), casino giant MGM Mirage (MGG
) pulled another card out of its sleeve on Nov. 10 with a giant residential and casino project it claims will match the size of New York City's Rockefeller Center, SoHo, and Times Square combined. Project CityCenter will be located on the Las Vegas Strip at a 66-acre site between MGM's Bellagio and the Monte Carlo casino, a joint venture between MGM and Mandalay.
The new megaresort, scheduled to be completed in 2010, will include a 4,000-room hotel and casino, three smaller boutique hotels, more than a half-million square feet of retail space, and some 1,600 residential units. BusinessWeek Senior Correspondent Christopher Palmeri spoke with MGM President and Chief Financial Officer Jim Murren about Project CityCenter and its impact on Las Vegas. Here are edited excerpts of the conversation:
Q: How much will Project CityCenter cost?
A: If you net out residential condo sales, it will cost about $3 billion. We'll have partners in the hotels and in the residential components. There will be joint ventures to raise money.
Q: Can Las Vegas support something of this magnitude?
A: We hired McKinsey & Co. in April and said, "With so much already under development can the city absorb this?" McKinsey validated our vision. We think there's an enormous market for this. They'll be a variety of price points, both in the residential components and in the hotels. We're not building a mall, we're building Soho. Las Vegas has created believers out of nonbelievers before.
Q: Why something so big though?
A: We could build another casino/hotel. Supply is relatively limited, not only for this year, which will be a record, but for 2005 as well. It wouldn't have been difficult to do that. But that, frankly, isn't very ambitious, [and it's] not the project the land deserves.
We really believe there's an opportunity to create a diverse metropolitan community that we really don't have in Las Vegas. We're a city of 1.7 million people on its way to 3 million, and we don't have a lot of elements of a city. We don't have residential developments where people can walk to work and restaurants, and interact in a cityscape. We can create in this that type of environment with studios, artisans. What we don't need is another mall.
Q: Can you give a sense of what this will look like?
A: They'll be atmospherically controlled streets for walking around. You'll have people living and staying overnight above you in 2-, 4-, 10-story buildings. They'll be winding roads, brownstones, retail stores, and buildings you can see through a screen, glass canopies. You'll see diversity in the skyline.
Q: And what's the time frame?
A: We're entering the architectural and design phase. That takes 18 months. Right now the land is surface parking for Bellagio employees. We're building them a new garage. Actual construction won't start until 2006, so the earnings impact won't be significant over the next two years. We'll be finished in 2010.
Q: How are things going with the Mandalay merger?
A: We're right on schedule so far. We're presenting information to the Federal Trade Commission and to regulators in Mississippi, Nevada, Michigan, and Illinois. We think we'll get their approvals by mid-March. By the end of first quarter, we could close the deal. We've already secured financing, which was dramatically oversubscribed. We set out to raise $7 billion in bank debt. We got $9.7 billion.