After years of hunting, MGM Resorts International has found a new home in New York.
This week, MGM announced plans to acquire the Empire City Casino in Yonkers for a total consideration of $850 million. The buyers will pay another $50 million if the property receives a table games license before the end of 2022. Most of the money will be fronted by MGM Growth Properties, a real estate subsidiary that leases casino space to its parent company.
Although these plans date back several years, there’s never been a better time to move into the NY casino business. The state is pressing toward legal online gambling and sports betting, and MGM has regional ambitions in both verticals.
The parties expect the transaction to close in the first quarter of 2019.
MGM casino + NYC market
When MGM takes over operations, it will have access to the largest population center in the US. At least 20 million people call the NYC metropolitan area home.
This purchase has been a long time coming for MGM. The group was part of the conversations surrounding the 2013 upstate casino expansion, but it was publicly opposed. CEO Jim Murren said the plan was “flawed” by neglecting the downstate areas facing the strongest competition. MGM instead proposed a $1.5 billion property in NYC, which never materialized.
Half a decade later, though, the group has managed to plant a flag in the Big Apple. Murren says the Empire City purchase aligns with MGM’s regional roadmap.
This acquisition represents an excellent opportunity to further solidify our presence on the East Coast, and in particular, expand our reach into the high-density New York City region. We believe this transaction enhances our free cash flow profile and presents attractive future opportunities for the Company, and we look forward to welcoming the Empire City team and guests to the MGM Resorts family.
That presence on the East Coast is getting pretty substantial. Having historically focused on Las Vegas and China, MGM is turning the eastern US into its new frontier:
- 2016: Buys Boyd Gaming out of Borgata to take full ownership of NJ casino
- 2016: Opens MGM National Harbor near Washington D.C.
- 2018: Sets August grand opening date for MGM Springfield in Massachusetts
- 2019: MGM Empire City? MGM New York?
The group also owns casinos in Mississippi, Michigan, and Illinois.
Expanded NY gambling in MGM’s sights
Although the press release doesn’t mention online gambling or sports betting, they’re part of the underlying plan. MGM already operates an online casino in New Jersey and a sports betting platform in Nevada, and it would jump at the chance to carry both into a new market.
NY sports betting is only a matter of time, it seems. The activity is already legal at the four commercial casinos, and pending legislation would expand permissions to racinos like Empire City. Lawmakers adjourn in a few weeks, though, so time is getting tight.
NY online gambling also seems like a sure thing, but it’s been that way for too long. Lawmakers have considered the issue for several consecutive years without managing to come together so far. Optimism is waning once again as the 2018 calendar drips away.
Maybe the addition of a giant like MGM will help move the needle? The group will no doubt lobby for expansion, and regional competition provides a growing incentive to keep up. Pennsylvania and NJ have each legalized these modernized forms of gambling.
The Empire City purchase means MGM is suddenly part of the horse racing industry, too. And the horse betting industry. The track still hosts year-round harness races, and pari-mutuel wagering has been conducted on site since the 1940s.
It’s also worth noting that Empire City is in the district of Gary Pretlow, the state’s top Assemblyman on gaming issues.
More on MGM’s new property
The 100-acre patch of Yonkers beneath Empire City is less than 15 miles north of Manhattan.
The Rooney family, which also own the NFL’s Pittsburgh Steelers, has owned the property since 1972. The five sons of patriarch Art Rooney are the sellers in the deal with MGM.
The NY horseracing landmark first opened in 1899 as the Empire City Race Track. The current casino name is a throwback to the original, but the track has been Yonkers Raceway for decades. It set a handful of harness racing purse records during its heyday in the 1950s and 1960s.
Yonkers Raceway began its transformation into the Empire City Casino in 2006. A $225 million expansion added more than 5,000 slot machines, along with electronic table games like Blackjack and Roulette. Since the property falls under video lottery laws, the minimum gambling age is 18 years old.
Obviously, the local market provides the primary incentive for the buyers.
MGM has properties all over the world, and with the exception of Shanghai, none of them are in markets as large as New York City. Yonkers is the fourth-largest city in New York, essentially an inner suburb of NYC proper. The press release says Empire City’s footprint reaches 16 million eligible gamblers.
The property generated net revenue approaching $600 million last year, returning more than $300 million to the state.
Photo by LEE SNIDER PHOTO IMAGES / Shutterstock.com
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