MGM MIRAGE and Dubai World have signed a definitive agreement for a $5.1 billion long-term joint venture, the companies announced today. Dubai World will invest approximately $2.7 billion in MGM MIRAGE's CityCenter (pictured) mixed-use in Las Vegas and up to $2.4 billion in up to 28.4 million shares of MGM Mirage stock, representing an approximate 9.5 percent stake in the company.
The joint venture, CityCenter Holdings L.L.C., will be owned equally by MGM MIRAGE and Infinity World Development Corp., a wholly-owned subsidiary of Dubai World. Upon closing, the joint venture will own 100 percent of CityCenter, a self-contained "city within a city" that will include a 4,000-room resort casino, approximately 470,000 square feet of retail and entertainment space, 2,650 luxury condominium and condo-hotel units in multiple towers and two 400-room non-gaming boutique hotels, one which will be managed by hotelier Mandarin Oriental, upon its 2009 completion.
In connection with the joint venture, Dubai World will initially contribute approximately $2.7 billion for 50 percent of the equity in the project, while MGM MIRAGE will contribute the CityCenter assets which both parties have mutually valued at $5.4 billion, and receive the other 50 percent of the equity in the project. If CityCenter is completed on budget and on schedule, MGM MIRAGE, which continues to serve as the project's developer, will receive additional consideration of $100 million. Upon the project's completion, the joint venture will pay MGM MIRAGE a management fee to operate the resort casino, the retail space and the Vdara condo-hotel tower.
MGM MIRAGE and Dubai World met in May, when Dubai World chairman Sultan Bin Sulayem sat in on a meeting between MGM MIRAGE and Kerzner International Holdings on another project. Terry Lanni, chairman & CEO of MGM MIRAGE, then later met with Bin Sulayem, and joint venture discussions began.
"Dubai World was impressed with MGM MIRAGE and strongly believed in our business," an MGM MIRAGE spokesperson told CPN today. "This deal further validates that Las Vegas is a prominent development destination."
Furthermore, the spokesperson added that Dubai World sells more real estate at high prices than any other company in the world and has access to buyer pool that no one else does. "We wouldn't be surprised if we have increased activity and revenue (because of this access)," he said. "This is a case of one plus one may equal five."
The companies anticipate closing by the end of the year and that the tender office will commence during the week of Aug. 27, 2007. The purchase of shares will close concurrently or soon after, subject to requisite approvals.
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