Aria and Vdara Sold: CityCenter Owners Lose Billions

There’s some big, boring casino sale news today, and you know where to go for the story behind the story.

We mean here. Please keep up.

First, MGM Resorts is buying out its 50/50 partner in CityCenter, Infinity World (part of investment firm Dubai World), for $2.1 billion.

This seems like a lot of money until you realize CityCenter cost $9.2 billion to build.

Saying Infinity World “took a haircut” is about the biggest understatement of the year other than “Paper straws create a less than ideal cocktail experience.”

CityCenter Aria

Dibs on the boats.

At roughly the same moment MGM Resorts bought out Infinity World, it announced it will sell Aria and Vdara to Blackstone, a private equity firm, for $3.89 billion in cash.

As part of a lease-back agreement, MGM Resorts will continue operating Aria and Vdara. The company will pay Blackstone $215 million a year in rent.

If you’ll remember from four paragraphs ago, CityCenter cost $9.2 billion.

While it’s difficult to separate out the value of Aria and Vdara from the rest of CityCenter (Crystals mall was sold to Investco and Simon for $1.1 billion in 2016), they represent the bulk of the value.

That means MGM Resorts and Infinity World have eaten billions in losses based upon their original investment. If you put the hit at $4 billion, the loss represents about as much as it took to build Resorts World, the most expensive casino resort ever built on the Las Vegas Strip.

We’d better not see this Aria artwork in a yardsale.

The sale of Aria and Vdara continue what MGM Resorts creatively calls its “asset-light strategy.” Who needs those pesky assets, anyway? Owning things is so 1960.

A question few seem to be asking is why MGM Resorts sold Aria and Vdara to Blackstone rather than its own REIT (real estate investment trust), MGM Growth Properties.

In case you’re unfamiliar with the name, Blackstone already owns several Las Vegas casinos, including Cosmopolitan, Bellagio, MGM Grand and Mandalay Bay.

Proposed Blackstone slogan: Sin City’s Landlord.

Why is MGM Resorts selling now? Probably to address some of its debt ($12 billionish long-term), but the company also says it may use the cash to “expand sports betting ventures” (that sound you hear is flushing money down the tubes) or “possible casino development in Japan.”

Blackstone will soon own one of the more badass digital displays in Las Vegas.

What does the sale of Aria and Vdara mean to guests? Circling back to why such casino sales are boring: Pretty much nothing.

As the management of the hotels stays with MGM Resorts, anticipate little impact upon your visit.

The general trend has been less capital investment at hotels with lease-back deals, but overall, it’s business as usual for travelers.

There’s some jeopardy involved for companies like MGM Resorts, because if demand decreases, rents don’t, and tenants can find themselves in a pinch. Prior to the pandemic, Las Vegas visitation was flat.

Hey, if casino companies aren’t up for a gamble, who is?

Ultimately, it doesn’t matter who owns what, as long as the games are fair, the rooms are clean and the Captain Morgan is plentiful.

The sale of Aria and Vdara to Blackstone is expected to be completed later this year.

23 thoughts on “Aria and Vdara Sold: CityCenter Owners Lose Billions

  1. Jp

    Boyd is still the winner in the “Let’s pi** it away” category. $2 billion in Stardust real estate, only to sell it to Resort World for $300 million and then subtract the cost of tearing down the Stardust, planning Echelon and then building the first ten floors plus parking garage. Sum Total $00000.

    Reply
    1. Jackson

      It’s akin to investing in a major hotel group like Hilton or Marriott. Hotel groups own very few of their own hotels.

      I’d say it’s not any riskier than investing in airline stocks. You have to completely understand the business model and follow the trends/industry news closely. If you know what you’re doing, it can be profitable.

      Reply
  2. Michael Alexakis

    The real losers were the original buyers of Vdara “condo’s”, they were going for crazy high at the beginning of the City Center construction… I remember looking at the models they had in Monte Carlo of City Center with my kids, they were wondering what the hook was, the theme. It was a big Seinfeld, it was about nothing. And during the years log construction I always thought Crystals was going to be a casino, what freaking idiot built the only City Center casino way away from the strip… Worst shopping center I have ever visited, smells like bad perfume mixed with tobacco smoke, the only crap they peddle is designer priced handbags… Hornbuckle held on to Crystals? Hahaha

    Reply
    1. Hank

      Couldn’t agree more. City Center and Aria and the land they occupy are the biggest missed opportunities. And it’ll probably be sitting there for generations at this cost.

      Reply
  3. PhilInPhoenix

    @jp…don’t forget that Boyd also lost Barbary Coast in the Stardust/Echelon debacle. Traded to Harrah’s/CET for the Westward Ho land Boyd wasn’t smart enough to scarf up.

    Reply
  4. Topanga

    MGM leadership is not exactly a think tank. They wanted half the strip properties & got them. Now they want to sell them. Poor management, they live in a dream world. None were CPA’s, dreamers with high expectations & no understanding of costs & maintenance. They run up a $12 billion dollar debt, and shareholders demanding answers. Answers are clear. You need a new team. Lesson learned?

    Reply
  5. David

    How about the Fertitta boys. They were able bk stations and still become billionaires AND not lose ownership, all with the help of some judge. That is one huge scam that hardly ever gets any mention.

    Reply
  6. Catherine

    Las Vegas USED TO BE GREAT. It was a fun, economical place to visit. But corporate GREED has changed the tone of Vegas. First they added RESORT FEES. Now you have to PAY FOR PARKING. In the past, there were many, many GREAT DEALS ON FOOD. That brought many guests to all the hotels and casinos. The allure of cheap food and GREAT HEADLINERS in the showrooms at AFFORDABLE PRICES made Las Vegas appealing to the masses. They should rethink their GREEDY AGENDA and fill their rooms and casinos with HAPOY GUESTS. The money would flow and they would make a decent profit.

    Reply
    1. LA

      The author indeed misses the bigger point. MGM will now operate over 14 properties on the strip and as Catherine commented makes Las Vegas less appealing to visit. In fact the take the over of most of the great properties on the strip is a move out of the old Mafia playback with out a trip to the desert for failing to pay your gambling debt.

      Reply
  7. William Wingo

    The reason City Center didn’t end up like FontaineDrew is that they decided that finishing it was marginally preferable to abandoning it. The expression used at the time was, “The way forward [was] better than the way back.” Then throw in the Harmon tower debacle and you’ve definitely hit the big leagues. ​
    I visited Vdara/Aria shortly after they opened, and came out with every cent I went in with. The games were unplayable, and everything was too expensive–sort of like some other recent openings. Since then I’ve driven past City Center occasionally, on the way between my favorite off-strip casinos; but usually, I just take I-15.
    A time-honored Las Vegas cost-reduction tradition is to defer or even just neglect maintenance: “Just slap some duct tape on it.” With holding companies and REITs actually owning most of the strip resorts, and the operators squeezing every possible cent out of the day-to-day operation, it’s not hard to imagine these places all looking like Rio or Circus Circus in a few years. But at least the execs will have their golden parachutes.

    Reply
  8. KB

    My first and last experience at Aria was in 2010 when my wife and I had dinner with friends at the hotel. I tipped the valet upfront and asked to please put the car in a good spot. And what did he do? Took it to the downstairs garage drifting it and crashed it into a pole. Airbags out, front end in a V-shape. Aria’s “risk-management” wanted the car repaired. I of course refused, not demanding a new car, but replaced with the same vehicle that was not wrecked! $22k in damage, BTW. In the end, I had my insurance company go after them, total the car and succeeded with full reimbursement. Aria’s refusal to “make it right” and dragging out the situation told me everything I needed to know about Aria/MGM. Aria could have bought me 2 new cars with what it ultimately cost them in storage, replacement and loss-of-use. Since then, it’s been my pleasure to warn friends, family members, business associates, strangers-I-talk-to-at-airports to steer clear of Aria. I’ve also shared my story with valets in town and told them to tell their friends. Not that I valet my car anymore…………. : )

    Reply
  9. [email protected]

    Vegas is dead … the reaper just hasn’t told everyone… from corporate casino greed , to bad city experiences .. to traffic .. to water … the days of Vegas are dying … wait till California just legalizes all gambling…

    Reply
  10. Nicholas Kaiser

    Don’t forget the tragedy of the Harmon Tower and the recent announcement of that land being put to use finally. City Center is absolutely nothing like what was originally proposed and has had more than it’s share of challenges. Personally I think MGM had big dreams but failed miserably in the execution

    Your also forgetting Waldorf Astoria.

    Reply
  11. Mark

    Steve Wynn must be rolling over and in laughter! The fact that Jim “Jimbo” Murren spent around $8 billion to build City Center (which at the time was termed the largest private construction project in history), almost bankrupted the company during the recession, and then sold Bellagio (for $4.x billion) while City Center went for 3.9! Jimbo was a total joke! And that asshole got a $32 million dollar severance package. Between Aria and Vadara there must be over 5,000 rooms. Bellagio has to have less than 4,000. The bath MGM took on City Center is astounding.

    Was in Vegas for the Resorts World opening. Stopped by Bellagio. The MGM remodel looks cheap. They did away with the curtain overhangs that use to be over the gaming areas and opted for a more “modern” look. The seasonal decorations in the entry way were small and did not fit the grand large hallways they were in. Bellagio use to be the perfect property. As Thriller was to Michael Jackson Bellagio was to Steve Wynn/Mirage Resorts. Wynn is nice but Bellagio in its hey day was the best. It was the grand hotel. Even today if most people had a friend visiting Vegas they would tell them to visit Bellagio. Doubt many would say – you’ve got to see the shit show that is City Center. Hopefully MGM doesn’t pave over the fountains and replace them with a CVS and shopping mall!

    Reply
  12. lori

    If they can afford $215 million a year in rent, they didn’t lose much if any. With that income you do not just say cost minus sale is the bottom line.

    Reply
  13. The Strohman

    It might not be as awful as it sounds. How much cashflow has City Center generated for MGM since it opened? Its not like all of that was used to pay debt. They’ve raked in cash from that place for 11 years – how much is anyone’s guess. Its not a figure they likely publish in their public financial reporting. I’m sure they didnt lose as much as the sale suggests – and they’ll get a nice tax break on the sale depreciation.

    My take on the property – Vdara is and always has been the only worthwhile component of the complex. Its got awesome suites with tram access to Bellagio. The valet-parking-only at Aria always made it a non-starter for me. Its not convenient to walk to from anywhere and you had to pay to valet park. Only went in once just to see it – no need to go again.

    Reply
    1. David F

      Strohman, your mixing it up, Vdara is Valet only, Aria has self park albeit on the opposite side of the hotel from the front desk.

      Personally I like Aria for video poker and the bars. None of the bars are doing ticket/light systems and the bartenders are fantastic. Staff and everyone there is usually top notch. Rooms are ready for some tlc but otherwise still nice. It is a bit buried but really not that that hard to get places with direct access to the Park and tram to Belagio.

      As also mentioned you cant judge the success or failure of city center just on the real estate, it has been an successfully operating property for 11 years.

      Reply
  14. JeffinOKC

    Snark all you want, but this is the largest investment in Nevada history. And it got finished and opened over ten years ago. I don’t think T-Mobile and Allegiant get built without it. No Puckball or NFL. We would still be saying the Bellagio fountains and the NFR are the biggest things in Vegas.

    I don’t think they lost money on the sale. These properties have been making incredible revenue for ten years and we have no idea of the accounting and tax strategies deployed over the decade.

    Boyd Gaming did the smart thing and stopped on Echelon around 2008 because they didn’t have the access to capital at the level required to finish and ride out a slow opening. Kirk Kerkorian, Terry Lanni and Jim Murren had the vision and “tolerance for ambiguity”, plus access to capital, that was required to make City Center operational. This thing has been employing Nevadans for a decade, rather than being Fountainbleau on steroids.

    Reply
  15. project design

    I agree, MGM is nefarious to say the least …..yet no one see’s the likely hood of what’s going on. “MGM is still there” and when the feckless results of corporate greed and gov. happens, they have design, “a broom and dustpan effect” very similar to what the Fertitta’s did!

    Reply

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