Dan Haar: MGM to buy Empire City in Yonkers, will still pursue Bridgeport

Photo of Dan Haar

MGM Resorts International has reached a deal to buy the Empire City Casino in Yonkers, N.Y., a move that will turbocharge the Las Vegas-based gaming company’s northeast expansion with a coveted metro New York property and roil the debate over commercial casinos in Connecticut.

MGM Resorts and its affiliated real estate company will pay $850 million, including the assumption of about $245 million in debt, for the casino at the site of Yonkers Raceway — just 16 miles from the Connecticut line at Greenwich and 16 miles from midtown Manhattan.

Operations include 5,000 slot machines, some restaurants and a full schedule of harness racing, which MGM executives said they intend to continue.

The deal, expected to close in the first three months of 2019, adds yet another layer of complexity to MGM’s 2-year-old effort to develop a casino in Bridgeport. Executives were adamant that owning Empire City will not dampen that quest and made a strong argument for the logic of owning both.

They also said the deal to buy Empire City was not a hedge against a possible failure to prevail in Bridgeport, rather an opportunity unto itself, which arose when the Rooney family — relatives of the Pittsburgh Steelers owners in the NFL — put Empire City up for sale.

“This does not detract from any of our efforts whatsoever with Bridgeport,” said Dan D’Arrigo, executive vice president and chief financial officer of MGM Resorts. “We wish by now we had had much more progress in Bridgeport but it is what it is.”

MGM lobbied intensely in 2017 and again in this year’s legislative session in Hartford for a bill that would create open bidding by casino operators for a commercial casino. That would give MGM a shot at carrying out its proposed plan for a $675 million development on Bridgeport Harbor, which the company announced last September.

The bill passed narrowly in the state House of Representatives as members of the Bridgeport and New Haven delegations organized a power play, but with opposition from the Mashantucket Pequot and Mohegan tribes, it did not have enough backing in the Senate and didn’t come to a vote.

CT must act

The MGM play for Empire City had been rumored. Opponents of the open-bidding bill are likely to say MGM’s purchase of the Westchester County racing and slot machine location proves that MGM isn’t truly interested in Connecticut. That could make MGM’s effort to win open bidding in 2019 more difficult.

Regardless, this deal makes it abundantly clear that Connecticut needs to pull its collective head out of deep sand. If lawmakers won’t seek nonbinding bids for a commercial casino, the state at least needs to conduct a market study independent of the battling players — now, this summer and fall, not next spring when the issue is again up for debate.

We need to see whether we’d be better off protecting the tribes at Foxwoods and Mohegan Sun or moving away from that exclusive duopoly that netted state coffers $271 million last year. That’s the first rise since 2011 but the state’s take is forecast to decline after MGM opens its Springfield casino at a cost of nearly $1 billion this summer.

The coming of sports betting — the subject of a likely special legislative session — should be part of the same, broad examination with an eye toward moving quickly, something Connecticut seems unable to do.

As for MGM, why should it develop Bridgeport with the hope of attracting New York gamblers up I-95 when it can own and expand Empire City? A moratorium on table games at casinos in southern New York State ends Dec. 31, 2022; we can expect to see MGM try to bring poker, black jack, roulette and all the rest to Empire as soon as possible.

Under the deal, MGM will pay an additional $50 million for Empire City if it gains a license for live table games by that date.

In addition to possible table games expansion, the 97-acre Empire City property is about half open land and surface parking lots, leaving room for growth. It holds about 40 percent of the slot machine market in metro New York, with the Resorts World Casino operating 6,000 machines at the Aqueduct Raceway in Queens, near Kennedy Airport.

The tax rate in New York, where the state owns the slot machines, is more than double that of Connecticut, giving MGM an incentive to operate in both states.

Bottom line: The market will support both Bridgeport and Yonkers, MGM executives said. All along, MGM knew that somebody — whether MGM or another operator — would own and perhaps expand Empire City. The Bridgeport plan was designed and sized with that in mind.

“The supply hasn’t changed,” said Uri Clinton, MGM Resorts senior vice president and counsel, the face of the company in Connecticut.

Big northeast bet

How about saturation of the market in the northeast? “I don’t think we’re anywhere near close,” D’Arrigo said. “There’s still more opportunity here to continue to introduce gaming.”

That’s what MGM is doing in Springfield. Also, the Wall Street Journal reported last month that MGM was in talks to buy the Wynn Resorts Boston Harbor project, a $2.4 billion behemoth, after CEO Steve Wynn was ousted from his company amid sexual misconduct allegations.

D’Arrigo suggested MGM isn’t actively in those talks but he didn’t deny MGM has an interest. “We’re watching it just like everyone else but only Springfield is our priority right now in Massachusetts,” he said.

MGM would have to sell Springfield if it were to buy Boston Harbor, under Massachusetts rules.

MGM also opened the National Harbor casino in Prince George’s County, Maryland, just outside Washington, D.C., in late 2016. And the company bought the 50 percent of the Borgata Hotel Casino & Spa in Atlantic City that it didn’t already own.

The Empire City Casino doesn’t need expansion to be profitable, MGM executives said. It will be immediately accretive, meaning it will spin off cash net of financing costs. The facility already generates about $70 million in cash on total revenue of about $600 million a year — more than half of which goes to the state under a tax that’s effectively about 60 percent.

MGM wouldn’t need to issue new debt to pay for it, in part because it would sell the real estate to a separately traded, affiliated real estate investment trust, MGM Growth Properties LLC, and operate it under a lease agreement. The payment will include about $260 million in MGM Resorts common stock in addition to cash and assumption of Empire City’s debt.

MGM wouldn’t cut back on employment in Yonkers, about 1,200 people, and could expand that number, D’Arrigo said.

“We think we can improve the operation today significantly,” he said, “plugging it into our network.”