MGM: CITYCENTER SITUATION A LITTLE MORE COMPLICATED THAN ECHELON

Boyd Gaming announced this morning that it has postponed construction of Echelon, suspended its dividend, and approved a $100m buyback plan. This is the first time in awhile we’ve seen a smart redeployment of capital by a gaming company. MGM with CityCenter is in a seemingly similar situation except for a few important and complicating differences.

1. CityCenter is further along in terms of construction

2. Dubai World is a 50% partner and probably doesn’t want its billions in capital sitting in a dormant project

3. CityCenter has contracts for what it expects to be $2.7bn in residential sales within CityCenter. Millions of dollars of deposits have been received and would have to be refunded. Echelon does not contain a residential component.

This is a smart move by BYD and helps the supply situation a bit. However, let’s not get too excited about MGM following a similar path.