Gaming Industry Analyst Sees Borgata Sale as a Positive Sign
Michael J. Pollack, the head of the Spectrum Gaming Group, said that the recent sale of the Borgata Hotel Casino & Spa is a good sign for Atlantic City. In June 2016, Boyd Gaming sold its 50% stake in Atlantic City’s most successful casino to MGM Resorts, which owned the other 50% stake.
Pollack says that the willingness of MGM Resorts to invest so heavily in the future of Atlantic City is likely to be taken as a sign to other potential investors. As the thinking goes, if MGM Resorts is bullish on AC, then potential investors should take a look at the other Boardwalk properties.
John McManus on the Sale
John McManus, the Executive Vice President and General Counsel of MGM Resorts, seconded Michael Pollack’s opinion. McManus said that Atlantic City’s gaming industry is undergoing trouble at the moment, but MGM believed that the city was headed in the right direction. At present, Atlantic City is in the midst of a 130-day window to get its finances turned around (or face control by New Jersey officials). That window closes in late-October.
McManus said that buying out Boyd Gaming’s half of the Borgata was part of an overall plan to enhance the property’s value, while also helping Atlantic City to turn around its economy. Instead of focusing on an expanding the gaming operations, MGM Resorts plans on developing entertainment venues around the Borgata complex.
That dovetails nicely with the plan of city and state leaders to prime Atlantic City’s future more towards a non-gaming economy. The city has maintained a monopoly on casinos for nearly four decades, but there are indications the monopoly might not last. A casino referendum set for November could end the New Jersey gaming monopoly in 2016.
Mayor Don Guardian has worked to attract investors in the non-gaming economy, such as Philadelphia investor Bart Blatstein. It was Blatstein who built the Piazza a few years back. The retail complex has attracted shoppers.
Bart Blatstein’s Role
When Stockton University was unable (due to a 1988 contract) to convert the Showboat casino into a college campus, Bart Blatstein bought the property to convert it into a hotel. Because Blatstein is involved in the Philadelphia gaming economy, some speculated he would re-open a casino, but that does not appear to be the case.
The chairman of the Casino Control Commission, Matthew B. Levinson, said the sale was a good sign. Levinson said, “MGM is committed to maintaining Borgata’s brand of excellence, and I will hold its leadership to its commitment to continued capital improvements of the property, to New Jersey in general and to the Atlantic City gaming market in particular.”
North Jersey Casino License
Others speculate that MGM Resorts bought control of Borgata in order to obtain a North Jersey gaming license. If a referendum passes in November, New Jersey would license two counties in the northern reaches of the state to have land-based casinos.
In the first round of licensing, only those who hold a gaming license in the state of New Jersey could apply for one of those licenses. Thus, owning Borgata gives MGM Resorts an inside track on one of the lucrative North Jersey casinos, which would be within miles of New York City.
Borgata: An Insurance Policy?
Thus, it is possible MGM Resorts’s purchase of Borgata is not a sign of confidence in Atlantic City. It might be seen as an insurance policy. Borgata is the city’s top casino, with almost 50% of the revenues each year.
If the North Jersey casino referendum fails, then MGM Resorts has the best casino in the city. If it succeeds, the MGM Resorts will have the casino most likely to survive, as well as a chance at one of two lucrative casino licenses.