Making the News

CNN

Originally Published:Thursday, December 6, 2007

Joe Weinert reported for the Press of Atlantic City for 18 years, covering the casino industry exclusively for eight, and is now an analyst at Spectrum Gaming and editor of the newsletter Gaming Industry Observer.

"Terry is very highly thought of in the industry not just for his acumen as an executive but for being a good person," he said. "He checks his ego at the door when he goes to work and does not seek the limelight like some others in the business do."

Further, in Weinert's view, Lanni "also really sees where the industry is going and always seems to be one step ahead of the trend line."

SPECIAL REPORT: Lanni's Sin City Success
Story Is No Mirage

LAS VEGAS (Dow Jones) -- On the November day before a deal to sell half of its unfinished City Center project, and a chunk of MGM Mirage itself, to Dubai World was set to close, Terry Lanni was in an expansive mood.

 

Other gambling and hotel companies were busy getting gobbled up by private- equity groups, but Lanni had found a way to tap into that kind of cash while setting in motion a joint venture to take his company places no casino firm had gone before. "It is a seminal event, absolutely transformational," he said. "I liken it to Harrah's being bought by a mortgage company, while we are partnering with a bank."

 

Under terms of the pact, the investment arm of Dubai's government would eventually take a 9.5% stake in MGM Mirage and half-ownership of City Center, the Las Vegas gambling, hotel, condominium and retail complex set to open in 2009 that, at $7 billion and change, is the largest privately funded real-estate development in history.

 

The deal, the end result of Lanni's chance meeting with Dubai World Chairman Sultan Ahmed Bin Sulayem at a horse race, not only pours $2.5 billion in cash directly into MGM Mirage's coffers but opens up new markets and opportunities in the Middle East and beyond.

 

"And it's just the first step," Lanni said.

 

Head of a sprawling, multibillion-dollar casino and hotel empire that stretches from Las Vegas to New Jersey and Mississippi to Macau, Lanni ranks the agreement as perhaps the biggest success of his decades in the industry. And it is just one of a dozen moves he has made since last year that together have made him a finalist for MarketWatch's CEO of the Year award.

 

Not bad for someone who, 31 years ago, didn't know what he was getting into.

 

Literally.

 

Getting into the game

 

Sitting in his office at the Bellagio here -- a room built by and for Steve Wynn and adorned with rare wood that alone cost $1 million -- Lanni, who has been running the company since 1995, recalled how it all started.

 

After a decade in the realm of corporate finance, he left to work on President Gerald R. Ford's 1976 election campaign only to find himself without a job after an obscure Southern governor named Jimmy Carter prevailed in that contest.

 

Lanni was contacted by representatives of what was then Caesars World, which was looking to expand into New Jersey and needed a chief financial officer after Garden State voters had legalized gambling in Atlantic City.

 

"They said they had a very exciting opportunity -- great company, great people -- for me, and they talked to me for about an hour but wouldn't tell me the industry," he said. "Finally I asked, and they said gaming. I said, 'Gaming? You mean gambling? I don't know about that. There are some pretty bad people in that industry.' "

 

But a meeting with top Caesars executives changed his mind, and, when he was offered the position, Lanni took it. One of his first tasks for this born-and- bred Angeleno was to turn an old Howard Johnson's in the seedy Eastern resort town into a 500-room hotel and casino (the minimum needed to satisfy state rules).

 

The conversion cost a "whopping" $15.5 million, Lanni said. "Now we spend that much on a restaurant."

 

Not that he didn't enter into the business with some hesitation: "If my mother was sill alive, I wouldn't have done it, because she hated gambling," he said. But he also recognized that "there are people a lot brighter than I am who are not going to go into this business, so the competition will be easier."

 

That might have been true then, but it isn't so now, as a 30-year boom in the casino industry and the billions of dollars in profit it throws off increasingly attract some of the best and brightest minds in the business world. Fortunately for Lanni, he has hired many of them, and they have helped him -- and controlling shareholder Kirk Kerkorian -- keep MGM Mirage more than competitive. And rivals on their toes.

 

Apart from its agreement with Dubai World, in just the past year, MGM Mirage has:

 

* Announced plans to construct a $4 billion to $5 billion gambling, hotel and retail complex on land it owns in Atlantic City.

 

* Formed a joint venture with Kerzner International Holdings and Istithmar Hotels to develop yet another multibillion-dollar Las Vegas resort projected to open in 2012.

 

* Licensed its name to the Mashantucket Pequot Tribal Nation for a planned $ 700 million hotel and casino expansion at the Foxwoods in Connecticut. (It also teamed up with Foxwoods to build a more modest gambling resort in Kansas.)

 

* Opened the $800 million MGM Grand Detroit.

 

* Formed MGM Mirage Hospitality, a unit designed to extend its hotel brands and design new luxury lodging concepts at destinations in the U.S. and abroad.

 

* Made a deal with Abu Dhabi's Mubadala Development to create a joint venture to build high-end nongambling hotels that has already led to plans for a multibillion-dollar MGM Grand resort in Abu Dhabi.

 

* Completed the MGM Grand Macau, its first foray into a gambling market that is now bigger than the Las Vegas Strip, in time for a Dec. 18 opening.

 

The stock hasn't done badly, either. Shares of MGM Mirage (MGM) started the year in the low $50s, crested over $100 at one point in October but took a bit of a hit with the broader market and are now trading in the mid $80s. The stock had started 2006 at $40, 2005 at $30 and 2004 at $20 -- for a total return of over 400%, compared with 50% for the Dow Jones Industrial Average and the S&P 500. The company's revenue nearly doubled between 2003 and 2006 to north of $7 billion, driven by both acquisitions and organic growth, while pretax profit tripled over the same time frame.

 

All the while, Lanni has had to make sure things at the company's 17 existing properties -- and among his 70,000-plus employees -- keep whirring along. To do that, Lanni has needed to become a master delegator. Unlike, say, at rival Harrah's Entertainment (HET), where everything is centralized and done by the book in almost Borg-like fashion, or Wynn Resorts (WYNN), where the guy with his name on the door always gets the last -- and the first -- word, MGM Mirage tends to give its people far more leeway to make decisions.

 

"When you give people responsibility, you have to give them authority. I have had a couple bosses over time who gave me responsibility but not authority, and that is a very difficult situation to be in," Lanni said. "I've seen a lot of people move into positions like mine who become exactly what they complain the prior person was."

 

Jim Murren, president and chief financial officer of MGM Mirage, is probably Lanni's top lieutenant, and he sure isn't complaining.

 

"Terry is a tremendous leader from the standpoint of empowering people to make important decisions," Murren said. "He is the best communicator I know in Corporate America and doesn't have the ego that many of his peers have in our industry."

 

Of course, when you give people their head, some of them are going to screw up, and while Murren noted that Lanni is no more or less likely to tolerate mistakes than any good boss, "to my knowledge, he has never yelled at anyone, never humiliated anyone, never made anyone feel embarrassed or diminished. He always manages in a very respectful way."

 

He gets kudos from above, as well: "Terry is simply the most outstanding chairman I have ever met," Kerkorian told MarketWatch through a spokesman.

 

In on- and off-the-record interviews with other employees, acquaintances, analysts and competitors, the most common term used to characterize Lanni was " integrity." No one had a harsh word to say, with the possible exception of one blackjack dealer at a former Mandalay Resorts property (MGM Mirage acquired Mandalay in 2005) who complained that new management wouldn't let her put the card face-down on a double, to the annoyance of some of her players. She did concede later that Lanni probably hadn't made that call.

 

Lanni is well-known for his push to diversify the company's workforce, collecting a basketful of awards in the area in just the last year. Lanni said he launched that effort back at his first job in Atlantic City and has stuck to it, not just because he thinks it is the right thing to do and is "also good business."

 

"It's no surprise to me that Terry Lanni would be a candidate for Chief Executive of the Year," said Bill Boyd, chairman and CEO of Boyd Gaming (BYD) which competes with MGM Mirage but also has joint venture with it in the form of the Borgata in Atlantic City. "Terry has been one of the most progressive leaders in our business, and his vision and foresight have transformed MGM Mirage into one of the world's leading travel and tourism companies. I'm proud to call Terry a business partner and friend, and I can think of few others as deserving of this honor."

 

Joe Weinert reported for the Press of Atlantic City for 18 years, covering the casino industry exclusively for eight, and is now an analyst at Spectrum Gaming and editor of the newsletter Gaming Industry Observer.

 

"Terry is very highly thought of in the industry not just for his acumen as an executive but for being a good person," he said. "He checks his ego at the door when he goes to work and does not seek the limelight like some others in the business do."

 

Further, in Weinert's view, Lanni "also really sees where the industry is going and always seems to be one step ahead of the trend line."

 

One of the very few places where the company falls flat -- at least on paper - - is a corporate-governance quotient that is slightly weak, better than only 35.5% of the Russell 3000 and just 46% of its sector. However, that is due almost entirely to Kerkorian's majority control; MGM Mirage's financial disclosures are well up to standards, the result of both internal inclination and outside regulation.

 

And they are apt to stay that way as long as Lanni is in charge, which could be for a while yet. At 64, he shows no signs of readying to retire, although so many years in top spots in one of the country's fastest-growing industries have made him enormously wealthy. He declines to say how wealthy, demurring that he doesn't really know and quoting the saying that, "If you know how much you are worth, you aren't worth that much."

 

Besides, he likes what he is doing.

 

"I don't have one job," he said. "I have a hundred different jobs. We are in the entertainment business. We are in the development business. We are in the real-estate business. We are in the casino business. We are in the food and beverage business. I think the fact that no two days are very much alike is probably what has been the most exciting part of my 31 years in this business."

 

  (END) Dow Jones Newswires

  12-06-07 0015ET

  Copyright (c) 2007 Dow Jones & Company, Inc.

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