RECENT RESEARCH

Las Vegas High-Rise Blues II: From bad to worse

This analysis focuses on 26 residential towers in Las Vegas (up from 16 in our previous report "High-rise blues; outlook on CityCenter" from August 31, 2009) with a current inventory of nearly 8,700 units (pre CityCenter), which includes all relevant projects in the resort corridor, downtown, the south Strip and the suburbs. Of the residential towers, 20 are condos (pure residential) while the remaining six are condo-hotel.

Of the current inventory (excluding CityCenter as closings have just began at only one of the three residential towers), the number of “available” units that need to clear the market is alarming. This does not include currently owned units that are actively listed on the MLS system or what we believe could be a large number of owners who would prefer to sell but simply won’t given current market dynamics. In our analysis, we have assumed that all units in default will ultimately become available.

Of the 4,819 condo units we looked at, 49% are available or soon-to-be available. This includes unsold inventory (38% still held by the developer), units in default (10%) and bank-owned (2%).

Of the 3,863 condo-hotel units, 44% are available: unsold (33%), in default (10%), bank-owned (1%).

On a combined basis, 36% are unsold, 10% are in default and 1% are bank-owned.

Please contact us to view full report.

Honeymoon ending in Macau? A look at recent PBOC actions

China’s central bank, The People’s Bank of China (PBOC) unexpectedly tightened monetary policy earlier this week using a favored tool of raising the reserve requirement ratio (RRR). The increase was the first since June 2008 which then capped a cycle of 20 increases totaling 1,050 bps beginning in mid-2006. During the central bank’s late December 2009 quarterly meeting Monetary Policy Committee members noted that despite the upturn in China the economy lacks internal forces to sustain the recovery.

Members communicated plans for 2010 to maintain a proper balance between support for economic development, and managing inflation, highlighting the importance of continuing relatively easy monetary policy. However, the market immediately interpreted the move as a change in posture by China to more of a tightening stance (and stocks with Macau gaming exposure felt it disproportionately) in order to cool credit and asset growth which has been driven by looser monetary policy (underscored by RRR easing from September 2008 onward).

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Several days of observation at MGM’s CityCenter

We attended MGM MIRAGE's CityCenter opening and have spent time in this spectacular complex on each of its first four full days. We've spoken with MGM management and property level executives subsequent to the opening. We've also had discussions with F&B (Food and Beverage) executives in town, competitors and have spent time observing CityCenter's competitive set over the same time period. We recognize that it's very early to extrapolate these data points yet they are important to share from a directional perspective.

CityCenter volumes and gaming floor utilization appear higher than its peers' across day-parts thus far. MGM has taken advantage of the demand (most of which is walk-in, not hotel guests right now) by successfully yielding up slot machine denominations with the 58% of its slot floor at CityCenter that is currently server-based. An early example was CityCenter's $2.5m in slot handle in the first-two hours post public opening. This compares to Bellagio (during a typical December 2009 day) with $5m in slot handle over a 24-hour period. Half the volume in one-twelfth of the time is an encouraging early data point. Please contact us to view full report.

Boyd & Station combo – playing for a recovery

Earlier this week Boyd Gaming (BYD) revised its bid for Station Casinos to include all of the Station assets and management contracts in exchange for consideration of $2.45bn in an effort to complement its LV locals business (such as Sam’s Town, Orleans, Gold Coast, Suncoast). This compares to approximately $5.9bn in Station’s outstanding debt, suggesting BYD is offering about 41 cents on the dollar (assuming no equity value). BYD currently has about $2.2bn in liquidity over the next 12 months while taking into account free cash flow, cash, investment capex and also including $2.0bn in capacity remaining on its credit facility. Please contact us to view full report.

Genting Singapore: Resorts World Sentosa - consensus has it wrong

Genting Singapore (GENS SP) will likely open its S$6.6bn Resorts World Sentosa (RWS) in Singapore throughout January and February 2010. RWS will open with four of its ultimate six hotels (approx. 1,300 of 1,800 total rooms), Maxims Tower (high end), Hotel Michael, Hard Rock Hotel (including 7,300 delegate ballroom) and Festive Hotel (family oriented), Resorts World Casino, Universal Studios Singapore, FestiveWalk, and Le Vie Theatre (which will double as a conference hall).

We often hear analyst commentary suggesting that RWS will be challenged / disadvantaged, or even fail due to the family element of the resort (Universal Studios / Festive Hotel / FestiveWalk) mixing with the casino component, unlike Las Vegas Sands' Marina Bay Sands (MBS) - the other Integrated Resort (IR) forthcoming in Singapore, given its non-family orientation. We strongly disagree with this somewhat consensus view and believe RWS can be successful--bolstered, not hampered by the family dynamic. Please contact us to view full report.