a variety of people here and has been building up a model that shows a pretty substantial growth in this type of business over many years.

And it's not lost on us when we see Four Seasons go out at 30 plus times cash flow, or Fairmont go out at 18 times cash flow, and look at some of our brothers in the hotel industry that are more asset light, I guess, that have been able to grow their cash flows through joint ventures, and achieve very high margins in returns.

It's -- we are in the gaming resort business.

That is our principal business.

But we believe we can enhance our growth through that mechanism.

I would add that I've also been identifying individuals from within the company, as well as outside the company who could form a team as we move this forward as it evolves.

So, I think we have sufficient management internally and some people we've identified externally to allow this to move forward as we do.

Great.

Thanks so much.

Your next question comes from the line of Mario Kontomerkos with JP Morgan.

Mario, your line is open.

Your next question comes from the line of Jeff [Vaughnston] with Bank of Montreal.

Thank you.

Terry, you've been a great observer of the Asian gaming market and especially bringing it to America and to your company's business.

How is the world, the Asian gaming market changing now with Macau and what may occur in a couple of years in Singapore?

Is it going to be complimentary to what is happening here in the U.S., or is it going to be a major competitor?

I think both complimentary and competitor.

That's why we obviously want to be in Macau and other parts of Asia.

But the real dynamic that's taking place now is really what's happening in the four coastal provinces of The People's Republic of China.

If you even look at Taiwan, which is still a good market for us, a significant portion of our high-end customers from Taiwan have either moved to, or moved their businesses to the People's Republic of China, spending less and less time there.

So a lot of the business that comes out of the PRC now is Taiwanese business because substantially established and significant sums of money already in place.

But if you take a look at really what's happening in Macau, when you add up the dollars that are probably wagered in Macau, I would guess it would be about 80% of the money wagered is from people from the PRC, either directly or indirectly.

When they look at the numbers they count all the people coming in from Hong Kong as Hong Kong SAR people, rather than PRC people.

And a number of them, we know for a fact are individuals who are from Shanghai, Beijing and other parts of PRC. but have residences and businesses in Hong Kong.

So real significant changes happening there.

Obviously, those people as they come into Macau, especially new people who haven't been to the United States before, will be exposed.

Right now, they're frankly exposed to this Venetian and to Webb.

That's why we're looking forward to the opening because that puts us at a disadvantage very frankly and I suspect the business in both those entities here in Las Vegas happens to be derived from their introduction of the people they know in Macau.

A lot of people coming in from the PRC also who probably aren't as interested in exposing the amount of wagers that they make as close to home as in Macau and might be more comfortable in a bit more anonymity here in Las Vegas.

It's rather complex but rather simple at the same time.

And one follow on.

Just the strength of the high-end business has gone on for a while.

What are the dynamics around that?

What are the things that you guys worry about relative to the high-end business?

Obviously, we want to see the PRC continue to grow at the rate they did last year at 10.7%.

That's very effective for our business.

If they fall into a recession, that would be something that would be a headache there and probably a hiccup at least here in Las Vegas.

So, that's a factor.

Obviously, the ability for those people to travel into the country, we have real problems in this country, as you probably know with visas.

It's not the exit visas from PRC or other places, it's the entrance visas into the United States.

And we've had a reduction in tourism to the United States.

I think it's down 7% since 9/11.

There's a human cry -- we're working with Congress in trying to reduce that.

I mean, terrorists are something, but not all these people are terrorists.

A small minority are.

We have to deal with them and that's one of the few positive balance of trades we have is tourism.

Our country's not effecting that very well.

Thank you.

Your next question comes from the line of Dennis Forst with KeyBanc.

I wanted to get a few clarifications this morning.

First of all, debt at the end of the year?

Jim?

It's in the -- it's on -- you have the balance sheet, don't you, Dennis?

If it's in the press release, I guess I didn't get that far.

Yes.

It's $12.994,869 billion.

My eyes are bad.

All right.

Then moving on to other questions.

Tower III, you said completes in April of this year?

That is correct.

So, John, what will the profits be in the, I guess, third and fourth quarter we're going to see most of those profits?

You're going to see them in Q2.

And again, it's a little bit difficult to predict when you look at even what happened with our estimates for Q4 versus Q1.

I think right now the early estimate is about $43 million in Q2.

Again, it's really a function of how quickly you can close it.

We are on track to complete that Tower in April and closings would start in May.

Didn't go through the rest of the year.

Correct.

Substantially in Q2 and Q3 you see those closings.

What would be the total, without having to break them out quarter by quarter, once that is completed about how big a profit is that going to be for you?

It's in that -- well, when you look at land and everywhere else, probably in the $85 million to $88 million range.

A little more than Tower II?

Yes.

Okay, great.

Next, Jim, on corporate expense, you gave a guidance in the first quarter $40 million to $45 million.

Does that include the stock comp expense portion, which I think in the fourth quarter was around $7 million?

Yes, it does, Dennis.

Okay.

You're saying it's going to be somewhat lower than the third quarter -- I'm sorry, lower than the fourth.

The first will be lower than the fourth.

That's correct, Dennis.

Okay.

Then there were a couple of line items in the quarter that I was a little confused about.

Other income, or other expense was $8.2 million.

What was that?

We had a write down of some assets and investments.

Investments.

And then there was also another $5.5 million of corporate assets write down that was in a different line item?

Yes.

That was in property transactions, I believe.

Yes.

What was that?

I'm trying to -- yes, Dan was saying just a bunch of stuff -- clean up.

Nothing was a big number. $1 million was the biggest of it.

Okay.

So, between the two, write downs and clean ups, it was almost $14 million?

That's correct.

And then lastly, for John again, I wanted to understand the Signature rooms that come -- the profits from the revenue on the sale of those rooms, not the sale, but the renting of those rooms on a daily basis.

Is that just buried in the MGM Grand cash flows?

Yes.

That's correct.

Okay.

And when you talk about RevPAR at $147 in the fourth quarter, John, is that on the 5,000 MGM Grand rooms or 6,000 including the Signature rooms?

All the hotel information we provide, with respect to the Grand excludes the residential product.

Excludes that.

Correct.

Thousand plus rooms.

Okay, great.

Then in Jean, last question.

Jean, there's 160 acres.

Is that both sides of I-15?

It is, Dennis.

So, that is the total encompassed land you own in Jean.

And you're putting the whole thing into a joint venture with your two partners?

Correct.

And you're going to close Nevada Landing and build a new hotel casino at some point as part of the new project?

Yes.

With our partners, master plan the entire acreage which will include a hotel casino.

My recollection is there's not much other private land in that area?

No.

A lot of BLM land all around it.

There is little bits and pieces, but it's a pretty strategic piece because of the fact it's privately owned.

Okay, great.

Thanks a lot.

Thank you.

Your next question comes from the line of Bill Lerner with Deutsche Bank.

Thanks.

Can you guys -- I know Jimmy touched a bit on this.

But can you talk more about these deals for example in the Middle East and China.

Are they about geographical penetration and brand growth without a lot of capital investment?

And is there something more strategic about these partners?

In other words, are you developing relationships with what could be local partners in places where you might see some gaming expansion?

Maybe I'll touch it, since you asked me.

But I'll turn it over to Terry, too, because it's a very important part of our business.

There's a -- there's no question that there's an opportunity to grow our business footprint in a variety of markets that don't currently include gaming.

We have tremendous brands.

We have this expertise that we referred to in development and in management.

And we believe that there's a variety of opportunities ahead of us.

One is to provide a stream of revenue and earnings to us.

Two, to use our brands as marketing outposts throughout the globe.

That would have, I think, a very beneficial impact on our existing resorts.

For example, closer to home, let's take the MGM Grand in Connecticut, after talks with reservation.

What that does to our existing properties I frankly don't know.

I know it's good to have an MGM Grand in New England with that demographic.

It would have a positive impact in terms of marketing exposure to our existing results, but that's part of the picture.

The other part is to provide us with the revenue to development in nongaming ways and in gaming ways without a lot of asset intensity.

We've been specific as to the kinds of partners we're looking for, and the ones that you referred to Mubadala, with the Emirate of Abu Dhabi and Diaoyutai are tremendous partners for us, because of their local expertise, because of their resources and because of the markets in which they are dominant.

And those are the type of partners, and I don't think we're trying to say we're limiting ourselves to those partners.

We're looking at a variety of opportunities similar to that.

Anything more to add?

I think you handled that very well.

Thank you.

Your next question come from the line of David Anders of Merrill Lynch.

Great.

Just two quick ones.

Could you -- I missed the slot growth on the strip.

Did you provide that?

I know John gave us a number, I think, for his properties, but strip wide?

I think we had it in my comments.

The slot gross was basically flat.

Slots year-over-year were flat versus the fourth quarter of '05.

Jim, did you say $3 billion in Capex this year?

Is that correct?

Yes.

All in.

That includes City Center you probably have in your model, which I think is like a $1.7 billion or so, $1.8 billion.

That's a major component.

Finishing up Detroit, which is a couple hundred million.

Finish up Detroit which would be $2 million, or $3 million.

And then the rest -- I broke it out between the rooms remodel and other projects.

All right.

Thank you.

You have a follow-up question from the line of Larry Klatzkin with Jefferies.

Hi, guys.

Probably just one.

I forgot to ask about Yonkers.

What's the timing, what's going on with that?

I think you mean NYRA.

What was NYRA?

NYRA is an aqueduct.

This is Gary Jacobs.

No.

What's happening with the change of administration in New York, there seems to be a recognition that it would be a good thing to have [inaudible] as an aqueduct and get the revenue generated for the state of New York.

We're in active conversations with the state authorities and this project actually looks like it's moving and going to be moving relatively rapidly.

How many slots do you plan to open up with, and any timing?

I think the number is still about 4,5000.

They're not slot machines.

You've got to bear in mind these are video lottery terminals.

There is a distinction of course, and timing will be really 12 months approximately from the time all of the legal work is concluded and negotiations are completed.

Also bearing in mind there are further complications with NYRA being in a Chapter 11.

So, it's not without its complications.

All right.

Then the second thing is what you guys see as new gaming opportunities outside the U.S., like, what's happening in your vision with UK and what you might be doing Japan, Thailand and such?

We're evaluating each of those.

Thailand, I think,probably on hold because of the difficulty and change with the administration and prime minister talks and moving on.

As far as the U.K., we're evaluating it.

The Parliament hasn't even approved the recommendation. [inaudible] made it yet to her.

I understand there's going to be probably an RFP process.

May start as early as July, but probably not sooner than that.

We're looking at Japan and we have our people on the ground there and we think that's an interesting marketplace.

There are other parts of Asia that we're also focusing on.

We know a lot of our competitors are listening on this.

They're probably in the same spots anyway.

We won't disclose those.

But we're highly focussed in Asia.

But there are unique other aspects in the world that may be of interest to us.

We have to evaluate each one.

I guess Taiwan is one of them too.

Thanks, guys.

Thank you, Larry.

I guess we'll take one last call, Leslie, since I think we're running out of time.

Your next question comes from the line of Dennis Forst with KeyBanc.

Yes, just one follow-up question.

If I do the math right, 0% increase in overall slots. 6% increase at John's four properties.

Some of the strip had to be downed in the quarter at the slot businesses.

Is that right, and what's the -- what's going on with those?

Well, a couple things.

One is we're running Player's Club through the overall enterprise, Dennis, as you know.

So most of John's properties have been on Player's Club.

We just put Excalibur on last week.

So, as it relates to the fourth quarter, Player's Club certainly wasn't strip wide.

It certainly won't be strip wide until the end of this year, as I think we've mentioned.

So, one component of it is rolling out Player's Club.

The second component is the remodeling projects.

I'm thinking particularly of Monte Carlo, which his whole front door has been ripped off basically as we dramatically upgrade that as well as remodeling projects at the Mirage Resorts properties in general.

That would be my $0.02 on that, Bob.

Do you have anything additionally?

As it relates to some of the properties in the strip, Bellagio, New York-New York, just looking at the numbers in the fourth quarter there, pretty flat to last year.

And Dan just gave me an important data point.

The year ago of course had the boardwalk in the slot numbers, so that's a big component of the year-over-year comparison.

Okay, great, thanks.

Thank you, guys.

With that, then I want to thank you all for participating in the call.

If you have any follow-up questions, please do not hesitate to call us.

Thank you.

This concludes today's conference call.

You may now disconnect.