If ever there was a project enabled by one generation and given to another , CityCenter is it . tainment company , and the repositioning of the company began . Since 2018 , it has been proactive in diversifying revenues , notably with the introduction of car parking charges and other revenue enhancements . But if MGM had the confidence to adapt to projected trends , did they miss an opportunity by not integrating these insights into the programming at City- Center ?
Aria villa suite
If ever there was a project enabled by one generation and given to another , CityCenter is it . tainment company , and the repositioning of the company began . Since 2018 , it has been proactive in diversifying revenues , notably with the introduction of car parking charges and other revenue enhancements . But if MGM had the confidence to adapt to projected trends , did they miss an opportunity by not integrating these insights into the programming at City- Center ?
The property has excelled at the conventions business . The open , bright space at Aria is differentiated from many of the other resort convention spaces and the property has proved successful in booking convention customers , and today is squarely positioned for that segment .
If anything , CityCenter ’ s somewhat positive outcome is not just what the visionaries predicted , nor the successful adaptations made by several operating teams alone , but the structural changes within capital markets ; MGM sold the real estate and went asset-light .
Real estate investment trusts , formed in the Cigar Excise Tax Extension of 1960 , are listed vehicles that hold real estate , but are advantageous compared to traditional corporations as no tax is paid prior to dividends .
MGM created the spinoff MGM Growth Properties REIT , which listed with nine MGM-operated properties , but none within the CityCenter portfolio . MGM Growth was subsequently acquired by VICI , a REIT created from the Caesars restructuring after bankruptcy , for $ 17.2 billion .
At CityCenter , Ladder Capital acquired 427 condominium units at Veer Towers for a reported $ 119 million in 2012 .
In 2016 , the U . S .’ s largest retail REIT , Simon Real Estate , bought Crystals for $ 1.13 billion and in 2018 the Cherng family acquired the 389-room Mandarin Oriental Hotel for $ 214 million . The new owners brought in Hilton to manage the property under their Waldorf-Astoria flag .
In July 2021 , MGM bought out Dubai World ’ s remaining interests for $ 2.12 billion , enabling the company to trade the Vdara and Aria on a saleand-leaseback basis to Blackstone ’ s REIT for $ 3.9 billion . MGM is now a tenant at Aria and Vdara paying rent of $ 215 million per annum .
The company also entered an operating agreement to manage the Cosmopolitan on behalf of the new real estate owners ( a consortium including Blackstone ’ s REIT and the Cherng family ) in 2022 , paying $ 1.6 billion for the management contract as part of a $ 5.65 billion deal .
Whether MGM ultimately recouped its total construction and investment costs for CityCenter by asset sales alone is unlikely , but the new structure has made the ongoing operations of the properties more streamlined
and focused . Moreover , with the Cosmopolitan now part of the company ’ s platform , potential exists for greater integration with neighboring assets .
From Generation to Generation
On the June 15 , 2015 , Kerkorian , who was involved with nearly every property on Las Vegas Boulevard , died at 98 . Reid called their relationship “ one of the special things in my life .” Reid died in 2021 aged 82 . If ever there was a project enabled by one generation and given to another , CityCenter is it .
Nearly all of the protagonists that served during the conception and development of CityCenter have departed MGM , with Baldwin retiring in 2018 and Murren stepping down as CEO in 2020 .
Open for 13 years and despite the soaring architecture , evolving programming , a new financial structure , and over $ 400 million of annual revenues , it is premature to conclude whether the CityCenter gamble hit the high notes that were expected . It may prove to be when the resort turns 21 in 2030 .
What we can say with confidence is that CityCenter had a difficult childhood .
Aria and surrounding properties stand as a testament to what is possible in design and architecture , but also as a reminder that casino development is unlike other asset classes . The most important strategic asset is not the real estate , but the customer , and within this paradigm , the design objectives should be focused to meet those customers ’ needs . It is probable that as a consequence of the complexities of this development , and the challenging financial environment during construction , this fact was sometimes forgotten .
But unlike some properties that open fully formed and have few changes , Aria ’ s story is one of a property that is continually evolving and improving , and with the correct guidance and nurturing , it is possibly the best placed resort for growth within the next generation of Las Vegas customers .
Oliver Lovat is the CEO of The Denstone Group , which offers strategic consultancy in resort development . He was faculty at City University of London 2012- 2020 and University College of Estate Management 2010-2015 . His research topics are Las Vegas customer behavior and the evolution of competitive strategy within Las Vegas casino resorts . For a longer , more detailed version of this story , visit GGBMagazine . com .
SEPTEMBER 2023 www . ggbmagazine . com 45