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On the road to Morocco

16 June 2008

LAS VEGAS, Nevada -- The quest to find the next lucrative international gaming destination has landed in the Northern African desert of Morocco.

And the plans don't call for some gin joint in Casablanca.

Moroccan developers of a nearly 1,000-acre lakefront site near the city of Ouarzazate have asked Las Vegas-based Global Gaming Group of CB Richard Ellis to help find a casino operator for the location. The development is expected to have multiple uses, including residential, nongaming hotels, shops, entertainment and a golf course with golf course villas.

The casino is planned on a waterfront site near Lake Mansour Eddahbi and will include a hotel.

John Knott, the Global Gaming Group's executive vice president, said the project could be similar to Atlantis Paradise Island in the Bahamas, which is owned by Kerzner International Holdings. The 3,700-room hotel-casino is built around a 100-acre waterscape while the gaming element has 1,000 slot machines and 100 table games.

Knott said the potential casino in Morocco could be worth $100 million in annual gaming revenue depending on what is built and how the infrastructure progresses surrounding what is being called the Ouarzazate Lake City development.

"It's another legitimate international opportunity for a casino operator to diversify outside of the United States," Knott said. "Morocco wants to expand its tourism opportunities beyond its current market. They believe gaming could play a key role."

Morocco, which attracts roughly 7.5 million visitors annually, is a Muslim country. Knott said the government, including King Mohammed Ben Al-Hassan, support the Ouarzazate Lake City concept because the casino is just an aspect of the entire development. Morocco now has six casinos, but all are small by any standard. The largest is in the northern city of Tangier, which has 200 slot machines and 31 table games.

Ouarzazate is in central Morocco, 274 miles south of Casablanca and 126 miles south of Marrakech. Ouarzazate has an international airport that is about nine miles from the development. Knott said potential expansion could allow for flights from neighboring Spain, Portugal, France, Switzerland and Italy.

"The potential is what makes this an attractive locaition," Knott said.

He thought midlevel casino operators looking for an international opportunity might be the most logical candidates.

Deutsche Bank gaming analyst Bill Lerner said Morocco isn't on anyone's international radar. The current downturn in the credit markets has all but curtailed many domestic expansion projects and have slowed some international development.

Knott said the Moroccan developers, Palmeraie, a group of banks and investment firms, were open to building the hotel-casino themselves or having the casino operator put up all or part of the costs.

Lerner met with Knott and thought the project had potential to capture visitors from Europe and the Middle East if it was built based on the proposed concept.

"It really is similar to Atlantis, a big footprint with a fully integrated resort," Lerner said. "As long as the expectations are realistic and it's designed the right way, it has a significant shot of being successful."

Knott said the tax on gaming revenues could be anywhere from 17 percent to 21 percent, which is lower than gaming taxes in neighboring countries. Because of the Muslim government, which can't officially endorse gambling, the casino operator would have to set up its own regulatory system. Knott said he discussed the concept with Las Vegas gaming attorney Tony Cabot, who said it could be accomplished.

"It's not particularly complicated," said Cabot, a partner with Lewis and Roca. "You create a compliance committee that is made up of former regulators and build a regulatory structure around them."

Cabot said the regulatory structure would be important for any Nevada casino company interested in the Morocco opportunity. Cabot said the concept is used by casinos that operate aboard cruise ships.