Two Way Hard Three | Las Vegas Casino & Design Blog

Surprise, surprise? They pick the place with better profit potential over the state that thinks Al Capone is hiding behind every major gaming company's accountant. I just wonder if there's any bright future ahead for Atlantic City if MGM Mirage has decided Atlantic City is worth dumping from its portfolio.

So, what is NJ gonna do after Harrah's buys out James Packer and winds up as Pansy's brother Lawrence Ho's partner in Macau? NJ is going to be without the two biggest gaming companies in America during a time of the greatest attacks on their market. Forcing this issue is industrial suicide on NJs part, IMO!

Jeff has an interesting point, but Harrah's is stuck in AC. They have too many properties and no potential buyers. AC is a sad situtation that is only going to get worse.

Does anyone know if the Caesar's golf course in Macau is making enough to keep up with debt payments?

I think Pinnacle just announced they were dumping their land in AC.

I don't think anyone is surprised. Get the nails ready for AC's coffin.

Posted by mike_ch

The reality is probably not that NJ is too restrictive but that NV is not as restrictive enough.

If the NVGC was as, unimpressed, with the Ho family as NJ's were, it would really put some of these parties in Gambling Inc in a bind. MGM wouldn't (probably couldn't with any level of efficiency) drop all of it's Vegas holdings for one fourth/fifth place spot in Macao.

Mike C-

Certainly each state has its right to regulate gaming as much or as little as it likes. (Heh. Isn't it ironic that the LIBERAL here is bringing up states' rights?) ;-)

It's just IMHO that NJ is going overboard in essentially forcing MGM Mirage out of Atlantic City. While Pansy Ho's father may be involved in some nasty dealings, there's no real evidence showing her involved with the Asian mobs. And if Jeff is right and Harrah's then dives further into Macau, how will Harrah's be able to steer clear of everyone who may have any kind of relationship with Stanley Ho?

New Jersey certainly has the right to be as hard on the gaming industry as they want. I just think they're making a boneheaded business decision in starting what may turn out to be the unraveling of Atlantic City in kicking out one of gaming's top players (MGM Mirage).

Posted by mike_ch

atdleft: I'm a big government public services quasi-socialist too, but there's little doubt that Nevada kind of lives and dies on one industry. And while they have procedures, there's enough "you help me out, I'll help you" going on that I'm never sure who is serving who here.

Mike C-

Yes, we've talked before about Nevada being over-dependent on gaming. That isn't really debatable any more.

However Atlantic City is also heavily dependent on gaming, and I just don't see how it makes sense for New Jersey to scare away one of AC's top employers and throw AC's entire casino sector into jeopardy. What happens when Harrah's gets deeper into Macau and inevitably runs into someone with some kind of connection to Stanley Ho? Will they also be run out of town? And then who will be left to pick up the pieces and prevent AC from (again!) becoming a complete basket case (like it was before gambling was legalized in 1976)?

Again, I just don't see how this makes any kind of economic sense for New Jersey. Maybe this will score some political points for the pols among the Christianist right and anti-corporate left, but I'm starting to wonder if this will be the beginning of the end of Atlantic City as any kind of serious gaming destination.

Posted by Hunter

Well, to be accurate, the employer is actually Boyd. They are the operator, MGM is more like an investor in the project. BYD operates Borgata.

The rest of your questions are worth exploring.

Scoring points with the Christian Right?
What a really bizarre statement.

Atlantic City will be just fine if the new push for 'sports betting' gets through the state legislature - and as I mentioned before, online gaming (poker, etc.) is being considered as well. Personally I think both of these measures will pass because AC might die without them.

I am going to have to agree with Derek on this. What does Christianity have to do with this.

By the way Christianist is not actually a real word, it is just a made up word by activist blogger. It is in the same vein as Neoconservative.

But as you stated in a previous post this blog is not really the place to discuss politics or religion for that matter, so I digress.

As for Atlantic City, it makes no sense for NJ to be cracking down on MGM for dealings with someone half a world away. It seems incredibly short-sighted and can only hurt AC.

NJ is shooting itself in the foot. Now that casinos/racinos are popping up along the eastern seaboard, there is less reason for people to travel to Atlantic City. NJ should be exploring ways to increase tourism and investment by gaming companies, not drive them away.
I still believe two potential changes could cause massive failure for AC in the long run. First, if Florida's screwed up politicians would get their act together on allowing (and fairly regulating) casino resorts in South Florida, it would be a huge game changer. Second, if/when the Castro regime is no longer in power in Cuba, Havana could regain its image as the casino resort capital that it had in the 1950's.
Neither of these things will happen quickly, so AC has a little time left, but not much.
http://www.sun-sentinel.com/news/palm-beach/fl-session-gambling-20100206,0,7840247.story

Just imagine if Disney, Wynn, MGM and Harrah's partnered up and bought Cuba. It would become the Resort Capitol of the World!

Duffman & Derek-

I was just pointing out that the Christian right is anti-gambling. Whenever pro-gambling legislation is being considered in any state, they're among the first to oppose it. And while I try not to get too "political" here, I just think this move by NJ makes so little economic sense that the decision has to be politically motivated in some way.

Hunter-

True, Boyd has already been operating Borgata... But until now, they've done so with 50% of the investment coming from MGM Mirage. It seems likely Boyd will just buy MGM's 50% stake and make Borgata all its own.

However, wasn't MGM Mirage also considering an MGM Grand project in AC? Kiss that baby goodbye.

detroit-

Heh. Thanks for sharing. If Florida does allow for widespread gaming expansion, then New Jersey is probably screwed for life, Tunica and Biloxi will have to watch out, and even we in Nevada will have more trouble luring
East Coasters to come here.

And getting back to my earlier point on the politics of gaming, the Christian right had been VERY VOCAL in blocking as much gaming in Florida as they could. But now that the legislators are seeing the potential windfall of all that revenue, even they're abandoning their "moral values" as fast as they can for the dirty, cold, hard cash.

http://thestrippodcast.blogspot.com/2010/02/good-super-bowl-signs-re-vegas.html

Btw, I bet our Super Bowl tourism numbers will just drive them even crazier until they get some sort of gaming expansion passed.

Posted by Hunter

Yeah, the MGM Grand AC project has been dead for a few years already. Some doubted if it was ever a real project and not just a negotiating tactic.

Beyond the original investment, I don't believe MGM has invested anything into Borgata. Operations were funded through cash flow and the expansion project was funded by debt against the Borgata LLC entity.

Yes, I agree that Boyd is the most likely purchaser and they have right of first refusal. Of course, MGM will try to squeeze them and get as much out of it as possible.

Let's be careful with the religious discussion - as everyone knows I'm sure, it has the potential to get nasty quickly. I wouldn't want to ruin such an interesting conversation.

The state's motivations are curious, no doubt.

If Florida gets full casino gaming both Atlantic City AND Las Vegas will be hurt. To be honest, if there was a Bellagio in South Florida I would go there before Las Vegas.

I'm not sure if Cuba casinos will ever matter any more. The Bahamas has casinos and only The Atlantis is doing very well.

Hunter-

Sorry about that. I didn't mean to start any "holy war" here. I'm still just scratching my head and wondering why New Jersey wants MGM Mirage out. Again, it just makes no economic sense. Detroit is totally right that AC needs to up the ante to prevent losing any more East Coast market share to all the new casinos, "racinos", and other gaming ventures popping up all over The Northeast.

Posted by Dave

When you're talking about Atlantic City, you've got to remember that very few people there think globally about the gaming industry. They are more worried about what's going on down the Boardwalk than down the coast. If you keep that in mind, you can see how regulators wouldn't think twice about putting the screws to a company with "only" a 50% share in one casino.

I can't help but find it so odd that New Jersey's government is seen as one of the most corrupt groups in America, and has repeatedly embarassed itself for as long as I can remember, yet it obsesses about Casino operators purity. I think New Jersey is incapable of operating at the same level of honest association and transparency that they demand from their Casino partners. Hypocrisy of the highest order.
BTW, when can we look forward to the next installment of Killer Punditry, Mr. Hunter?

I know Hunter wants to keep things on topic, but it honestly blows my mind that someone would actually admit this...

"I'm a big government public services quasi-socialist"

Wow, I'm speechless.

Posted by Hunter

Not really any different than saying 'small government, bootstrap-it-yourself quasi-nationalist'.

Its all in ones point of view, i suppose.

Posted by Hunter

Indeed.

I'm typically not one for labels myself. I find that people are usually quite mysterious.

Posted by Hunter

Jeff,

re: next show - not totally sure. I've been on a bit of a 'burned out' cycle recently. Trying to get my mojo back.

H

Hunter
Sorry to hear that, but I can certainly sympathize. That mojo is an elusive beast and difficult to recapture once it's lost.

Posted by mike_ch

Brian: I'm just having fun. atdleft goes to great lengths to remind us of his political persuasion, and I'm just suggesting he doesn't need to play a "token" liberal.

I say quasi-socialist because what gets thrown around as socialism in this country is really quite moderate in other advanced nations. In the UK I'd probably vote Liberal Democrat or something, which is one of the three major parties, but here there is basically no mainstream representation for my points of view. There was probably 30 years ago. Once upon a time, Richard Nixon supported the idea of a national health system (before setting us on the road to today with the HMO Act.)

I don't see socialist as a negative label, but to be fair I watch a lot of UK/foreign news where people will wear that term unflinchingly whereas here it's the word everyone runs from.

Mike C-

"atdleft goes to great lengths to remind us of his political persuasion, and I'm just suggesting he doesn't need to play a "token" liberal."

Are those fighting words, comrade? :-p

At least I'm not in trouble this time. ;-)

Well, at least not on this site. Someone mentioned the issue today on one of my fave progressive blogs, and a few of them were horrified at the thought of any type of legalized gambling. Needless to say, they weren't saddened by NJ's decision to have MGM leave AC.

Jeff-

I totally agree on NJ being more than a little hypocritical here with MGM Mirage. Again, it just makes no sense.

Posted by mike_ch

atdleft: Adding casinos to a community depends on a lot of factors, including the community itself, the company that would be running a casino, and a lot to do with the politician who supports building one.

Usually in most other states, people suggesting casinos are like, city councillors who are known to be hanging out at strip clubs. The kind of character that voters don't trust. Though it seems like here the candidate who has the most scandal and the most troublesome background is always the one with the highest support.

I mean, I don't hate casinos (though I also don't think they're the community meeting ground that the industry sometimes try to cast itself as), but I probably wouldn't want one in my tiny hometown. But at the same time, people have a better chance than with the CA Lottery. *shrug*

Mike C-

Well, I get that... Or at least I remember when I lived in Orange County full-time and that was my mindset. When Garden Grove tried to get some of its city declared "sovereign tribal land" so they could open an Indian casino, the whole county shuddered in horror.

However, Atlantic City isn't quite like OC and the Bay Area suburbs. They've had casinos now for over 30 years, so I'm wondering why NJ is suddenly turning away MGM Mirage and jeopardizing the entire gaming sector in AC.

Here's the facts: 2 Casinos in Macau (Sands and Venetian) together made more money than all of AC put together in January 2010. It took MGM all of two seconds to decide which one to sell.

MGM's presence in AC was minimal so I don't think MGM or the NJCCC are really worried about MGM not being in town. MGM only got half of the net profits from one casino (albeit the best one) which I believe has been amounting to less than $50M/yr. The MGM Grand in Macau is already making them more than that.

AC had an ample window of opportunity to make the city (outside the casinos) habitable and it blew it. They spent all the tax revenue on a few big public works away from the casinos, but left the heroin infested public housing projects adjacent to the casinos. They should have bought up the projects and bulldozed them, so you could walk around without fearing for your life. Imagine moving the MGM Grand to a few blocks north of the Stratosphere.

parched-

But what type of signal does this send to other casino operators? "If you're even thinking of building in Macau, New Jersey doesn't you"? Or "Gaming in New Jersey: If we don't care about Atlantic City, why should you?"

And again, what happens when Harrah's inevitably expands its presence in Macau? Will NJ threaten to kick them out, too? Then who will be left to pick up the pieces? All the creditors banging the door at Donald Trump's next bankrupt fiasco?

As Dr. Schwartz has talked about before, NJ needed MGM far more than MGM needed NJ. Now the big question is whether Boyd believes enough in Borgata's (and AC's overall) future to buy the other 50% stake.

Posted by mike_ch

MGM owned 50% of a joint. They had few to none employees in NJ, and if I remember it right the parcel they talked about using for their MGM Grand project was originally sold by the government to Steve Wynn for a song and was picked up in the merger, and NJ would probably prefer that the parcel was bought by someone who would build something (maybe not even a casino at this point, just anything could do) instead of letting it sit there while blowing smoke.

Harrah's is stuck in AC, so Macau is out of the question for them. Boyd is stuck in AC because of the Water Club hotel/condo expansion they built next to Borgata. The MGM Grand parcel in AC is between Borgata and Harrah's. Both Harrah's and Boyd are already overbuilt next to this land, so I don't see that anyone is going to fight for it.

As for NJ gaming politics, there has never been much of a working relationship between the state, local, and gaming properties to try to make this work. I don't think they even know how to pretend to care about each other's interests.