Jim Murren waited five years to welcome the world to CityCenter, the 18 millionsq.-ft., $8.5 billion resort complex that opened this week in the heart of the Las Vegas Strip. When he took over as CEO of MGM Mirage a year ago, he was a youthful 47. "I'm now an old 48," he says, and he's got the gray hairs to prove it. That's because CityCenter came within a whisker of not opening at all, even as it was billed the most expensive private construction project in American history and thought of among locals as a beacon of the city's resurgence from the depths of recession.
Early this year, the company was in the grip of what Murren calls an "intense, very dire liquidity crisis." MGM Mirage's joint partner on CityCenter, the Dubai World subsidiary Infinity World, had sued MGM Mirage and stopped putting money into the project. Unable to find other sources of capital, the casino company was left with two choices: walk away from CityCenter or try to work out a deal with MGM Mirage's bankers.
It fell to Murren to convince the bankers that the project was worth saving but things had gotten so touchy that he had to ask Nevada's congressional delegation, led by Senate majority leader Harry Reid, to call the CEOs of MGM's banking partners to ask them to return Murren's calls.
Even that almost wasn't enough. The company owed a $200 million payment to CityCenter's contractor, Perini Construction. It was due on a Friday in March. Murren spent that day on a conference call with the company's banks, trying to persuade them to lend MGM the funds until it could resolve its problems with Dubai. Murren could promise them nothing. "We don't know the outcome of CityCenter. We don't know how we're going to get there."
MGM Mirage had already prepared its bankruptcy papers for the project and rented construction fencing to seal off the complex. As Murren waited for the decision in his office, TV crews circled overheard in helicopters, catching footage of a project widely rumored to be failing.
On March 27, the consortium of banks approved the loan by the narrowest of margins 50.43%. It proved to be the first step in putting CityCenter back in business. Had it gone under, Murren says, it's "very possible" MGM Mirage would have been brought down too. And the financially reeling state of Nevada, which received so much of its revenue from gaming, would be in "a tremendously damaged position, more so than even we had been this year." Murren calls it the most challenging time of his life "Had I known we would have survived, I might have enjoyed a bit of it."
Now, of course, he looks like he's enjoying this week as his playground of smart-suited corporate glass and steel glitters on the Las Vegas skyline. The mood this week in the city is upbeat as fireworks and a multitude of parties have marked the opening of Aria, CityCenter's central casino-hotel. (A retail mall, Crystals, opened early this month, along with a Mandarin Oriental hotel and a condo-hotel called Vdara. Three more towers are still in mid-construction.)
But the question remains whether CityCenter will help spur a rebound in the city the common wisdom in Las Vegas is that new supply creates demand or the addition of more than 4,000 new hotel rooms will depress an already oversupplied market. Murren describes it as the "stimulus package of all time for this community," pointing to the 12,000 jobs CityCenter has created. Expectedly, he's bullish that CityCenter will lure new visitors to Vegas. "There's no doubt in my mind that more people will come to Las Vegas next year than this year."
In the short term, though, Grant Govertsen, a partner and analyst with Union Gaming Group, says the "pool grows bigger, but it won't grow enough to maintain footing for all the properties. You'll see a hit at some of the other properties." Nevertheless, Govertsen also believes visitor growth will rise next year and expects a modest uptick in the city's revenue per available room, which could help the city absorb the new inventory.
But no one is expecting a fast turnaround. Indeed, as Aria is opening, the venerable Binion's Gambling Hall downtown has shut down, and the Sahara just announced plans to temporarily close rooms in two of its three towers. One of the early selling points of CityCenter was that a slate of condos was planned to give the project some semblance of urbane flair. But the high-rise-condo market is in dire shape. Murren says MGM Mirage has 50% of its condos under contract, but it also recently announced a 30% price reduction to lure in new buyers as well a financing package to help buyers afford to close the deal.
Real estate broker David Brownell says a 30% discount might not be enough. Condos around the city that were selling for between $500,000 and $750,000 in 2004 are selling today for less than $300,000. Brownell says if he had marketing money to spend, "one of the last places I would think of trying to invest it is promoting [condos at] CityCenter. I don't think there's a great demand for it."
Still, a cautious optimism has taken hold. In the airy, triumphant lobby of Aria, Murren notes, "Nothing gets close to the immense amount of gratitude and pride I have about this."
Parts of the project have had bad luck. The Harmon boutique hotel, a victim of construction defects, won't be finished until the end of 2010. But the opening of Aria is a significant achievement, signifying the end of an era in Vegas. The days of visionary auteurs bringing extravagant casino dreams to eager banks are over. Land is too expensive if you don't already own it. Banks are reticent to lend to developers who lack land equity and plenty of cold hard cash. MGM Mirage owns a larger parcel than CityCenter a few miles north of it on the Strip. It's unlikely the company will attempt a sequel. "I think people will quickly come to a conclusion that no one will ever top this," Murren says. "We've delivered in excess of people's expectations."