Author: Casino Connection Staff

Las Vegas’ shuttered Lucky Dragon Hotel and Casino will be auctioned off on October 30, hopefully to a buyer with a better business plan than the developer who believed he’d created a resort to which deep-pocketed Asian players would throng.

If not, the 203-room hotel and 27,500-square-foot casino on Sahara Avenue near Las Vegas Boulevard, quite a distance from the main Strip action, could be foreclosed on by its main creditor, Snow Covered Capital. SCC could then shop it around, its 2.5 acres possibly attractive to someone looking to develop non-gaming meetings or residential space or an e-sports venue.

For now, though, Michael Parks of real estate services giant CBRE said an auction is the best way forward.

“For the right visionary and owner, this site and amenity-rich property represents an excellent opportunity to own a first-rate Las Vegas hospitality property distinctly situated between the blossoming north end of the Strip and the gateway to Downtown Las Vegas,” he said.

Conceived by developer Andrew Fonfa and built at a cost of $160 million, the Lucky Dragon opened in November 2016 as Las Vegas’ first ground-up casino hotel since the Great Recession and was hailed at the time as the forerunner of a boutique style of resort geared to a very specific gaming and tourism demographic, and as far as Las Vegas goes, a lucrative and well-established one.

Sheathed in red, with Chinese-language signage, a bilingual staff, an authentic pan-Asian food and beverage offering that included a tea sommelier, and a gaming floor weighted toward baccarat, pai gow and sic bo, it looked like a slam dunk.

But it may have been too targeted, according to Parks, who said Strip casinos do well because they “market to a wide audience”.

There were other problems as well. The off-Strip location proved a detriment, discouraging foot and vehicular traffic, and when it came to operational wherewithal, Fonfa lacked the capitalization to compete with the megaresorts on comps, credit, luxury and transportation.

In any event, the paint was barely dry when restaurants began closing, and Lucky Dragon’s troubles were apparent.

In February, 15 months after opening, Fonfa pushed the property into a Chapter 11 reorganization in a bid to avoid defaulting to SCC, which loaned him some $50 million after the city of Las Vegas rejected his request for millions in subsidies. Another $89 million is owed to 179 individual investors from outside the U.S. who’d hoped to trade $500,000 each for a shot at citizenship under the federal EB-5 visa program.

The casino was closed around the same time as the bankruptcy filing, and when no buyers were found to rescue the property out of reorganization it was left to limp along with only the hotel and the remaining restaurants. Those closed on October 2.

The auction will be held at the Nevada Legal News building on Fourth Street near Charleston Boulevard.

The Massachusetts Gaming Commission is seeking input from residents of the southeastern part of the Bay State as to whether it should reopen the bidding process for Region C.

This is the region that includes Taunton, where the Mashpee Wampanoag tribe would like to build the First Light Casino & Resort but have been stymied by the courts and the Department of the Interior. The MGC in 2016 by a vote of 4-1 rejected a proposal for a commercial license in Brockton in deference to the tribe, which still had a hope that the Interior Department would figure some way around the court judgment that the tribe’s land into trust process was fatally flawed. The 321 acres that was put into trust is now in legal limbo.

The 2011 legislation that authorized casino gaming in the state called for three casino resorts, in three zones, and one slots parlor. Only the license for Zone C has not been filled.

The developers, Mass Gaming & Entertainment, which includes Rush Street Gaming and their partners, the owners of the Brockton Fairgrounds, propose a $677 million casino resort on the fairgrounds. In June they sent a letter asking that the commission reexamine their application in the light of the tribe’s faltering steps. The commission’s legal counsel advised it to do a comprehensive study of the gaming market of Region C to determine if it has significantly changed since its earlier ruling.

This is not the first time that rejected applicants have asked for a reconsideration. In those cases staff has advised the commission: “ (it) … may not have the ability to reconsider the denial of a gaming license, and if it did have the authority, it did not have a process to reconsider the denial of a gaming license.”

In response, the commission opened a comment period for residents. It is asking whether it should review “the status of the Mashpee Wampanoag Tribe’s litigation regarding land in trust, and the status of proposed federal legislation on the issue.”

Other questions address whether there is a demand for a new casino in the region; whether former agreements related to the bid process should be considered valid, whether past votes by host communities would be considered valid and whether a new element should be added to the mix: sports betting and daily fantasy sports.

The comment period will end November 30. Comments will be accepted by email of postal mail.

A complication to rehearing the Brockton proposal is the fact that the commission didn’t just reject it because of the tribe’s casino, but because the developer “did not articulate a clear vision or provide any well-developed plans as to how it would achieve the same quality of results in Brockton as it has at its properties in other jurisdictions.”

Mashpee Tribal Chairman Cedric Cromwell congratulated the panel on “not allowing themselves to be bullied.” He added, “It’s also a relief to hear the gaming commission will not automatically entertain the shenanigans of a deceitful developer.”

Cromwell is referring to Neil Bluhm, owner of Rush Street Gaming, which has financed some of the lawsuit by residents of Taunton that has, for the moment, stalled the tribe’s progress.

A bill has been passed in the House but not in the Senate that would put the land into trust, bypassing the Interior Department.

Last week the Mashpee tribe filed a new lawsuit in U.S. District Court against the Interior Department, challenging its ruling that the tribe is ineligible to put the land into trust since that would violate the Supreme Court’s 2011 Carcieri v. Salazar ruling. At the same time the tribe’s attorney sought a stay in its appeal of the earlier judgement by a federal judge that the department used as the basis for its ruling.

Fantasy sports operator FanDuel is urging Florida voters to oppose Amendment 3, titled “Voter Control of Gambling in Florida.” The proposed constitutional amendment would “ensure that Florida voters shall have the exclusive right to decide whether to authorize casino gambling,” according to the ballot summary for the November 6 election.

FanDuel officials said Amendment 3 “pretends to give voters more power, but the reality is it makes it more difficult to protect your right to play fantasy sports.” Also the proposal would “make it impossible to bring sports betting to Florida. If Amendment 3 passes, the legislature will no longer have the power to authorize sports betting in Florida.”

John Sowinski, president of Voters In Charge, the political group promoting Amendment 3, said it “does not prohibit sports gambling. What it does is gives the final say on this and other casino gambling decisions to Florida voters. Likewise, it does not affect traditional fantasy sports pools.”

Sowinski recently spoke at a forum on the topic hosted by the Seminole County Regional Chamber of Commerce. “We don’t think casino licenses should be for sale to the highest bidder in Tallahassee. It should be an issue that’s decided by voters,” he said.

Also in attendance was Jamie Shelton, representing the Best Bet Jacksonville cardroom. “This is and should be a legislative matter and it should be dealt with by the people we elect to represent us in the state of Florida,” Shelton said.

Seminole County Regional Chamber of Commerce President and state Rep. Jason Brodeur noted tourism makes up a considerable portion of Florida’s revenue, so, as a lawmaker, he said he has to consider the state’s family-friendly image.

“If I believe that that equity is going to be jeopardized by changing the way we are viewed as a state that’s something I have to consider as a legislator. As an individual, I think the voters should be in charge,” Brodeur said.

The amendment has the backing of Disney Worldwide and the Seminole Tribe of Florida, who together have donated $36.3 million to Voters In Charge. According to September 28 filings with the state Division of Elections, Disney had contributed $19.6 million and the Seminole Tribe $16.7 million.

Two political action committees have been formed to oppose Amendment 3. Citizens for the Truth About Amendment 3 has raised more than $6 million and Vote NO on 3 has raised $981,832, according to the filings.

Citizens for the Truth About Amendment 3 received $500,000 from the Tampa Bay Buccaneers, $400,000 from Los Angeles-based Elevated LLC, $250,000 from the St. Petersburg Kennel Club and $145,000 from Cardroom Tech.

Vote NO on 3 received all of its funding from West Flagler Associates, the parent company of Miami’s Magic City Casino. The group’s chairman is Isadore “Izzy” Havenick, whose family operates Magic City and Naples-Fort Myers Greyhound Racing & Poker in Bonita Springs.

Both groups claim the wording of Amendment 3 is designed to fool voters. The Citizens for Truth About Amendment 3 website states, “On its face, the amendment ballot language appears to empower voters. However, what Amendment 3 really does is cost education funding hundreds and hundreds of millions of dollars. Because the referendum would be statewide, voters in one part of the state would decide whether a gaming facility can open somewhere else. This would benefit larger companies that have the resources to gather hundreds of thousands of signatures needed for a referendum.”

The PAC maintains the proposal would cost Florida schools $200 million in new tax revenue annually. In addition, the measure could remove some slot machines and designated player games, costing schools another $330 million in tax proceeds over the next 10 years.

Amendment 3 requires 60 percent voter approval to pass. However, a recent Florida Chamber of Commerce survey indicated it’s supported by 54 percent of voters, with 28 percent opposed. The issue could be determined by the 18 percent of voters who were undecided. The Chamber and the League of Women Voters support the amendment.

The Greater Springfield Convention & Visitors Bureau isn’t giving up its campaign to impose a new 1 percent assessment on hotel guests in the city of Springfield, Massachusetts, despite the fact that the tax died in a committee of the city council last week.

The tax would add 1 percent to the existing 5 percent tax on hotel room stays in seven hotels in Springfield which includes the just opened 252-room MGM Springfield casino hotel. The money raised would be earmarked for boosting tourism in the Greater Springfield area.

The opening of the MGM Springfield is generally believed to have bolstered the business of all of the area hotels.

The bureau estimates the tax would raise at least $250,000 annually.

The Bureau is also supporting a similar tax being proposed in the legislature. This proposal failed this year but will be introduced again in 2019. That legislation would allow cities to impose the tax only if a tourism destination marketing district is created.

Tilman Fertitta, billionaire owner of the Golden Nugget casinos, the Landry’s restaurant chain and the NBA’s Houston Rockets and host of CNBC’s Billion Dollar Buyer reality program, has approached Caesars Entertainment with a merger offer that values the Las Vegas-based casino giant at $13 a share.

Sources cited by Reuters and CNBC said Fertitta is looking to interest Caesars in a reverse merger in which Caesars would be the acquirer and Caesars shareholders, including private equity firms Apollo Global Management and TPG Capital, would be shareholders in the combined company, with Fertitta as chairman and CEO.

Caesars (NASDAQ: CZR), coping with general softness in its prime Las Vegas Strip market, had seen its shares plummet 28 percent year to date as of last Tuesday after warning of slower Q3 growth with its second-quarter earnings report in August. The stock leapt after Reuters first reported the offer on Wednesday. It was up more than 12 percent to $10.25 at the close on Thursday.

However, it was far from clear late last week how the offer would fly, with Caesars commanding a market capitalization of around $7 billion after last week’s rally and Fertitta’s net worth pegged by Forbes at $4.5 billion.

Caesars, Apollo and TPG declined to comment, while Fertitta and his representatives were similarly mum, according to Reuters.

Fertitta, 61, is best known for building Landry’s into a nationwide powerhouse featuring brands such as Saltgrass Steak House and Joe’s Crab Shack. He owns more than 600 restaurants in all, including the McCormick & Schmick, Morton’s and Rainforest Café chains.

His closely held Golden Nugget operates casinos in Downtown Las Vegas and Atlantic City and in Laughlin, Nevada, Lake Charles, Louisiana, and Biloxi, Mississippi. Considered well-run and benefiting from significant reinvestment, particularly in Las Vegas and Atlantic City, the portfolio generates $250 million to $300 million in annual EBITDAR, according to gaming analyst Carlos Santarelli of Deutsche Bank.

One of the keys to his success has been to feature his restaurants in his casinos and to aggressively market them together via advertising and a customer loyalty program.

His combined holdings were good for $650 million in EBITDA last year on total sales of $3.5 billion, according to data compiled by the Bloomberg Billionaires Index. But he borrowed heavily to buy the Rockets for $2.2 billion last year, and his company’s current debt stands at around $4.3 billion.

A merger with Caesars would dramatically increase his casino holdings—with the vastly expanded restaurant cross-marketing opportunities that go with that, not to mention a big-time entry into the burgeoning U.S. sports betting market—while enabling him to fold his debt into the larger company.

Caesars, which has been an aggressive acquirer in its own right, could see the prospects playing nicely into its own plans as well.

The parent of brands that include Caesars, Harrah’s and Horseshoe, Caesars owns or operates 49 casinos in 13 states and in Great Britain, Canada, Egypt and South Africa. Caesars recently acquired two racinos in Indiana.

But the company missed out on the Macau boom—which it’s looking to compensate for by planting its flag in Japan, South Korea and Australia—and a protracted bankruptcy reorganization has forced it to play catch-up domestically and internationally with mega-rivals MGM Resorts International, Wynn Resorts and Las Vegas Sands.

The one jurisdiction that might cause a problem for the proposed combination would be Atlantic City. Caesars owns three properties out of nine in the resort, and with Fertitta’s Golden Nugget, it may constitute as too much capacity for one company if determined by the state Division of Gaming Enforcement. Some speculate that the lagging Bally’s could close or one of the properties could be sold to a company like Boyd Gaming, which until recently operated the Borgata with its former partner and now sole owner, MGM Resorts.

Caesars is still paying down around $9 billion of debt, but the reorganization, which was concluded last autumn after 18 months of difficult wrangling with creditors, allowed it to shed more than $10 billion of obligations stemming from Apollo’s and TPG’s 2008 acquisition of Harrah’s Entertainment and gave it a REIT partner to offload its real property onto and furnish leverage for diversifying out of Las Vegas. Last November, the company concluded a deal to buy privately owned Indiana casino and horse racing company Centaur Holdings for $1.7 billion and is currently exploring a multibillion-dollar bid for Jack Entertainment, the casino operator owned by Quicken Loans founder Dan Gilbert.

Sources close to Fertitta’s plan said it calls for exchanging stock in a private company owned by Fertitta for shares in Caesars at the same multiple that Caesars currently trades. There would then be somewhere between a $2 billion and $3 billion “Dutch” tender to give Caesars shareholders an option to sell, with Fertitta emerging as the largest single shareholder. Caesars also would sell the land and buildings associated with Landry’s and Golden Nugget to a REIT, using some of that cash to repurchase its own shares. Vici Properties was a Caesars spinoff formed last year and currently owns a majority of the Caesars real estate. It’s not clear if Vici has had any role in the ongoing negotiations.

The deal would not affect Fertitta’s 100 percent ownership of the Rockets, CNBC said.

Santarelli calculates the $13 offer at 8.5 times his 2019 EBITDAR estimate for Caesars, saying, “At the very least, it brings interested parties to the table and reminds investors that nonsensical valuations don’t go unnoticed within the industry.”

Conversely, Cameron McKnight of Credit Suisse said Golden Nugget’s high-quality portfolio would be additive and sees potential synergy opportunities around sports betting, while Fertitta would be a great addition to Caesars management as he’s well-known and respected and a successful cost-cutter. He reiterated his “outperform” rating on CZR and has named the stock his top gaming pick.

McKnight said the proposed deal is just the latest example of consolidation within the gaming industry.

Chad Beynon of Macquarie Securities said last week he was holding to his $15 target for CZR, implying the offering price could go higher.

Fertitta is a cousin to Frank and Lorenzo Fertitta, who own and operate Red Rock Resorts (formerly Station Casinos), based in Las Vegas. The relationship between the cousins has reportedly been tense for years.

Kentucky appears set to join West Virginia in rejecting any sports betting regulation scheme that carves out a piece of the action for the country’s major pro sports organizations.

The West Virginia Lottery Commission has approved permanent rules that don’t include the so-called “integrity fees”; while across the border in Kentucky, a joint House-Senate committee working on a bill to establish legal bookmaking in the Bluegrass State doesn’t contemplate them either.

Looking ahead to an expected wave of state legalizations, the NFL, NBA, Major League Baseball and the PGA Tour are shopping the idea to lawmakers and members of Congress that their game data is intellectual property which they own exclusively. Betting operators therefore should pay them for it—a royalty, of sorts, which essentially is what the fees are.

It’s a novel idea—considering that Nevada, which has been booking bets legally for more than 60 years, has never recognized any such obligation—and a controversial one, because bookmakers need the data to settle wagers, but they contend their business model is based on such narrow revenue margins, generally in the range of 5 percent, that they can’t afford to pay for it and still make a profit.

John Cavacini, president of the West Virginia Gaming and Racing Association, warned that casinos will consider taking legal action if any such fee is imposed.

“Emergency rules can only be amended to include the legislative intent of the statute that was put in place and passed by the legislature,” Cavacini said, according to the WVNews.com website. “The real argument is between the casinos and major league sports as to whether major league sports can charge us statutorily as a part of the rules and regulations, for information and data. But we don’t believe the emergency rules can contain anything in them that is not authorized with legislative intent when the bill passed.”

Lawmakers feel the same way. “The legislature clearly chose not to include integrity fees in the authorizing legislation or some of the other provisions you’ve mentioned,” said West Virginia Del. Paul Espinosa, according to the site.

“It’s absolutely the same as integrity fees,” added Cavacini. “It’s a money grab by major leagues ports to try to confiscate from casinos, or the state of West Virginia or somebody.”

Opponents of the fees also argue that the leagues don’t need the money because they’ll be raking in plenty of new revenues from a legal nationwide betting market in the form of expanded advertising and sponsorships and increased fan engagement resulting in greater demand for media rights and increased sales of tickets and merchandise. The American Gaming Association, the commercial casino industry’s federal lobbying arm, has released a study commissioned from Nielsen Sports that projects a $216 million revenue bump for the National Hockey League alone. For the NFL it could top $2 billion, according to an earlier Nielsen study also commissioned by the association.

In Kentucky, where legislation is expected to be introduced as soon as January, lobbyists are already tussling over the issue.

“The first words out of my mouth were ‘You’re not getting an integrity fee,’” state Rep. Alan Koenig, who chairs the joint committee, told Sports Handle, an internet handicapper. “Vegas has been taking sports bets since 1949 and they don’t pay an integrity fee, so does that mean that they were not on the up and up?”

In an interview with the Lexington Herald Leader, Rep. Jason Nemes, a member of the committee, echoed Koenig’s position. “If we provide sports leagues with that fee, what will Kentucky get in return? Can you say ‘nothing.’”

“They want a piece of the action, which means a piece of the money,” former Gov. Julian Carroll, a state senator and also a member of the committee, told Sports Handle. “The consensus of legislators is no way.”

The committee, which has met twice, is expected to take testimony again this Wednesday in what Koenig intends as an educational session for lawmakers.

No representatives from the major sports leagues have been invited, he said.

The bright lights of the Las Vegas Strip went dark last Monday night in remembrance of the 58 people killed and the hundreds injured one year to the day in the deadliest mass shooting in U.S. history.

Dimming of the resort marquees, along with the “Welcome to Fabulous Las Vegas” sign, started at 10:01 p.m., the moment the shooting started. Earlier in the day they displayed images of the Strip with a message that proclaimed “One Year Braver; One Year Closer; One Year Kinder; One Year Prouder; One Year Stronger. #VegasStronger.”

The city hosted a series of events in the days surrounding the anniversary, which was marked by gatherings of people at various locations along the famed neon boulevard waiting for the marquees to go dark.

A reporter for The Associated Press made note of a small bouquet of dried flowers wedged inside a padlock on a portion of a chain link fence surrounding the 15-acre site of the outdoor country music festival that descended into a bloodbath when Stephen Paddock, a resident of the nearby town of Mesquite, opened fire on the crowd with an arsenal of automatic and semi-automatic weapons he’d brought to a suite on the 32nd floor of the adjoining Mandalay Bay hotel. Paddock killed himself as police closed in, leaving whatever motive he had for his madness to die with him.

The white crosses placed at the “Fabulous Las Vegas” sign last year for each of the dead were moved for the anniversary to the rotunda of the Clark County government building, where they were displayed with photos of the victims. News reports say a museum is planned in the suburb of Henderson where they will be housed permanently.

All but five of the more than 500 victims were tourists.

Some “scattered remembrances” of the tragedy were visible elsewhere around town, AP said—among them a makeshift memorial garden Downtown comprised of painted stones and pictures hung in newly planted trees.

But residents and tourists alike appear mostly to have moved on, the wire service said.

“We don’t have a lot of long traditions here. You can see it with buildings. Casinos come up, casinos get knocked down. People tend to look forward, not back,” said Pauline Ng Lee, a community activist and chairwoman of the Nevada Republican Men’s Club.

“A lot of people have probably put it out of their minds,” said Steve Sisolak, who chairs the County Commission and is a 2019 gubernatorial candidate. He said he expected the anniversary “to bring up a lot of feelings, good and bad.”

Much of the bad feelings have centered on lawsuits filed nationwide by victims and their families seeking damages against casino giant MGM Resorts International, owner of Mandalay Bay and the site where the massacre occurred.

Perhaps the worst feelings, though, were engendered by MGM itself, which earlier this year sued 1,900 of the victims in federal courts in nine states in a bid to leverage a post-9/11 federal law that immunizes companies from liability for acts of terrorism if they’ve pursued and received a special anti-terrorism certification from the Department of Homeland Security. The company that organized the music festival has that certification, and MGM argued that as the contractor it enjoyed the same protections. The lawsuits were filed in a bid for federal jurisdiction over the myriad damage claims MGM faces in state courts so the company could make its case for immunity.

The suits sparked an outcry from attorneys for the victims and a social media campaign to boycott MGM properties. An assemblywoman from Queens, N.Y., has gone as far as calling on the state Gaming Commission to void the company’s planned $850 million purchase of Yonkers Raceway and its adjoining Empire City Casino.

Aravella Simotas, in a letter to commission Chairman Barry Sample, called MGM “unfit to operate in New York state.”

“These victims have already suffered through an unimaginable trauma,” she said. “It is unconscionable for MGM to use a twisted legal strategy to prevent them from seeking damages and holding the company accountable for its failure to adequately protect them from harm.”

An effort by MGM to have the 19 suits that have be filed this for against the company for alleged shortcomings connected to the October 1 shootings failed last week. A federal court permitted all suits to go forward separately, and MGM said it would defend each individually in that case.