Credit crunch deals a losing hand to Vegas

By Deena Beasley - Analysis

LOS ANGELES (Reuters) - Some casino developers are folding in their cards as a chaotic U.S. credit market deals them a losing hand on the building boom that has turned much of the Las Vegas Strip into a construction zone.

Developers are waking up to the fact that expansion is coming at the same time would-be gamblers are grappling with sky-high gasoline and airline ticket prices, while the mortgage debacle has made banks wary of overextending themselves.

"A slowdown is probably wise and prudent given the circumstances," said Carlton Geer, head of the global gaming group at commercial real estate broker CB Richard Ellis.

Work is under way to add more than 40,000 luxury hotel rooms to the Vegas gambling corridor -- about one-third more than today.

One major project has already been mothballed and credit problems have delayed, or threatened to delay, several others.

Boyd Gaming Corp (BYD.N) last week placed on hiatus of at least nine months on its partially built $4.8 billion Echelon project, located toward the north end of the Strip on the site of the storied Stardust resort.

Boyd tied its decision to an inability to arrange financing for two key joint venture segments of the project.

Meanwhile, Las Vegas has seen a steady decline in gambling revenue this year -- including a 16 percent drop in May -- and summertime hotel room prices have been slashed in an effort to attract tourists and conventioneers.

No. 2 casino operator MGM Mirage (MGM.N), which is in the midst of building the $9.1 billion multiuse CityCenter project located between its Bellagio and Monte Carlo resorts, said on Tuesday it had secured commitments from lenders for more than half of the $3 billion it and partner Dubai World are seeking.

The companies have so far spent about $4.2 billion on CityCenter and will need to raise another $2 billion before the "city within a city" opens late next year, according to Chief Financial Officer Dan D'Arrigo.

"The Echelon delay certainly improves the prospects for CityCenter. Now they have at least a two-year head start," said Robert LaFleur, an equity analyst at Susquehanna Financial.

But MGM acknowledged it has no plans to break ground on a previously announced multibillion dollar Strip resort to be financed by partners Kerzner International and Istithmar Hotels, a unit of government-owned Dubai World.

The project, to be located on a 40-acre parcel owned by MGM, had been slated to open in 2012.

In addition, MGM has canceled plans to develop a housing and casino project on more than 100 acres in Jean, Nevada, about 25 miles southwest of Las Vegas.

Next to CityCenter on the Strip, construction is continuing on the Cosmopolitan Resort & Casino, even though senior lender Deutsche Bank AG (DBKGn.DE) foreclosed on the project after developer Ian Bruce Eichner defaulted on a $760 million loan.