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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Moody's backs Penn National's San Diego Indian casino

28 November 2015

Moody's Investors Service has praised a San Diego-area Indian casino being developed by Tropicana Las Vegas owner Penn National Gaming, which is a key property in the regional gaming company's western push.

The $390 million Hollywood Casino Jamul in San Diego is expected to open in July. Penn National is funding development of the resort and will manage the property for the Jamul Indian Village.

Moody's assigned a B3 rating to the project's $460 million in debt, which will be used to finance the project and repay Penn National. The casino company has a seven-year management contract with the tribe that pays Penn 30% of pre-tax profits and a 1.5% licensing fee for the Hollywood name.

Moody's said the Hollywood Jamul will benefit by being the closest casino to downtown San Diego, a distance of 20 miles.

"The ratings also take into account competition from several large casinos already operating in Jamul's primary market area," said Moody's gaming analyst Keith Foley. "Currently, there are eight competitors in San Diego County, three of which already target Jamul's core market."

Penn National announced the project in 2013. Two years earlier, the company — which operates nearly 30 casinos and racetracks nationwide — acquired M Resort in Henderson. In August, Penn closed on its $360 million purchase of the Tropicana.

In an interview at the Global Gaming Expo, Penn National CEO Tim Wilmott said the San Diego project was important in developing Penn's Southern California customer base to market both M Resort and Tropicana. Penn plans to spend up to $200 million in upgrades at the 1,500-room Tropicana over the next four years, which will initially involve changing out and expanding the resort's restaurant offerings.

Penn National's player rewards system has a 3 million-member database that Wilmott expects to see increase because of the San Diego resort.

The Hollywood Casino Jamul, located off San Diego's state Route 94, is a three-story development totaling 200,000 square feet with a casino, restaurants and other amenities, but no hotel.

Moody's estimated the property could generate $25 million to $30 million annual cash flow following expenses.

"The project will also benefit from the expertise of Penn," Foley said. "The stable outlook is based on Moody's expectation that Jamul will have sufficient funds to complete the remaining construction, including an additional reserve that extends three months beyond the construction period and the appropriate level of contingencies reserves typically provided for this type of development project."

California's 69 Indian casinos produced slightly less than $7 billion in gaming revenue in 2013 — $6.994 billion to be exact — according to the Indian Gaming Industry Report for Casino City, authored by California economist Alan Meister. The state's casinos accounted for a fourth of the nation's $28.3 billion in total Indian gaming revenue in 2013.
Moody's backs Penn National's San Diego Indian casino is republished from GamingMeets.com.