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Howard Stutz

Penn National still pursuing Strip resort

25 October 2010

LAS VEGAS, Nevada -- Penn National Gaming executives Thursday said the company's acquisition of the debt covering M Resort does not mean the casino operator is done shopping for a Strip casino.

Company officials spent the first portion of their third-quarter conference call with analysts and investors lauding the 19-month-old M Resort "as a terrific property and a compelling opportunity."

However, Penn National officials did not reveal many more details about M Resort's future operations, other than commending the Marnell family for their stewardship of the hotel-casino during challenging economic times.

Penn National Chief Executive Officer Peter Carlino said company officials have been "in a constructive dialog" with the Marnell family, the equity holder of the 390-room M Resort, "regarding ownership and future operations."

The Marnells will continue to operate M Resort in the interim. Penn National General Counsel Jordan Savitch said any change in ownership and operation would have to be approved by Nevada gaming regulators. He didn't expect any action until after the first of the year.

Penn paid $230.5 million for about $860 million owed by the resort, which cost about $1 billion to develop.

The deal gives Penn, which has spent two years seeking a casino in Las Vegas, a hotel-casino about 10 miles from the Strip.

"We have basically stepped into the role of the bank," Carlino said. "It's an interesting situation. We own the debt and we have an objective in mind. M does not meet our strategic objectives in Las Vegas. It's a one-off purchase and an opportunity that we believe in in the long term."

Penn National Chief Financial Officer Bill Clifford said M Resort had revenues of $106.5 million through Aug. 31 and positive cash flow that he thought would continue.

"I view this as a purely financial opportunity," Clifford said. "Over time, in the foreseeable future, we see this asset as a handsome return on investment. There was no other motivation other than that."

Penn executives believe ownership of M Resort will allow the company to accommodate its regional customers who wish to visit Las Vegas.

The company, based in Wyomissing, Pa., posted third-quarter net income of $48.3 million, or 46 cents per share, compared with $21.4 million, or 20 cents per share, a year earlier. Revenue rose 2.9 percent to $638.3 million for the quarter than ended Sept. 30.

Penn National opened a casino in Maryland in September and is planning for casinos in Ohio and Kansas.
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