http://www.nj.com/news/ledger/index....150.xml&coll=1
MGM sees, raises A.C. mega-casino
$5B behemoth called key to saving resort
Thursday, October 11, 2007
BY JUDY DeHAVEN
The company says it will happen this time. Really.
Las Vegas gambling giant MGM Mirage, which has talked about building an Atlantic City casino for years, announced plans yesterday for a multibillion-dollar resort that would be the largest and most expensive casino in Atlantic City, on par with Vegas' top resorts.
The cost: close to $5 billion, excluding the value of the land. The investment would be second only to MGM's $7.4 billion CityCenter on the Las Vegas Strip, which is expected to open in 2009, and larger than Boyd Gaming's $4.8 billion Echelon Place in Vegas, which is being built on the site of the former Stardust.
The MGM Grand Atlantic City would be built in the Marina District next to the Borgata casino, which MGM co-owns with Boyd and has added glamour to a resort long thought of as dowdy and outdated. MGM's proposal includes three hotel towers in what the company called a "strikingly unique design" that would dominate the skyline.
"We believe the success at Borgata demonstrates the eagerness for further evolution of the nation's second-largest gaming market," said Terry Lanni, MGM's chairman and chief executive. "We ... hope to re-energize the city's resort offerings and attract a new market of affluent East Coast customers."
Jim Murren, MGM's president and chief operating officer, said the planned resort would be a "category killer," a casino on a "far different level than what exists in Atlantic City today," and one that will help grow the market at a time when it is losing gamblers.
MGM hopes to open the resort in 2012, around the time two other new A.C. casinos -- one from Revel Entertainment and another from Pinnacle Entertainment -- are expected to be completed on the famed Boardwalk.
The Revel and Pinnacle plans already have given the A.C. gaming industry some hope as it tries to weather the toughest year in its 29-year history. But industry analysts said MGM's would dwarf those plans.
"The size and scope rivals anything in the world," said Joe Weinert, vice president of the Spectrum Gaming Group, a casino consulting firm. "The project puts Atlantic City on the world stage."
Still, the announcement comes at a peculiar time. For weeks, the city has been preoccupied with the bizarre absence of its mayor, Robert Levy, who finally announced yesterday that he was resigning amid a federal investigation into whether he lied about his Vietnam War record to obtain better veteran's benefits.
What's more, A.C.'s 11 casinos have been under siege, with competition from slot parlors in Pennsylvania and New York eating away at the market. Just yesterday, state officials reported a double-digit drop in Atlantic City casino revenue for September.
And MGM is awaiting the results of an investigation into its dealings in Macau, where a $1 billion casino is scheduled to open in December. State investigators have been probing MGM's partnership with Pansy Ho, the daughter of Asian gambling tycoon Stanley Ho, who has been dogged for years by allegations that he has ties to the Chinese mob.
Yvonne Maher, acting director of the New Jersey Division of Gaming Enforcement, which acts as the prosecutor in casino licensing cases, said the agency is hoping to file its report on MGM's Macau dealings within the next month. Afterward, the case will go before the Casino Control Commission, which acts as a judge on licensing issues.
New Jersey regulators, considered among the toughest in the country, could approve the partnership, impose penalties or restrictions, or even force MGM to choose between Atlantic City and Macau. Maher said yesterday MGM's announcement of a new casino did not put pressure on the division.
"Our investigation is independent," she said.
In a note to investors, however, Susquehanna Financial Group analyst Robert LaFleur said: "Guess this means MGM thinks Pansy Ho licensing is a done deal."
Murren said the company's decision to move forward with its A.C. plans was two years in the making and had nothing to do with the division's investigation into its Macau partnership. MGM's board of directors approved the Atlantic City project Tuesday.
"When we laid out this development plan and project to our board over several hours, I can tell you the regulatory discussion never came up," he said. "We believe they are totally unrelated discussions, and certainly did not factor into whether we should build in Atlantic City or not."
Many industry observers have been skeptical of MGM's commitment to the New Jersey market. The company first eyed A.C. in 1978 and bought property in the Marina District for a casino but later sold it.
Then, in 1996, MGM announced plans for a $700 million casino next to Showboat, but it had trouble assembling the needed land. Those plans were abandoned in 2000 after MGM acquired Mirage Resorts, including more than 100 acres in the Marina District. Initially, MGM said it would proceed with plans for a casino next to Borgata, then dropped them, then hinted it could partner with Boyd Gaming for another casino, and then abandoned those plans again.
Murren called criticism of MGM's commitment to A.C. unfair. He said many people forget MGM owns half of the $1.1 billion Borgata, which since opening four years ago has added a $200 million casino and restaurant expansion and is now undergoing a $400 million hotel addition.
Murren said that after MGM bought Mirage Resorts, it had to decide where to build first, Las Vegas or Atlantic City. It chose Las Vegas.
But now it's Atlantic City's turn. Murren said the company may bring in a joint-venture partner later in the development, but there are no plans to do so now.
MGM's announcement came hours before the Casino Control Commission said gambling revenue plunged 10.6 percent in September -- what state officials said may be the steepest decline ever. For the first nine months of 2007, total casino revenue has fallen 4.8 percent.
Analysts are predicting this is the first year in A.C.'s 29-year gambling history that revenue will decline year-over-year, possibly falling below the $5 billion benchmark it hit in 2005.
Other casino operators said they were encouraged by MGM's announcement, hoping that such a grand project would grow the entire A.C. market.
"If I were them, I would do it," said Tony Rodio, head of operations at Resorts and Hilton, two of Atlantic City's smallest casinos. "I feel that strongly about the long-term viability of the Atlantic City market despite the speed bumps we've been hitting along the way."