MGM MIRAGE may have to write down the book value of some or all of its residential real estate inventory in its new CityCenter complex in Las Vegas, the company said in a filing to the US Securities and Exchange Commission yesterday.
What happens in Vegas, to borrow from the title of the recent Hollywood film starring Cameron Diaz, may not seem immediately relevant to MGM MIRAGE’s joint venture operation in Macau. It could however put further pressure on the parent to sell up in Asia—especially if New Jersey gaming regulators come back with a demand for an end to the company’s tie up with Pansy Ho.
MGM MIRAGE may have to discount the residential units at CityCenter from their present book value as current market conditions for real estate are unlikely to support such valuation, explained the company in the SEC filing. It said it planned to conduct what it called an “impairment analysis” as of 30th September.
“The Company believes it is reasonably likely that the outcome of this review may lead to a non-cash impairment charge but cannot reasonably estimate the amount or range of such impairment charge at this time.”
The company continued in the filing: “Its [the company’s] ability to close out its residential sales program will be based, in part, on future market conditions. As disclosed in the June 30 10-Q, CityCenter may incur a non-cash impairment charge if discounts to the prices of residential units prior to completion lead to a conclusion that the carrying value of the residential inventory is not recoverable based on management’s estimates of undiscounted cash flows.”
MGM MIRAGE added that the write-downs might show up in either the results for the fourth quarter 2009 or the first quarter of 2010.
It added: “The Company would record 50 percent of any such impairment, offset by certain basis differences, as a part of “Income from Unconsolidated Affiliates” in its “Consolidated Statements of Operations.”
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