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Massachusetts ready for gambling expansion

21 November 2011

BOSTON, Massachusetts -- The ink wasn't even dry on the final piece of legislation authorizing three Las Vegas-style casinos and a slot machine parlor in Massachusetts when Ameristar Casinos bought a seat at the table for $16 million.

But the hands may have already been dealt.

Gov. Deval Patrick is expected to sign the gaming expansion bill, which landed on his desk late Wednesday night. Supporters believe the legislation will create 6,000 construction jobs, 15,000 permanent jobs and generate some $300 million in annual tax revenue for state and local governments.

Massachusetts is providing the largest piece of gaming expansion since Ohio voters approved four casinos in 2009.

The three Bay State casinos -- located in Boston, the state's southeastern corridor, and in western Massachusetts -- were expected unleash a free-for-all when the bidding process begins. The 25 percent gaming tax is considered reasonable, since the three licenses are virtual monopolies.

Entry won't be cheap. Developers seeking a casino license are required to pay $85 million for the license and invest $500 million into the project. The slot machine parlor would cost $25 million for the license and $125 million for the facility.

It appears that several potential gaming operators are holding all the aces in the deck.

The Suffolk Downs racetrack in East Boston is all but assured the license for the lucrative Boston market, which some analysts estimate could produce annual gaming revenues of $1.5 billion. Key lawmakers support the track's efforts.

In April, Suffolk Downs struck a strategic alliance deal with Las Vegas-based Caesars Entertainment Corp., which operates 52 casinos in 12 states. Caesars Chairman Gary Loveman lives in Massachusetts, taught at the Harvard Business School, holds a doctorate in economics from M.I.T., and owns a minority stake in the National Basketball Association's Boston Celtics.

You can't get much more Boston than that.

The casino license for the southeastern part of the state apparently belongs to the Mashpee Wampanoag Indian tribe, which will most likely earn exclusive rights until next July. But the tribe doesn't have a casino site after a deal for a once-promising location collapsed. That could open the market for several other Massachusetts-based investment groups.

The real fight is in the west. At least four companies are seeking the license, which could generate roughly $380 million annually in gaming revenues.

"We expect significant competition for the western Massachusetts license," Deutsche Bank gaming analyst Andrew Zarnett told investors.

The Mohegan Sun tribe, which operates one of the two casinos in neighboring Connecticut, proposes building a $600 million project in a yet-to-be-determined location.

"There is a demand for quality gaming products there," Mitchell Etess, CEO of the Mohegan Tribal Gaming Authority said last week. "We believe Massachusetts will be a successful market for us and create a sustainable product."

Hard Rock International is proposing a casino in partnership with a local developer at country club in Holyoke. But the new mayor reportedly opposes casinos. Regional casino giant Penn National Gaming, which owns M Resort, is looking for a site.

Meanwhile, Ameristar entered the fray when it agreed to buy a 41-acre location off Interstate 291 near Springfield. Analysts said the Las Vegas-based company is "well positioned for growth for the first time in several years."

Jefferies & Co. gaming analyst David Katz thought Ameristar, Penn National, Mohegan Sun and Hard Rock were "expected to be formidable competitors in the bidding process."

Surprisingly, Las Vegas Sands Corp., MGM Resorts International and Wynn Resorts Ltd. may be shut out of Massachusetts.

Instead, the three are focusing attention on Florida, which appears to be the next major casino expansion battleground.

Zarnett said he wouldn't be surprised if other New England states join Massachusetts in the casino industry.

Last month, New Hampshire lawmakers voted to legalize slot machine like video lottery terminals. In Rhode Island, the governor hired a consultant to study Massachusetts' impact on the state's two racetrack casinos.

"While still preliminary, the actions are a good indicator that both New Hampshire and Rhode Island will likely look to gaming in some form in order to mitigate the negative impact from Massachusetts," Zarnett told investors.
Massachusetts ready for gambling expansion is republished from