It has not been a good year to be a shareholder in a major casino company. Yet MGM Resorts Chairman and CEO Jim Murren is smiling at the Global Gaming Expo in Las Vegas this week: "We're doing better, thank God."
Murren sat down for a lengthy interview covering topics from Macau to Massachusetts, from REITs to Reid (as in Harry).
"We're really struggling in Macau," he said, stating the obvious about the Chinese gambling hub. Revenue is down as much as 40 percent. However, Murren said comparisons should start to get easier this month. He expects the Macau market to bottom by the end of the year. "I do think in 2016, revenues in the market will be up ... but it's been ugly this year."
MGM Resorts and Wynn are both opening new properties in the next year, but Murren said MGM tweaked its Cotai casino resort layout to cater more to the mass market instead of the high-roller, junket business, which has all but disappeared in a mainland China corruption crackdown. Murren also said for the first time, the Macau government has brought together all six companies running gambling operations there in order to discuss what they plan to do beyond making money — small businesses, training locals to be management, health care, the environment. "It's kind of like a report card," he said. "This has been a great exercise. I know we've learned a lot. They've learned a ton."
Beyond Macau, MGM has an established relationship on the Chinese mainland with a hotel partnership, which Murren thinks gives his company a leg up on the competition. "MGM is well-known in China," he said, before joking, "They still think we make movies — I couldn't break it to them."
But it wasn't until last week in Washington that Murren met Chinese President Xi Jinping for the first time. "He's a scientist, he's thoughtful," Murren said, adding that he came away from the meeting feeling better about Beijing's commitment to American business. "Despite what you hear in the headlines, the big-picture, down-at-the-granular level, the 'let's get some work done' level, it's better than it's been in my 18 years."
Problems in China have bled over into Las Vegas, where revenue is down from a year ago on the Strip as a whole, due in large part to a decline in gamblers from Asia. Murren said at his properties, however, revenues are growing. "We've exceeded our forecasts," he said. "Next year looks better."
One reason Murren likes the look of 2016 is that a $400 million arena with 20,000 seats the company is building with sports and entertainment firm AEG will be completed then.
"When you spend $400 million on an arena, you'd like to get some revenue from that," he said. "I would bet ... a lot ... that we will get a hockey team, a professional hockey team, and I bet we will know by the end of the year."
He said MGM has no interest in being part owner of a team, because it wants to keep the arena "neutral" so every company in town feels comfortable supporting a new team and buying suites. Murren is confident that any concerns that professional sports leagues have about a pro team playing in a town which makes a living from gambling have been allayed.
"I will make another bet," he said. "If we get an NHL hockey team, basketball's around the corner."
Murren was born and raised in Connecticut, but now his company is suing the Nutmeg State for allowing two Native American tribes to compete to build a satellite gaming operation off tribal land near the Massachusetts border. MGM Resorts is building an $850 million casino resort in Springfield, Massachusetts, in part to draw from the Connecticut market, and Murren said the governor of Connecticut is breaking state law by allowing a satellite operation to proceed without a competitive bidding process.
"This is how ridiculous this is," he said, getting heated. "We've got two tribes that have made a gazillion dollars operating a duopoly in Connecticut, and at the whiff of competition ... their first reaction is, 'Let's just grant a concession to two Native American tribes to build some slot box on the border of Connecticut and Massachusetts without even a bid.'"
Murren mocked the proposed satellite operation — "It's a shopping center, that's sexy" — while still insisting it could threaten his company's massive investment. "If the tribes want to put $850 million into their own resorts to make them better, game on. But instead, no, they just want to spend a couple hundred million dollars building some lame kind of slot box with a few tables just to try to cut off some revenue, and the state thinks that's OK."
Investors have been waiting to see what decision the company makes about its financial structure, and whether it will spin off part of MGM Resorts into a real estate investment trust. Murren said the company will decide on a REIT. "I've got advisors on advisors."
There's likely to be some form of a trust, which doesn't have to pay federal taxes but does have to give nearly all profits back to investors.
"There is no doubt in my mind that gaming real estate, and MGM real estate, is undervalued in the marketplace today," Murren said. "There's also no doubt that there are multiple ways to try to create visibility and value around that real estate."
Earlier plans this year to move quickly to break MGM Resorts into two companies right away — one a REIT, the other an operating company — were proposed, in Murren's words, "at the wrong time, and it was the wrong format."
His team is working to figure out the right time and the right format. "I believe that there will be more REITs in the gaming space."
Murren is a Republican, but he has been a supporter of outgoing Senate Majority Leader Harry Reid, a passionate Democrat.
"It hurts Nevada a lot," Murren said of Reid's upcoming retirement. Reid called bankers when they refused to return Murren's calls — MGM was perhaps minutes away from bankruptcy during the construction of CityCenter. The bankers took Reid's calls, and MGM survived.
"I don't think I have to be a Republican or a Democrat on this topic," Murren said about Reid leaving the Senate. "I think I can be a Nevadan on this topic, and it's gonna hurt."
Murren's blunt talk about competition from Connecticut — "lame" "slot box" — made this reporter suggest he sounded Trump-like. He laughed, "How's my hair?"
As for the Republican presidential race, the CEO said that while the debates have been "kinda fun to watch," he hopes they will become more substantive. He said he likes John Kasich and Jeb Bush, then added with a laugh: "I love Chris Christie, I love listening to that guy. I think he picked Abigail Adams (to be the first woman on the $10 bill)."
It was different, and he liked that. "I don't like the guys who said 'My mom.' How hokey is that?"