RonnieAdventures: RonnieAdventure 0413 - Las Vegas, The Ghost Town Part II, Nevada

Yes! That is a real lion cub that acted like he wanted to bit Andrew

I have never been a superstitious person, so it did not bother me when Kolohe adopted a black cat, it does not bother me to step on cracks in the sidewalk, and Friday the 13th tends to be my lucky day. Therefore, I was somewhat surprised when I learned that superstitious people were avoiding the main entrance to the MGM Grand because they thought it was a bad omen to walk into the casino through the lion's mouth. And, who wants a bad omen when you are going into a casino! (There was originally a large lion's head on the front of the building and the front door was located inside of the lion's mouth.)

The MGM Grand hotel contains 6,852 rooms, making it the largest single hotel in the United States, the second largest hotel resort complex in the United States, and the third largest hotel complex by number of rooms in the world. When the MGM Grand opened in 1993 it was the largest hotel complex in the world.

Located on the property are five swimming pools, a convention center, the MGM Grand Garden Arena, numerous shops, night clubs, restaurants, and the largest casino in Clark County. Originally the "MGM Grand Adventures There Park" was located at the back of the property, but the Theme Park was unprofitable and closed after a few years.

In 1993 the MGM Grand opened at its current "New Four Corners" location on the northeast corner of "The Strip" and Tropicana Avenue, which is just north of the Tropicana Hotel/Casino (southeast corner of the intersection) and just east of New York-New York (northwest corner of the intersection). The Excalibur is located on the southwest corner of the intersection.

When the property opened it had a Wizard of Oz theme, which explains the building's green "Emerald City" exterior finish. On the building's interior there were extensive Wizard of Oz memorabilia and decorations; "Emerald City;" a yellow brick road complete with cornfield, apple orchard, and haunted forest; audio-animatronic figures figures of Dorthy, Scarecrow, Tin Man, Cowardly Lion, and Wicked Witch of the West. The yellow brick road ended at a performance of "The Wizard's Secrets." Patrons hated the Wizard of Oz theme and people avoided the MGM Grand Casino, causing revenues to fall short of projections. Within two years a major renovation started to remove all of the Wizard of Oz theme materials and rebrand the hotel complex as The City of Entertainment using Art Deco materials. It was unheard of in Las Vegas to rebrand a new property that was only two years old.

I was working at Bank of America at the time and was assigned to revalue the property for financial purposes. Little did I know that over the next few years I would visit casinos throughout the United States and establish new methods for valuing casinos and the types of loans Bank of America would make on similar properties. Fortunately, at the time I worked for probably the industry's leading authority on commercial real estate valuations and I learned from him a number of important concepts that I used throughout my career. Thanks Steve!

The MGM Grand is constructed so that the west end of the building is stepped with ultra-elaborate "high-roller" suites. "High-rollers" typically do not travel by themselves, so attached to the "high-roller" suites are addition rooms for friends and staff. There is a hot tub on the patio of each suite (see picture below for stepped design).

When we were inspecting the property for refinancing purposes, someone in the group asked how much the "high-roller" suites rented for per night. The hotel manager just shrugged his shoulders and replied that he did not know because they had never rented one - he said the suites were just comped to "high-rollers" (In Las Vegas "high-rollers" are also known as "whales.")

Bank of America had historically never made loans to hotel/casinos but had recently acquired a portfolio of hotel/casino loans through mergers and acquisitions. After receiving the assignment and running a number of computer projections, working closely with a commercial fee appraiser we finally came up with a property value and then we started discussing how far we should round the value before reporting it for loan purposes. I'll never forget that we finally decided to round the value to the nearest $50 million. It seemed so strange that the rounding amount was so large. Many commercial fee appraisers go through their entire career and never even appraise a $50 million property.

In the second phase of rebranding, the lion's head was removed from the front of the property and replaced with a six story 100,000 pound bronze lion statue. The lion is the largest bronze statue in the United States.

Panaramic Picture by Kolohe

Located north of the MGM Grand is the Showcase Mall that runs all of the way to the Travel Lodge by Wyndham at the corner of "The Strip" and Harmond Avenue. The mall is known for its 100-foot high Coca-Cola bottle and colossal bag of M & M's. When the Coca-Cola business first opened you could sample different Coca-Cola products from around the world - for free! That did not last too long. Also located at the Showcase mall is the relocated Hard Rock Cafe, PBR RockBar & Grill, and Polo Towers Resort with an electronic sign that displays the current total national debt and the national debt per person. If you have time you can stop and visit with Elvis and Zoltar.

Panoramic Picture by Kolohe

Picture by Kolohe

By the time New York-New York was planned I had perfected our computer modeling for hotel/casino valuations, so when I first saw the proposed plans and specs for New York-New York I knew that something was really wrong with the design. Before running any computer projected cash flows I used various financial "rules of thumb" ratios to determine if the hotel room count matched the casino space, number of food/beverage choices and seats, entertainment venues, and back-of-the-house operations. The design indicated there would be a little over 2,000 hotel rooms, but the casino space was way too large and did not meet the room-casino "rule of thumb" ratio. In a meeting with the developers I questioned this discrepancy and was told that they were aware of the over-sized casino area. They went on to explain that the "New Four Corners" area of "The Strip" was so "hot" everyone visiting Las Vegas would want to visit the area and this property was going to attract a substantial portion of the walk-by foot traffic. This did not seem logical. After running numerous casino cash flows I could not even come close to the developer's projections. I finally arrived at a valuation number for loan purposes and the developer insisted that I was way low on the valuation. Everyone finally accepted the valuation figure and agreed to look at the cash flows a year after the the property had been in operation. A year later I discovered that I had missed the valuation by 100% - low! They never let me forget that valuation.

The New York-New York development gets its name because the building's architecture resembles the New York City skyline of the 1940s era. There is even a 150-foot tall "Lady Liberty" in front of the buildings that resembles the Statue of Liberty.

When the U.S. Postal Service printed their Statue of Liberty Forever stamp, they used a picture of "Lady Liberty" rather than a picture of the actual Statue of Liberty. A spokesperson for the Postal Service stated that they just selected a picture from a file of stock photographs and they did not realize that it was "Lady Liberty" instead of the Statue of Liberty. The spokesperson went on to state that they "wold have selected this photograph anyway" because they wanted a picture that was different from previous stamp pictures. It turned out the stamp was so popular that the Postal Service continued printing the stamp even after they discovered that the picture was "lady Liberty." Therefore, the sculpture of "Lady Liberty" sued the Postal Service for copyright infringement of a distinct piece of art and settled for $3.5 million.