Crown Ltd. Denies Being in CityCenter Recap Talks

LAS VEGAS-Crown Ltd. said Monday it is not in discussions about co-investing in CityCenter with Colony Capital. Reports citing people familiar with the negotiations between CityCenter developers (MGM Mirage and Dubai World) stated that the Melbourne-based owner of casinos in Australia and China was considering a co-investment with Los Angeles-based Colony that would cover all or part of the remaining $800 million of required project equity.

“Crown is not having any discussions with MGM or Dubai World with respect to any such investment in CityCenter,” Crown said in the statement.

The $800 million is necessary to gain access to a $1.8-billion facility that would fund the completion and pre-opening of the 7,000-unit hotel, condo and retail development between the Bellagio and Monte Carlo resorts on the Las Vegas Strip. The news of Crown’s supposed interest was reported in the Wall Street Journal, which previously reported that Colony Capital was considering an investment in CityCenter, a 50-50 joint venture of MGM Mirage and a subsidiary of Dubai World, an investment arm of the Dubai government.

Dubai World sued MGM for breach of contract after MGM revealed in its most recent annual report that its ability to continue as a going concern was in serious doubt. MGM Mirage last week covered a required $100-million payment for Dubai World, which is trying to get out from under its remaining financial commitment to the $10.5-billion development.

Packer or Packer-controlled entities have made three other moves to acquire gaming assets in Las Vegas recently. In April 2007, Publishing and Broadcasting Ltd., which is controlled by Packer, agreed to take a 19.6% stake in locally based casino resort developer Fontainebleau Resorts LLC for $250 million. The company’s $2.8 billion, 61-story Fontainebleau mixed-use project at the north end of the Las Vegas Strip is scheduled to open later this year with 3,812 rooms, a 100,000-square-foot casino, a 300,000-square-foot retail center and 27 restaurants.

The following month Crown made a $22.5-million cash payment for a 37.5% stake in LVTI, the holding company for the Crown Las Vegas project proposed for a 27-acre Wet ‘n Wild site on the Las Vegas Strip that it had put under contract. However, in June 2008, with one month left to pull the trigger on the acquisition–and having made an estimated $70 million in non-refundable option payments–LVTI dropped its option to acquire 27-acres on the Las Vegas Strip from Archon Corp. for $475 million and wrote off its $42-milion investment in the project and the partnership, which also included Texas developer Christopher Milam’s IDM Properties and New York City-based fund manager York Capital Management.

In December 2007, Crown offered $1.8 billion for Cannery Casino Resorts, a Vegas-based company that owns the Cannery and Eastside Cannery casino-hotels in the Vegas region, and a temporary casino next to the Meadows Racetrack outside Pittsburgh, where it is building a permanent facility. The company also manages the Rampart Casino in the JW Marriott in Summerlin, NV. Cannery is controlled by Millennium Gaming, which is co-owned by casino veterans Bill Paulos and William Wortman, and a subsidiary of investment management corporation Oaktree Capital Management.

Nevada endorsed the deal in January but Pennsylvania did not. In March, with the global economy in tatters and gaming earnings on a steep decline, Packer opted to pay $370 million to postpone and re-craft the deal. The $370 million includes a $50-million termination fee and $320 million for nonparticipating shares that can be converted into a 24.5% stake. As part of the deal Crown has a two-year option to acquire the company’s remaining shares for $1.4 billion.

If Crown fails to receive the necessary US approvals by mid-May it would get the $320 million back but would have to pay an additional $200-million termination fee and invest an additional $40 million for a 4.1% nonvoting stake in Cannery. So if the deal falls apart Crown would end up paying $290 million to kill the deal and gain the 4.1% stake.

The total development cost for CityCenter is now approximately $10.5 billion, which includes $6.9-billion in guaranteed maximum price contracts minus $500 million in planned savings, $1.8 billion in other construction costs not included in the GMPs, and approximately $1.7 billion for the land plus $300 million in financing costs and $200 million in pre-opening expenses. Sales revenue from some 2,700 condos was initially expected to total $2.7 billion, but the recession has left approximately half of the units unsold and a construction mistake killed plans for a couple of hundred condos that were planned above the Harmon Hotel.