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Gaming Guru

Howard Stutz
 

MGM Resorts' Maryland casino plans dealt a blow by state panel

22 June 2012

By Howard Stutz

MGM Resorts International's proposed $800 million hotel-casino complex in suburban Maryland suffered a severe setback Wednesday as a state working group failed to reach agreement on gaming expansion.

The issue could be revived in a July 9 special legislative session or through a ballot measure in November, but the collapse of negotiations is a blow to MGM Resorts' planned development at National Harbor in Prince George's County, about 10 miles from the Capitol.

The working group appointed by Gov. Martin O'Malley had two major issues to discuss: adding a sixth gaming license though only three of five planned casinos are operating, and cutting the state's industry-high 67 percent tax on gross gaming revenues.

"As Maryland residents, we are not all that surprised by the panel's inability to reach a consensus," said Stifel Nicolaus Capital Markets analyst Steven Wieczynski, who is based in Baltimore. "Looking ahead, we believe (the) news likely marks a delay of the inevitable, as we expect legislators to revisit the issues in January."

Last week, MGM Resorts said it reached agreement with Peterson Cos., which developed the 350-acre National Harbor area on the Potomac River south of Washington, D.C., to build a hotel-casino complex.

The National Harbor complex is a high-end mix of offices, residences, shopping and dining. It is also home to the Gaylord National Resort and Convention Center. An MGM Resort economic study prepared for lawmakers showed the casino would provide Maryland with $347 million annually in new tax revenues.

MGM Resorts Chairman Jim Murren said in a statement the company "remained willing" to see the project to fruition.

"MGM Resorts is committed to Maryland and our interest in National Harbor is unabated," Murren said. "With our partners at Peterson Cos., MGM Resorts remains keenly interested in building a world-class destination resort at National Harbor; a project that will bring significant investment, tax revenue, and much-needed jobs to the state."

MGM Resorts said the casino would include 4,000 slot machines, 250 table games, a spa, entertainment venue and other amenities. The development agreement is contingent on legislation to license a sixth casino, specifically at National Harbor; adoption of a "competitive tax rate" for gaming at the site; and approval in a statewide referendum.

The plan to add a sixth casino in Maryland is vigorously opposed by the Cordish Cos., the Baltimore-based owner of the Maryland Live! casino in Anne Arundel County, which opened this month.

A fourth casino is planned near Baltimore's Inner Harbor area as a joint venture of Caesars Entertainment Corp. and Rock Gaming.

Deutsche Bank analyst Carlo Santarelli said the rejection is good news for operators of other casinos in the area.

"We view this as a nonevent for MGM," Santarelli told investors. "More importantly, the risk of further cannibalization on properties within the state of Maryland and in West Virginia has been muted. We believe this had been an overhang."