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TWST: Was the acquisition of Mirage (NYSE:MGG) a surprise to industry watchers?

Mr. Cogan: Yes, I think it was a big surprise. Are you a basketball fan at all? Ask people about the first time they ever saw Dr. J. or Michael Jordan jump from the free throw line and slam-dunk a ball through the hoop. Most people could never do that, and never imagined it could be done, but those two made it look so easy. And that’s how it felt watching the MGM Mirage merger, watching MGM Grand acquire a company that most thought would always be the bellwether in the business. Through the recent acquisition of the Desert Inn, Steve Wynn is going to stay in the business, just not as a publicly traded entity at this point. The acquisition was not something we had anticipated, but at the time there were limited options for Mirage to get its stock price up given some operating and earnings disappointments.

TWST: Are there any major new projects scheduled for Las Vegas?

Mr. Cogan: Aladdin, which is a private venture, is scheduled to open on August 17. That will be the fifth of the new casino resorts to open in Las Vegas since October 1998. MGM Mirage is talking about opening a property between Bellagio and Monte Carlo that will focus on young affluent consumers. They’re just beginning to discuss the idea with architects and developers, and we think the company is quite focused on reducing their leverage in the near term following the acquisition of Mirage. Therefore, it could take a few years. You’re probably talking 2004 or 2005 before it opens.

TWST: And what is the compelling reason to buy MGM Mirage?

Mr. Cogan: MGM Mirage is the bellwether in the industry.

TWST: As Mirage had been.

Mr. Cogan: Well, that’s part of the reason why MGM Mirage is now. The combination of MGM Grand and Mirage gives investors some of the best assets on the Strip. In addition, MGM Mirage has, in my opinion, one of the best management teams in the industry and they are clearly focused on shareholders, with Kirk Kerkorian owning 60% of the company. Other things to consider include: MGM Mirage is the premier beneficiary of the rapidly growing Detroit casino market; they’re going to improve and fix the operations in Biloxi at Beau Rivage; and they’re in the process of doing a joint venture in Atlantic City. So their cash flows are also becoming more diversified from a geographic standpoint. MGM Mirage is also increasing the diversification of its high-end gaming operations in Las Vegas. Now that it owns MGM Grand, Bellagio, and the Mirage, earnings should be more insulated from a temporary unlucky streak at one property. Historically, the institutional investors who stayed away from gaming stocks did so because they didn’t like the volatility in the cash flows and they didn’t think the companies were all that focused on shareholders. Well, the leading competitors are showing right now that they are clearly focused on shareholders: MGM Mirage, Park Place, Harrah’s, Station Casinos (NYSE:STN), and Mandalay. Also, cash flow volatility is falling. This should lead to higher valuations for MGM Mirage and the group over time.