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Posts Tagged ‘Cordish Company’

Maryland’s Gaming Situation

Posted by jkarmel on September 23, 2010

I’m back from my writing hiatus – I’ve been busy with our new baby (6 months old), other projects and the early semester professor stuff. But the first casino in Maryland – Penn National’s Hollywood Casino in Perryville – is set to open on September 30, just up the road from me off I-95: hence my return.

There’s plenty of current gaming news around the mid-Atlantic, including the opening of SugarHouse in Philadelphia today and ongoing developments in the Atlantic City gaming saga. But, this post is dedicated to my home state, where gaming has had an interesting ride since votes approved 15,000 VLTs at 5 locations in 2008.

As any Marylander within earshot of a television in the past few months knows, there’s a heated fight over the Cordish Company’s proposal for a Maryland Live! casino at Arundel Mills Mall. I haven’t seen any recent polling as to which way Anne Arundel county voters will vote – but I’ll speculate anyway. I think the anti- side is winning. They have a lot more ads out and they are fairly well-done for the purpose. They effectively resonate a simple message, whether you agree or not with it: voters should block the casino because mall-going families and casinos don’t mix. The commercials are slick and simple and well-produced. By contrast, there have been only a few commercials on the pro- side and (apparently) not as much resources expended to this point.

Last week, there was a report that the state might investigate Penn National’s (PN) funding of the anti- Arundel Mills campaign and possibly delay the opening of that firm’s Hollywood Casino in Perryville on Sept. 30: but that doesn’t appear likely right now. I can’t find anything in the Maryland legislation prohibiting such an effort, so I’m not sure how there would be any legal case for the postponement.

However, PN’s involvement as a partner with Magna Entertainment to block the Cordish proposal certainly will complicate matters if the group succeeds in stopping the Arundel Mills casino. Maryland’s gaming legislation seems clear enough: no operator can have more than one site license. From the statute, often referred to as “S.B. 3” for Senate Bill 3:

(C) A LICENSE ISSUED UNDER THIS SUBTITLE IS NOT VALID AT A
GEOGRAPHIC LOCATION OTHER THAN THE GEOGRAPHIC LOCATION OF THE VIDEO LOTTERY DESTINATION LOCATION AT THE TIME THE LICENSE IS ISSUED.
(D) (1) IN THIS SUBSECTION, “OWNER” INCLUDES ANY TYPE OF
OWNER OR BENEFICIARY OF A BUSINESS ENTITY, INCLUDING AN OFFICER, DIRECTOR, PRINCIPAL EMPLOYEE, PARTNER, INVESTOR, STOCKHOLDER, OR BENEFICIAL OWNER OF THE BUSINESS ENTITY AND, NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS SUBTITLE, INCLUDING A PERSON HAVING ANY OWNERSHIP INTEREST REGARDLESS OF THE PERCENTAGE OF OWNERSHIP INTEREST.
(2) AN INDIVIDUAL OR BUSINESS ENTITY MAY NOT OWN AN
INTEREST IN MORE THAN ONE VIDEO LOTTERY FACILITY.

So, if/when Magna-Penn National applies for the Arundel site license, there will need to be a legislative fix to allow it to go through. As well, anybody else could jump in with a new site application- including Cordish – if the referendum passes.

There was almost a precedent for a legislative fix that would allow one firm to operate more than one casino in last year’s legislative session. The Assembly almost passed a bill allowing for an existing licensee to operate a Rocky Gap casino (western Maryland) as a satellite operation.

The provision didn’t make it into the final bill, which otherwise slightly lowered the overall tax rate for the Rocky Gap site in an effort to attract a bid for the gaming license: from 67% to 64.5% for the first five years of operations. We’ll know soon how well that worked when the Maryland Lottery re-bids the site in November.

But while it didn’t make it into the final bill, the Rocky Gap proposal could provide a precedent of sorts to allow PN a way to operate both Hollywood Perryville and a new Laurel casino. In that event, Penn National would be the majority gaming operator in Maryland for the foreseeable future. Of course, that would take us into questions about the implications of market consolidation in Maryland gaming: a good topic for a future post.

Update: I just heard from a good source that the Assembly did, in fact, update the terms of the Rocky Gap site license to allow for a business entitiy other than the owner to manage the property. Theoretically this would allow an existing licensee to manage that property via some contractual arrangement, Penn National for example. This is a relatively common feature of the gaming industry: various Indian casinos have management agreements with external entities, for example. Here is the operative legislative language:

….AN INDIVIDUAL OR BUSINESS ENTITY MAY ENTER INTO A MANAGEMENT AGREEMENT TO OPERATE A FACILITY LOCATED IN ALLEGANY COUNTY THAT IT DOES NOT OWN, SUBJECT TO THE APPROVAL OF THE VIDEO LOTTERY FACILITY LOCATION COMMISSION AND THE STATE LOTTERY COMMISSION.

jk

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Maryland Update: Table Games & More

Posted by jkarmel on July 24, 2010

I’m just back from Europe after a long trip surrounding a conference in Prague: saw a bunch of small casinos from the outside, even a solitary slot a machine outside a gas station in one place, and a highway service area/mini-casino.

So today in the Baltimore Sun, reporter Hannah Cho has an update of Maryland gaming, including the news that the MD Court of Appeals ruled against the Cordish Company and will allow the referendum to take place on the Arundel Mills casino this November. Obviously, that’s bad news for Cordish — but it’s also good news for Penn National, which should have its Hollywood casino open for business by October with zero real competition in Maryland. The article also has a summary of the new table games action surrounding Maryland – in West Virginia, Delaware and Pennsylvania. Here’s a key excerpt:

Delaware Park has reported a slight increase this month in slots revenue, said Andrew Gentile, the casino’s chief operating officer.

“It would be the first month in 25 months that slots revenue is up year over year,” Gentile said. “Table games have brought a lot of energy back to the slots floor.”

Ron Marcus, who owns two hotels near the Charles Town casino, is so optimistic that he’s planning to build two new hotels and to expand his Turf Motel adjacent to the Hollywood Casino.

That table games have boosted VLT revenue at Delaware Park is very significant. Slots are still the driving force and will be the gaming cash cow in the mid-Atlantic for the foreseeable future. Yet table games can make a significant impact, for example accounting for over 30% of revenue in Atlantic City (though we’ll see if that changes now that PA casinos have table games too). Yet, they can bring in new customers to at at casino restaurants, drink at pubs, stay at the hotel, etc. — all to produce revenue.

However, table games often come with significant start-up and labor costs that have to be offset with potential revenues, now complicated for MD casinos due to the close competition. Basically, Maryland’s costly late start with slots/VLTs compared to its neighbors is now being replicated with table games. Is it too late to make them worthwhile for Maryland casinos, even if the state legalizes? Maybe.

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Arundel Mills Casino: Win For Cordish

Posted by jkarmel on June 26, 2010

Big win for Cordish yesterday when a judge threw out the anti-casino
referendum from the “Stop Slots at Arundel Mills” group, clearing the way for the Maryland Live! casino. Expect an appeal. Both sides have a lot at stake in this battle of gaming interests: Cordish vs. MD Jockey Club/Magna Entertainment:.
Fox 45 article
Baltimore Sun article

The ruling is a bit of a twist and very good for Cordish because it nullifies the principal behind the referendum drive itself, adding a significant legal hurdle to the forces to grapple with on appeal. The judge viewed the zoning approval as an “appropriation” and therefore not even subject to a referendum, using a similar failed effort to block Oriole Park at Camden Yards in the 1980s. Now, the casino opponents must demonstrate 1-why the zoning approval really is legitimate, and 2-the signatures are valid.

Importantly, the judge also noted that the 2008 voter approval would be essentially reversed if the referendum were allowed to go through and wrong. This has been a significant point for Cordish from the beginning – that Maryland and Anne Arundel voters have already spoken via the original referendum, and that decision should stand.

I’ve written this before and again want to emphasize that this really is a battle between two gaming interests, with a little NIMBY aspect thrown in. Magna and its MD Jockey Club partners have been behind the effort from the beginning, and have capitalized on the grumblings of some local residents to make their case. This reminds me a lot of the battle over the tunnel-connector in Atlantic City in the late 1990s, really a battle between gaming titans Steve Wynn (then of Mirage) and Donald Trump – but that played out publicly as a movement led by a few local homeowners.

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Moving Fast in Maryland

Posted by jkarmel on June 2, 2010

[Originally published by GA on November 6, 2008]

According to the Baltimore Sun, the state is moving quickly to get its new casinos established within the two year window mandated by the law. Of course, this is necessary in order to meet a February 1, 2009 deadline for the license applications. The new commission may in fact be up and running next month (December) to start administering the application process. The Sun also pointed out that Baltimore moved quickly to make designated property available for purchase — something which will smooth the process for a potential gaming firm to make a bid.

Right now, the Cordish Company is clearly eyeing the area, along with other designated spots. The Maryland Jockey Club (parent company: Magna Entertainment) is pulling together its bid for the Laurel site even as slots opponents in Anne Arundel County declare intent to keep the fight going with a zoning battle (as I predicted in yesterday’s post).

With all the potential for sensationalized obstruction, I’m confident that Maryland officials will go about this efficiently & publicly to get things done fast. The pitfalls otherwise loom large in the charged political climate surrounding Maryland casinos. I doubt that local forces will be able to block the new casinos via zoning, but in Laurel & Ocean City, they could delay proceedings for a while. There appear to be no substantive local hurdles in Baltimore, which is good news for bidders there. From an industry standpoint, the fact that Maryland is a closed market could also be advantageous: despite the restrictions, gaming companies won’t need to constantly be concerned over competitors opening up and carving up the market.

I’m still wary of the financial commitment involved in a stalled gaming market, but also encouraged that things are moving in a more positive direction. The great locations of MD’s three I-95 corridor casinos should attract sufficient interest for viable casinos to open within the law’s 2-year timeframe. The Rocky Gap location is a big question mark right now: will its remote location hinder development?

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