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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

MGM Resorts strikes deal for hotel-casino complex near Washington, D.C.

18 June 2012

MGM Resorts International signed a deal Friday to build a large hotel-casino complex in southern Maryland, but there are many obstacles to navigate before slot machine gamblers can line up cherries roughly 10 miles from The White House.

The casino giant announced the agreement jointly with the Peterson Cos., which developed the 350-acre National Harbor area along the Potomac River in Maryland's Prince George's County.

The MGM Resorts-operated hotel-casino would become part of the National Harbor complex, which serves as a waterfront destination for the Washington, D.C., metro area, offering restaurants, retail, offices, residences, and several hotels. The National Harbor also includes the Gaylord National Resort and Convention Center.

MGM Resorts officials met with Maryland Gov. Martin O'Malley and legislative leaders Friday in Annapolis to talk about plans for the potential casino. The announcement was made soon after the discussion ended.

The casino, however, is not a done deal.

The agreement is contingent on the Maryland lawmakers passing legislation to grant a sixth casino in the state for a license at National Harbor. It would also depend on passage of a "competitive tax rate" for the site and a referendum by Maryland voters.

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.

In a statement, MGM Resorts Chairman Jim Murren called the opportunity to build the closest casino in proximity to Washington, D.C., "extremely compelling."

Murren said the casino would "serve as a new amenity for the more than 40 million domestic and international visitors who travel to the nation's capital each year."

Maryland gaming laws allow for five casinos, but only three have opened. The state currently does not allow table games and has a 67 percent tax on gaming revenues, the highest in the nation.

Deutsche Bank gaming analyst Andrew Zarnett told investors Friday that a destination resort in Prince George's County could be a game changer, especially for Maryland Live! and a planned casino in Baltimore that would be built in partnership by Caesars Entertainment Corp. and Detroit-based Rock Gaming.

"We expect the existing casino operators to strongly oppose the awarding of a sixth license, given the potential cannibalization impact from such a project," Zarnett said in a research note. "Although we expect strong opposition from existing operators, we believe lawmakers may consider lowering the existing tax rate and authorize table games at the existing locations, which may help soften the impact."

The proposed MGM Resorts casino, with easy access to three interstate highways and the Woodrow Wilson Bridge, would include 4,000 slot machinelike video lottery terminals and 250 table games with shopping, restaurants and a luxury hotel.

Cordish Cos. Chairman David Cordish believes it's premature for Maryland to be discussing new casinos when the five originally approved properties all haven't opened.

"I don't care whether it's MGM or Harry Smith's slot barn. The basic point is that we shouldn't be talking about expansion until we have all the facts," Cordish said.

His company's $500 million Maryland Live! has drawn roughly 50 percent of its business from customers in Prince George's County, Northern Virginia and the Washington D.C. area, all of which would be targeted by an MGM Resorts casino at National Harbor.

Cordish also was critical of MGM Resorts, mentioning the company's $203.3 million first quarter net loss.

"Their financial problems are well known," Cordish said. "That's not a great recipe."

Caesars Entertainment Senior Vice President of Public Affairs Jan Jones said the casino operator is not opposed to a sixth casino in Maryland, "but some tax considerations need to be taken into account."

Jones said the challenge for lawmakers will be to make the state's gaming landscape a fair and equitable environment.

"All we want is fairness and clarity," Jones said. "Right now (MGM's proposal) is just a vision without legislative support."

MGM Resorts, which operates 10 casinos on the Strip including Bellagio, MGM Grand, The Mirage, Mandalay Bay and the CityCenter development, has been actively looking for casino expansion opportunities in large markets of late.

The company's name surfaced with potential casino developments in Toronto, New York City and Miami. MGM Resorts also wants to build a casino in western Massachusetts, but pulled out of its original location near the town of Brimfield. The company is seeking an alternative site.

The company operates the MGM Grand in Detroit, was well as casinos in Mississippi and Macau. Also, MGM Resorts has a hospitality division that is building both gaming and nongaming projects in China, India and the Middle East.

"The power of the brands in the MGM Resorts portfolio and their loyal customer base of 60 million will attract customers from all around the globe," Peterson Companies Chairman Milt Peterson said in a statement.
MGM Resorts strikes deal for hotel-casino complex near Washington, D.C. is republished from Online.CasinoCity.com.