美高梅國際酒店集團 (MGM) 2008 Q1 法說會逐字稿

Good morning and welcome to the MGM Mirage first quarter 2008 conference call.

Joining the call from the company today are Terry Lanni, Chairman and Chief Executive Officer; Jim Murren, President and Chief Operating Officer; Bobby Baldwin, Chief Design and Construction Officer of MGM Mirage, and President and CEO of City Center; Dan D'Arrigo, Executive Vice President and Chief Executive Officer; Gary Jacobs, Executive Vice President, General Counsel and Secretary; and Aldo Manzini, EVP and Chief Administrative Officer.

Participants are in a listen-only mode.

After the company's remarks there will be a question and answer session.

(OPERATOR INSTRUCTIONS) Now I'll like to turn the call over to Mr.

Dan D'Arrigo.

Please go ahead, sir.

Thank you, Tina, and good morning everyone and welcome to the MGM Mirage first quarter earnings conference call.

This call this morning is being broadcast live on the interest at www.mgmmirage.com, and at companyboardroom.com, and a complete replay of the call will be available on the company's website.

This morning we furnished to the SEC on form 8K a copy of the attached press release and in addition we posted supplemental significant detail, related to our resort properties on the company's Web site.

Before turning the call over, just a quick 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 amendments of the Private Securities Litigation Reform Act of 1995.

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.

Now I'd like to turn the call over to Terry Lanni for his introductory comments and some initial commentary on our results and development initiatives.

Thank you, Dan, and good morning ladies and gentlemen.

Let me first make some comments regarding our results in the first quarter, and how we see the current environment.

The first quarter was obviously challenging.

It was clearly impacted by the economy.

We did expect this, and certainly had already discussed our experience in January and part of February during our last earnings call.

We still reported solid results and cash flows at all of our resorts.

We have been continually adjusting to the environment and ensuring that we really maximize the volume of guests in each of our resorts.

And we continue to look for areas of revenue growth through marketing and other initiatives, as well as areas for managing expenses as evidenced by our recent reduction in management positions.

It's relatively difficult for us to forecast trends into the next few quarters but so far in the second quarter we are seeing much of the same as it relates to customer volumes and our job is to manage within the context to maximize profitability in what will surely be a challenge alleging year.

It's relatively difficult for us to forecast trends into the next few quarters, but so far in the second quarter we are seeing much of the same as it relates to customer volumes, and our job is to manage within the context to maximize profitability in what will surely be a rather challenging year.

We clearly have not reached our potential in Detroit, as the Detroit market has also been challenged.

We have the best asset in the marketplace and will continue to seek opportunities to maximize our returns.

Let me give you brief comments on the MGM Grand Macau results.

MGM Grand Macau generated net revenues of approximately $298 million, and property EBITDA of $43 million.

We are generally pleased with the resort's performance thus far, but clearly know that we have several areas to improve on going forward.

We expect margins will improve at this joint venture as it grows in this dynamic marketplace, and remain focused on improving results in all operating segments.

As many of you know the Chief Executive of Macau, Edmund Ho has recently made comments regarding several initiatives, including placing a hold on new gaming concessions and sub-concessions.

We frankly see this as a positive development.

We do not believe it will have an impact on our expansion of MGM Grand Macau which is under way, or on our plans for a resort and Coti, where we have submitted a development plan for that site, and each of those initiatives seem to fall within the statements that Chief Executive Edmund Ho made, and we'll define that as we have upcoming meetings with him, but we feel pretty comfortable with that.

On development initiatives, MGM Grand Foxwoods opens on May 17 , a little bit later this month, and will continue to earn a branding and licensing fee for the use of the MGM Grand name, while the Mashantucket Pequot Nation will operate Foxwoods.

They own it and they will operate it as I say.

The new resort is part of the overall Foxwoods campus.

In Atlantic City, The Water Club at Borgata will open in June this quarter.

And we believe it will be another stellar offering in that marketplace and very complementary to our future MGM Grand Atlantic City, which is situated immediately next door.

As relates to our development in Atlantic City we continue design work with KPF, New York, and we are in the midst of the CAFRA review, which for those of you who are not familiar with New Jersey the Coastal Agency Facility Review Act, which requires an additional look at anything within close proximity to the coastline, which our project is.

We are in the advanced stages of the selection process for a general contractor, and will be able to note that some time in the near future.

In Abudabi, we continue to assist in the design of MGM Grand Abudabi, and we are close to naming an architect for this prestigious and significant project.

Bobby is going to give you a full update, so I won't mention anything on City Center.

He will give it to you in his comments.

I would now turn this back over to Dan, for a few detailed comments on our operating results for

Thank you, Terry.

Tina, can you make sure that everybody is in a listen-only mode.

We have a little bit of feedback there, thank you.

Yes sir, one moment.

Yes, sir, all lines are muted.

Thank you.

You're welcome.

I'd like to provide a short summary right now on the results for our first quarter.

The full details were laid out in our earnings release this morning, as well as the supplemental data that we posted to our website earlier today.

Our overall operating results, this morning we reported diluted EPS from continuing operations for the first quarter of $0.40 per share, compared to $0.55 per share in the prior year's quarter.

The prior year quarter, just to note, was an all time company record for any first quarter in the company's history, so we had a pretty tough comp year over year.

On the operating basis, as Terry has mentioned, the economy has certainly impacted our business results here in the first quarter, as well as the closure of Monte Carlo, which negatively impacted our results, and we incurred some additional depreciation expense with the newer larger MGM Grand Detroit Resort.

Net revenues decreased 2%, to approximately 1.9 billion in the quarter.

Our casino revenues decreased by 3%, and our net non-casino revenues were 2% lower.

Revenues were down in our Las Vegas resorts by roughly 5%, but excluding Monte Carlo in both periods, our strip properties were down approximately 3% year over year.

While we saw decreases this year again we are mindful of the fact that the 2007 first quarter was a record on most measures for the company.

As outlined in the press release, our property EBITDA was down approximately 12%.

This property EBITDA was impacted by the lower RevPAR numbers in the quarter, lower results at our Mississippi properties, and the continued ramp-up of our Detroit facility, which impacted our ability to leverage the additional gaming capacity and new hotel and dining amenities at that resort.

Just a couple of quick comments on our Detroit facility.

It's a spectacular facility, and that facility in the Detroit marketplace now commands over 40% market share, and continues to earn rave reviews.

As Terry mentioned, this market is a little bit challenging at the moment, but we believe that our investment will provide excellent long-term returns as we continue to focus on not only driving top-line growth, but improving our margins as we move forward.

Monte Carlo reported property EBITDA of $14 million this year, compared to 34 million in the prior year quarter, due to the closure, as a result of the fire during this year's quarter.

We recorded recovery of costs incurred during the quarter, but did not record any recovery for lost profit, and we will do so once all contingencies with our insurance claims have been resolved.

Excluding Monte Carlo, property EBITDA in both periods was down 10%.

We earned a little less from our unconsolidated affiliate line this quarter, as both Borgata and Silver Legacy decreased slightly year over year, and the prior year results also included about $8 million of profit from the signature at MGM Grand condominium profits.

Additionally our City Center residential costs are now being recorded against this line in the current year period, versus the last year period where it was part of our EBITDA and are broken out separately.

These negative impacts were partially offset by the income we picked up related to the full first quarter operations of MGM Grand Macau.

Also our pre-opening expenses were slightly lower during the quarter given the completion of our Detroit and Macau properties in the fourth quarter of last year.

Our property EBITDA margin was 31% in the quarter and still pretty solid EBITDA margins, despite what's going on around us in the broader economy.

Our net interest expense for the quarter was approximately 150 million.

This is significantly lower than our interest expense in 2007 of 184 million as we had overall lower debt balances this year during the first quarter as a result of the CityCenter joint venture transaction, and the private placement of shares to Dubai World in the fourth quarter of '07, as well as the benefits of the lower interest rate environment related to our floating rate debt.

These reductions were partially offset by increased borrowings related to our share repurchases during the first quarter of 2008, our gross interest expense in the first quarter of 2008 was roughly 189 million with capitalized interest of roughly 39 million in the quarter for net interest expense of about $150 million.

Right now I'd like to turn the call over to Jim Murren for some more detailed discussions on our operations.

Thank you Dan.

First I'll talk about the non-gaming results and then get into gaming.

On the room side, our revenue was down 30 million, or 6%, in the quarter, but if you exclude Monte Carlo, rooms revenue was actually down only 3% year over year on the strip.

As noted our RevPAR was down 4% in the quarter.

Our average rate was $165.00 in the quarter, versus $169.00 in the prior year.

Occupancy rate on the strip resorts was 93% in the quarter.

We started out much weaker than that in January.

Our January occupancy was actually 88.5% but we improved throughout the first quarter.

We are 94.6 in February, for example, 97.3 in March, and those trends improved and continued into the second quarter.

We expect that RevPAR will be down again in the second quarter but less so than in the first quarter.

May is looking like a pretty solid month for us.

On the conference business we noted in the last call that our conference business had softened in the first quarter.

It was actually down 10% in Q1.

The attrition rates were very high in January.

They are 18% company-wide, but they were 16% in February, 13% in March.

The attrition rates continued to improve as we move into the second quarter.

It looks as though the second quarter on the convention and conference side will be much better than the first quarter.

It might be down in the single digits at most.

We obviously also had less rooms available in the first quarter, primarily related to the Monte Carlo fire and we will have more rooms on the books going into the second half of the year, we get more rooms back in line as a result of room remodels that will be completed [inaudible].

Our revenue per occupied room or RevPAR was actually flat in the quarter, and we've been able to drive good gaming revenue which I'll talk about in a minute especially in the high-end.

On the gaming side, table game volume decreased 5%.

The high-end actually held up well.

We talked about having a soft Chinese New Year.

I think everyone did in town, but we actually picked up a bit in March and here in April, on the high-end and we are encouraged.

We have a tournament going on right now, as does our friend down the street.

It looks like the activity is better this year for that event than it was last year.

Our whole percentage within the normal range in both quarters, both this year and last year, a little bit higher this year than last year, but within that range that we've articulated in the past.

Our slot volume was down 1% in the quarter.

I think that's better than what most people had expected.

We've actually had increases in slot buying at several properties, including Bellagio, Mandalay Bay, Mirage.

If you exclude Monte Carlo, our flat revenue in Las Vegas (inaudible) resort was actually flat with a year ago.

Our mid-market slot business has been soft, with challenge throughout the year, and remains so and we've suffered a bit as well, particularly down at Beau Rivage.

We have been driving business through our ever-increasingly beautiful properties through our loyalty marketing programs, better casino analytic marketing programs, cross-marketing our shows, centralizing our call center, using our rooms more effectively as a company, and putting technology into place to better rate our customers, for example, our table touch system, which went into the MGM already, going into Mandalay now, and three more properties will be done by the end of the year.

We've been upgrading our internet channels, our websites, at the hotel side.

Actually 17% of our occupied rooms were booked through branded websites in the first quarter.

That's up from 13% a year ago.

And we are not emphasizing promotional activity to fill our rooms.

We've actually been driving better occupancy through a mix shift, as we lost some convention business we picked it up on the F.I.T.

side.

As Terry mentioned, there's no doubt that we are in a tough economic environment.

We continue to react to that.

We are focused in on areas where we can drive revenues, and more efficiently improve our cost structure throughout the whole organization.

On the revenue side, many of these efforts are already underway.

We've implemented them several quarters ago, and they are starting to hit their stride right now.

We have a rooms committee that allows us to adjust to the market more rapidly, and we've been able to yield our rooms more cohesively and more efficiently as a result of that.

Our gaming, we've been able to mitigate some of the softness in the economy through more strategically placing events, both in our arenas, but also in our marketing events.

This is a good example of it right now where we have a very strong high-end tournament going on as we speak.

We are also very focused on leveraging our database, and it has been something that we've been remiss to a degree in the past.

We are focusing on it more now, and I think you'll see better productivity in our profit as a result of that.

On the cost side, as I mentioned, technology is helping us.

Our table rating system at the MGM, we are putting it throughout the properties, that's going to improve our access to our customer, actually improve customer service, and actually improve margins, we believe.

We have also done some of the back of the house areas where you wouldn't see but it's important to our cost structure where we are automating a variety of systems in the back of the house in order to get to our employees more quickly through, for example, an automated uniform dispensing system and be more efficient before we get to the customer.

And obviously, we've been monitoring our staffing.

Really, we do this in an ongoing nature.

Our FTEs are down.

They are down about 4% year over year and we've challenged our entire company, our Property Presidents in all the corporate departments, to look at how we do our business, and in fact we've made many changes to how we operate our business more efficiently without, we believe, impacting customer service whatsoever, or compromising our market (inaudible) assets.

Based on that review and efforts that we have underway, we've already identified opportunities to save over $75 million a year in efficiencies, with more to come.

We as a company continue to be positioned we believe very strongly in this market.

We've been here before in tough economic times.

We have positioned ourselves to be the market leader, to operate more efficiently and effective in a tough environment that we are in.

We are making solid profits right now, and when the time comes when the economy does pick up, which it will obviously, eventually, we'll be in a position to again, as we are right now, outperform our peers in terms of profitability.

With that I will turn it over to Bobby Baldwin for his remarks.

Thank you, Jim.

Good morning.

As part of my comments I want to talk just a moment about Monte Carlo and its situation, as you know, we had a roof top fire that occurred in January, January 25, and this fire caused the complete closure for three weeks of the Monte Carlo facility.

We re-opened February 15, and since the re-opening we've had gradually added back more and more and more room inventory, as those rooms became available for occupancy.

For the first quarter we lost 96,000 room nights to rooms that were out of service, and obviously that impacted our results.

Beginning on the 15th of April, we'll have about 265 rooms out of service, and then in mid-May we'll go down to 162 rooms that will remain out of service, mostly suites in the top floor, and they'll be out of service throughout the remainder of this year.

We expect a total insurance claim as it results to this incident to be $85 million, about $49 million in business interruption, and about $36 million in actual property damage.

As relates to CityCenter, CityCenter we've been working of course on the overall cost of CityCenter as we work through our maximum price contracts with Perini Building Company.

All the GMPs will be finalized by the end of the third quarter, and as it relates to the overall cost of CityCenter, it's consistent with what has been reported in the most recent Form 10K.

Total project costs are expected to be between one point - - pardon me, between 8.1billion and 8.4 billion, excluding pre-opening expense of about 200 million.

As relates to the construction update, a few highlights.

The central plant, which is important to us, oddly enough all of the customers never see it, we can't do anything without it.

We've actually fired up the central plant and we are beginning to provide cooling, and in some cases heating, to the various buildings on the CityCenter campus, as we install interiors, and this is very important to climate control.

The hotel casino, the Pelli Hotel Casino will top out this year in August.

The concrete structure is complete up to level 52.

Structural steel is complete in the hotel's casino's west podium, and 90% complete in the east podium.

The showroom for the Cirque du Soleil Elvis show, all the structural steel is erected, and the exterior enclosure has begun.

The Vidar Tower, right across the street, is expected to top off in May, which is three months earlier than the original schedule.

The Mandarin Tower is expected to top off in September.

And the two Veer Towers, the concrete structure for the Veer Towers West and East is complete between, through level 17 and level ten respectively.

The retail center Crystals, all of its structural steel is up, and we are beginning to frame some of the interior spaces, and those spaces will be made available to our first group of tenants for their fit-outs beginning in February.

The Harmon hotel and its associated residences, it's structural concrete decks have been placed through level ten.

The podium structural steel there is scheduled for completion in July.

The automatic people-mover system, the tram system that goes from Bellagio, has a mid-point stop at CityCenter, and a third stop at Monte Carlo.

This guideway will be complete entirely by July 2008.

The cars are in fabrication currently in Switzerland, and the two stations at Bellagio and Monte Carlo are currently under construction.

There are 13 large tower cranes on the site and approximately 6,100 workers currently.

This peaks at midsummer at about 7,500 workers.

On the residential front at CityCenter, CityCenter Residential has now launched all four residential products, each branded, positioned, and designed to cater to the distinct buying group, and each receiving overwhelming market acceptance.

With 1,365 units sold to date, we've generated 1.7 billion in sales.

This equates to a project-to-date sales price of about $1,264.00 per square foot.

CityCenter's sales pace and pricing is attributed to CityCenter's urban design and architecture, the quality of its interior layouts, the array of services and amenities offered, and of course, the center strip location.

Buyers are also encouraged by the construction progress and appreciate our planned on time delivery for November of next year.

We are increasing our hotel marketing effectively for CityCenter with two new galleries to help promote the CityCenter residential products.

The CityCenter Residential Gallery at MGM Grand opened February 1, and the CityCenter Residential Gallery at the hotel at Mandalay opened April 2.

We have also engaged in Nakheel, a subsidiary of Dubai World, and Dubai's leading developer, marketer, and seller of luxury residential real estate in the U.A.E., to introduce City Centers residential products to the region and eastern hemisphere.

This new sales partnership provides CityCenter a new, distinct pool of customers in that region.

As you know all sales contracts are accompanied by a 10% non-refundable deposit, with an additional 10% deposit, due six months after signing, and to date we have had zero contract cancellations.

And that concludes my report on CityCenter and I'll turn it back to Dan.

Thank you, Bobby.

Just a couple of final comments and a little bit of guidance to help you with your financial models for the second quarter and we'll open it up for questions.

For the first quarter we invested approximately $236 million in capital expenditures.

The details are outlined in our earnings release, but this is pretty consistent with our overall yearly guidance of approximately $1 billion, that we had previously provided.

Regards to our capital position for the quarter, we borrowed approximately 1.6 billion in net debt in the quarter.

Most of this attributable to our share repurchase in the quarter.

Remember we completed a joint tender offer with Dubai World, at a cost of about $680 million, for our share of 8.5 million shares.

In addition we repurchased an additional seven million shares in the open market during the quarter, at a total cost of $427 million.

We have roughly about 2.6 million shares remaining under our existing share buy-back program.

As relates to our balance sheet, in February, we repaid $180 million of senior notes using our availability under our credit facility, and had minimal debt maturities over the next 12 months.

At quarter end, we have approximately 1.9 billion available under our bank credit facility, with roughly 60% of our debt being figured and 40% of our outstanding debt being floating, as of the end of the quarter.

We are currently in the marketplace talking to our lead group of banks with regards to securing financing for CityCenter.

We recently held a bank meeting in Dubai with our partners there, and these leading institutions, which was extremely well attended.

The feedback has been very positive from this initial group of banks, and we look forward to progressing this financing here in the second quarter.

The project is progressing quite well as Bobby pointed out, and given the sponsorship and the progress we are making on the construction front and on the residential sales program, this is coming together quite nicely right now for us and our partners, Dubai World.

Our balance sheet is quite strong, as of the end of March, with ample bank capacity, which affords us the ability to continue to significantly invest in our properties and plant the seeds for growth, while at the same time providing us with the ability to be more opportunistic in how we access capital in these more difficult times.

Our current RevPAR forecast for the second quarter shows a low single-digit percentage decrease compared to the prior year second quarter, maybe a touch better than what we saw in the first quarter.

Some specific guidance to help with your modeling in the second quarter, our estimated total stock compensation expense is approximately 11 million in the quarter, corporate expense in the high 30s, low $40 million range, inclusive of about $4 million of stock compensation expense.

Pre-opening expenses should be pretty consistent with the first quarter, primarily related to our share of pre-opening expenses for CityCenter.

Our net interest expense will be consistent with the first quarter on a net basis of around $150 million, and our depreciation expense will be in the 190 to $200 million range, with an effective income tax rate of approximately 36% in the second quarter.

At this time I think we have roughly about 25 or 30 minutes left in our allotted hour time frame.

I would like to turn it back over to Tina to open it up for questions and answers.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Larry Klatzkin, with Jeffries.

Hey, guys.

Good cost cutting.

A couple of questions, as far as the extra 14 acres in A.C., are you guys still working on partners for that, is that something we could see in the future, the next quarter or two?

I can answer that, this is Terry Lanni, Larry.

The issue of the 14 acres is that it still is in litigation, but oral arguments were heard, what, fellows, about two weeks ago, and we would expect some ruling within the next month.

That's an appeal from an original victory that we had in the original court, and we are really not doing anything with that property until that matter is resolved, and when it is resolved we would continue our conversation, which actually have taken place with some other people in earlier periods.

All right.

And then as far as international hotel business goes, what's going on in the Dubai project and in China, any little outlook into that?

Actually we have our people right now, Gamal Aziz, President of Hospitality, is in Dubai and Abu Dhabi.

We mentioned earlier in the comments that Abu Dhabi, as a first phase, a $3 billion first phase of a significant project on the waterfront there, which has three hotel products, a 10,000 seat arena, half million square feet of convention, half million square feet of retail, and that we would expect to have finalized with an architect shortly and begin construction there, again that's no investment on our part, by the end of summer, probably before Labor Day we would expect construction to begin.

But again, a project, $3 billion, no investment on our part.

In China we are continuing our project.

We have the second ring road in the [Dalai] Temple project.

That's beginning construction moving along.

We have other projects that we are looking at right now, and we will be discussing with our board shortly in that particular marketplace.

We are in Dubai and looking at different opportunities in the future there for a major hotel product, again, not owned by us, designed, development and managed.

So it continues to move and we think it's going to be a very fruitful relationship.

There are other parts of the world we are looking at, other parts of the Middle East and outside of the United Arab Emirates, as well as in Singapore and other cities in China.

Excellent.

Okay, and as far as the Macao law changes, do you see that as a positive what they've said?

I don't think they are law changes.

I think it's basically just a change in interpretation of what can be done.

As you know in the original issuance of concessions and then subsequent sub-concessions, you had the ability to re-open with additional concessions that could have been considered in 2009.

The Chief Executive in the last couple of weeks has indicated that is not going to happen.

There's going to be a pause in that particular regard.

So I think it is positive.

I think the other concessionaires and sub-concessionaires have made similar statements.

Right now it is our interpretation, because these comments were made in response to the Chief Executive in his legislative conference, in which he met with legislators which he indicated these factors.

But we believe we have use of our items in the pipeline, sufficiently in the pipeline, the way we understand it.

We'll get further clarification when Gary Jacobs and I are in Macau at the very early part of June.

We expect to meet with the Chief Executive and get further clarification.

But on balance, I think those of us with concessions and sub-concessions are quite pleased.

Last question, Dan, really for you, for you in Dubai, funding CityCenter until you have a bank loan, it's about 100 million a month each?

That's roughly about right.

And I think for the full year, CityCenter, for the full 2008, CityCenter was looking at about 2.5 billion of total construction cost for this year.

But like I said, we are in the market talking to our lead banks right now, and the initial response has been pretty positive.

All right.

And one other thing.

As far as gaming revenues in the second quarter, you gave room and such for second quarter, but how is the gaming revenues look for April and May?

Well, we don't give them out month to month, but I did say, Larry, that we are pleased with what's going on right now in the high-end, and on balance it looks like the second quarter is a lot like the first on the year over year basis.

All right.

Thank you, guys.

Thanks, Larry.

Your next question comes from the line of Felicia Hendrix with Lehman Brothers.

Hi, good morning, guys.

Jim, you were talking about how the convention outlook is improving in the second quarter.

I was wondering if you could give us color on what it might be looking like in the third and fourth quarter.

Sure.

You know, it's getting a little harder to project out quarters, because we've gotten a lot of conventions that have been either cancelled very soon before they were actually going to occur, or actually been booked in very short periods of time, so we are usually a little bit better on this, but I will give you a sense of it.

It looks like as I said the second quarter looks like it is going to be better than the first, and then it's kind of a tale of which property you're talking about.

Bellagio looks like it's going to have a very solid year all year long on the conference convention side.

Mandalay Bay is doing better every month.

MGM Grand will be down particularly in the third quarter, where they had some big business in the third quarter '07, we just will not be able to recover from that, and Mirage will be down as well.

Those are our major properties as relates to it.

So on balance I would say the first quarter is what it is, second quarter will be better.

It's unclear exactly how the second half will turn out except directionally, Bellagio and Mandalay should do well.

MGM Grand looks like it will be weak, versus a year ago in the third quarter, and Mirage looks softer, as well, in the second half, versus the last year.

Okay.

And then just moving on to CityCenter, Bobby, you said that there were zero cancellations on the deposits, but I was wondering if you can give us, have there been any defaults, what the default statistics have been?

No, there have been no defaults at CityCenter.

Okay, great.

And then, as of March you gave an update of the condos, 52% have been sold and the hotel condos, 42%.

Can you bring us very up to date on that, as of now?

I can.

As you know, the market has slowed down dramatically.

It began to slow in December, and for the first quarter we sold, how many units here?

For the first quarter we sold - - For the first quarter we sold $57 million worth of product or 56 units, and in April we sold 16, or 14 million.

So the market has slowed down dramatically.

The good news, kind of bad news, is that best we can tell based on our analysis, we represented about 93% of the total Las Vegas sales for high-rise condominium or condominium hotel products here.

So the market is quiet, although CityCenter still enjoys a great deal of success, it is quiet.

Okay.

Are you seeing any kind of, I'm wondering if there is going to be a lag effect from the sales efforts you started in Dubai, have you seen any of that hitting your books yet?

We are going to, we are in the process of setting up a sales center over there as I mentioned, and we are actually going to kick off a sales program in August, and our hope is to sell 100 units in our first launch over there and we are excited about that.

Okay.

Great.

And then just final question.

With CityCenter, wondering if you can give us any sense of timing?

Dan, you were pretty positive on your conversations you're having with the banks, but I was wondering if you could give us any sense of timing when this might all get wrapped up, and I'm wondering with the funding that you and Dubai World are putting into the JV now off your own balance sheet, do you get that repaid to you once the financing is complete at the JV level?

Well, as far as it relates to timing, Felicia, we are looking at a time line of wrapping this up by the summer, by the end of the second quarter here, and as it relates to the funding we are making right now, we will see how that negotiation goes with the banks.

We may get some of those funds back.

We might leave it in for more equity and drive better pricing in terms of the bank deal.

Okay.

And then just last one.

On the -- I'm sorry, do you have more to add to that?

I'm sorry, it's Jim.

I was going to add couple of things because I'm grizzly and old, but we were over there, Dan and I were both over there.

The response was very, very strong.

And I'm sure, I'm pretty sure that, by the time we report the next quarter, we'll be able to tell you all about the deal itself, a $3.5 billion deal.

It won't be a matter, in our view, of getting the deal done.

It will be a matter of pricing.

And the pricing obviously will be wide of what it would have been, say six months ago, but those of you who were around like we were when we did the Borgata deal, for example, back in '99, I guess, the pricing will be inside of that and, of course, LIBOR is lower as an absolute number.

So we are going to get a very solid deal done.

It will be at, I think, very reasonable pricing.

The demand is quite high, not only because MGM is a good credit but ,frankly, a lot of our banks are welcoming the opportunity to develop a relationship with our partner Dubai World.

And so it's a matter of differentiating ourselves a little bit which I think we are doing, and that will be completed the next couple of months.

Okay, great.

And then just, final question, on the fourth quarter, you had given us the expectations that all the GMP contracts would be signed by this quarter, so I was just wondering what has changed there.

Bobby?

Oh, we have one outstanding item.

Actually we have eight GMPs, and we've actually received seven of them, one we are going to receive the pricing for GMP eight which is the podium for the casino hotel, one of the most complicated pieces of business at CityCenter.

So that particular eighth GMP is, it's due date is June 30, and it's going to take us about two months to work through all the detail.

So we actually get it at the end of the second quarter, but we are not going to execute it probably until the third quarter.

And that's the eighth GMP.

Most all other GMPs will be, all will be executed in the second quarter, but not the east and west podium of the [Peli] Casino Hotel.

That particular piece of business is currently priced, just that one component, at $1.270 billion, and has many thousands of pages of details associated with it, so that one is taking longer to work through.

Got it.

Okay, thanks a lot for your time.

Thank you.

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

Thanks, hey, guys.

Two questions one, Jim, you mentioned you've identified about 75 million in, I think, cost saves.

Could you just either color that in a little bit, or give us a sense of the time frame and then I have a follow up, thanks.

Sure, Bill.

Obviously payroll reduction was one component of it, and that gets the headlines, and we're obviously sorry that we have to do that, but that really wasn't even the majority component of the cost that we've been able to pull out of the existing expense structure.

As I said earlier, we really challenged everybody, corporate and property-wide, to go through all of their P&Ls to look for ways of improving our cost structure, really changing the way we are doing business.

We have a variety of energy projects, for example underway, which will save tens of millions of dollars on an annualized basis, and that's a great effort that's been done at the corporate level, but also at the property level.

We have dramatically reduced our consulting relationships, and our travel and advertising expenses.

We've reduced our inventory of supplies, and inventories in general, where they've been sitting in warehouses.

We've improved our ability from an HR perspective, to touch the customers more directly and reduce the layers of supervision and management, in order to do that.

We've been a limit smarter on our special events and our casino comping, and drilled into those type of expenses both on T&Es, but also on our casino comps, and that's why will you see our profitability and our margins actually holding up pretty well.

And these experiences we'll drill into throughout 2008 and into 2009.

So the number that we talk about is a large, but growing number, and it really reflects a change in how we are doing business to become more efficient.

Payroll is obviously a component of it.

There isn't a company in our industry that has not laid off people, regardless what have they say, and the issue is getting your payroll and your volume to align with one another.

And also, the issue is getting to be smarter about how you manage your business without affecting customer service, which we have never done and will not do, and the results are obvious.

No one made more money in the first quarter than Bellagio.

We also had number three and number four in the first quarter.

So the customers respond to our properties, we continue to reinvest in them.

I think what you will find also as we spend our capital, you will see us spend capital with very high emphasis on current and long-term returns on investment, and there's a lot of scrutiny as relates to that, and again no one is spending more money than we are.

I think Dan mentioned we are spending about $1 billion this year.

We are investing in our properties.

A lot here.

Expanding them.

We opened a new theater at Luxor, for example, in September, with Cirque du Soleil, and Chris Angel, several new venues up and down the strip.

We are remodeling rooms at a more rapid pace than our competitors, that generates better ADR, better volumes, and better revenue in general.

And so, it's a combination of some revenue initiatives and also some cost savings, which we actually began last September and have been more emphasizing since January, and frankly will continued to do on a going forward basis, because we think we will continue to improve our efficiencies here.

That's helpful.

Thanks, Jim.

And then, I just had a follow up.

You know, it strikes me that you guys get very little credit for this big pipeline of JV- type deals, where you are not using your own capital, you are contributing land or using your brand or management or construction expertise and maybe that's measured in hundreds of millions of dollars of cash flow going forward.

How do you monetize that when you think about other fee businesses in lodging in the past that have traded at relatively big multiples, is that how you're thinking about it?

Clearly that's a factor.

When we sat down and worked with our board in determining that, it seemed to us that we had great brands and the ability with the contacts that we had, our joint ventures in and Mubadala, frankly, and Abu Dhabi, and Dubai World, encouraged us to do that and we do think that there's significant cash flows there, and I know that Jim, when he was Chief Financial Officer, we used to always be very frustrated that the multiples that the quote pure hotel companies enjoyed, as compared to the gaming companies, and at some point if that grows to a sufficient level, if that continued to be the factor we could certainly split the companies.

And I would add, Terry, you know that of course we had a record first quarter in '07, and if you strip out Monte Carlo as we said earlier, our cash flows were only down 10%.

As Terry had said internally here we are still making a considerable amount of money, on an annualized basis or in the quarter.

The key for us is, with the balance sheet that we have and the way we want reinvest our business, how do we build on that growth?

We are capital-intensive business, and we think we can out-think our competitors in that area.

We have in the past, and our cash flows and our existing casino resorts, we believe, will continue to increase over a period of many years.

But layered on top of that is the growth of MGM Mirage hospitality, which starts out with zero and growing into, we think over time a very large company, which will not be capital intensive but generating a significant amount of development in fee income, on a going forward basis, and that of course is the type of income that gets the higher multiple in the marketplace.

It's complementary to what we are doing.

It's not distracting to what we are doing.

And we think it will overall accelerate our growth and improve and diversify our earnings.

And I would agree with you, I don't think we get and maybe we shouldn't yet, but we don't get a significant amount of emphasis on that business because it's currently small.

Thanks, guys.

Your next question comes from the line of Celeste Brown with Morgan Stanley.

Hi, guys, good morning.

Dan, just a little one for you, what were the CityCenter JV costs in that JV line for the quarter?

The expenses?

Yes.

Our share, roughly about three to four million.

Can we expect a similar level throughout the year, or should that ramp as you get closer?

It will ramp slightly this year, and then it will be more, it will be a higher level as we build out into next year, closer to opening.

So it will ramp off of these levels, not too much this year, but before next year.

And Jim, as you think about your two newer properties MGM Macau and Detroit, without sort of speculating as to where the revenues go in this environment, what kind of upside could there be on EBITDA if you were operating them at the efficiency level you would expect maybe in a couple of quarters?

Well, I will make a general comment and then maybe one specific on Detroit and I will bounce it over to Terry on Macau, maybe.

But clearly, you've been around awhile and you know that when we open up a property, we open it up with over-staffing our properties and spending a considerable amount of money on pre-opening, as we position a property.

We went into Detroit from a interim facility with limited food and beverage, no entertainment, no hotel, no convention business, and really a gaming operation, to a full-scale integrated resort,and spent a lot of money making the right impression, and that clearly has happened.

You can see our market share has grown substantially on the gaming side, but more importantly we believe the feedback in the customer reaction and response to the non-gaming side at Detroit has been very, very high.

We have been, ever since we opened, working to improve the efficiencies.

That property will make considerably more money than it is right now, as we finish that program.

It will take about all year.

On top of that of course the economy is very tough in the Midwest and tough in Michigan and tough in Detroit.

You have to take that into account when you think about what we will make there.

But from what we can control, which is to drive more business through the properties through our marketing efforts and to improve efficiencies, you should expect Detroit to make more money sequentially throughout '08 as we do what we do whenever we open a property and improve the margins.

I guess a similar story being Macau, Terry, but I will turn it over to you.

Great, in Macao if you take a look at the parameters there, we are roughly about 9% of the capacity represented in MGM Grand Macau property, and frankly since opening we are running about just under 8% of market share, so we are below our capacity in market share.

But, one, we have an absolutely fabulous facility there.

It's getting rave reviews from people.

Number two, if you really look at it there's three components in the business in Macao.

And the first component is the area of VIP rooms.

A significant part of it, lower margins obviously because of the partners that you have there.

We are exceeding our expectations there, and we consistently have done that.

The other two components are the mass market and the area of slot machines.

Frankly we erred in this, because we were very fixated in getting that building opened, we were having difficulties with subcontractors because everyone else was trying to get buildings finished and we put a lot of focus on that.

The assumptions erroneously from us were the determination because MGM is a known name, because of our former sister company the studios, that people would flock there in the mass market and the slot area.

Well, those people come from the four coastal provinces of China, 90% of the business by most estimates there.

Frankly those people may recognize the studio but they didn't recognize the fact that there was an MGM Grand Hotel Casino, if you will, in Macau.

So we need to be much more aggressive, and we've developed and are beginning to develop programs to deal with that mass market where we are underperforming and the slots were underperforming, and we've seen some movement, positive movement in that regard.

You are able to advertise non-gaming aspects in a judicious matter in the People's Republic of China.

That's something we had failed to do, and something we are now addressing.

I believe we have a great facility, great people there and the ability to bring more customers in, and we need to address those two areas of mass market and flux.

Terry, how do you think about the commission pressures in that market?

Do you feel like the property is at an appropriate level, or do you think you need to be paying more?

Well, we've adjusted that as of May 1, and I'm not going to give all the details on it.

Let our competitors find out on their own as to how that works, but we've adjusted that to deal with the marketplace.

As I said, even without that adjustment, we were getting a more than our fair share of that business and we expect even to grow that business further.

The real issue though is that you really want to get as much business as you can in the mass market in slots because that's where the margins are.

When you have partners sharing in the other, it's an important part of the business but I think sincerely we really have to grow the other two parts of the business.

What we are doing in the room operations, we are doing quite well and I think, in fact I'm convinced, that we are doing that well and can continue to improve on it, but I want to see the other two parts of the business grow, that we can really get the high margin returns that we should get.

And I think I would ad, Terry, if I may is that, on that business, of course, we've known these junket operators for a long, long time.

I think we have the best in the marketplace, and we did adjust the structure, as Terry said on May 1, we are clearly not leading the market.

We are anywhere but the most aggressive on that area.

We are leading with the relationships that we have with these operators, and more importantly the facility and its location, and not on price.

Thank you.

Ladies and gentlemen, we have reached the a lot the time for question and answer session.

I would now like to turn the call back over to Mr.

D'Arrigo for closing remarks.

Thank you, Tina, and thanks everyone for joining us.

If there's any follow up questions please feel free to call my office and we'll be around all day.

Thank you very much.

Thank you.

This concludes today's conference.