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TheStreet Open House

MGM Resorts Wins Key Maryland Gaming License

NEW YORK (TheStreet) -- Friday afternoon, Maryland's Video Lottery Facility Location Commission voted to assign the coveted Prince George's County casino license to MGM National Harbor. The new gaming resort will be operated by Las Vegas-based MGM Resorts International (MGM). The $925-million facility will feature approximately 3,600 video gaming devices and 140 table game and poker tables.

MGM, by virtue of the scale and location of its project, had been favored to win the license, so the Commission's decision did not appear to come as a major surprise to equity investors. At the time of publication, MGM's stock was up 0.7%, in-line with today's gain in the S&P 500. The shares of rival gaming operator Penn National Gaming (PENN), also in contention for the license, were up 0.2%.

For MGM, the casino license grant, while representing a small potential profit source in comparison to the company's Las Vegas and Macau resorts, would help develop a "northeast corridor" of sorts, for the gaming operator. MGM is also vying for a casino license in Springfield, MA. A parallel license victory in Massachusetts would enable MGM to access another important east coast leisure market.

Among existing Mid-Atlantic casinos, PENN has perhaps the most to lose as a result of MGM National Harbor's license win. National Harbor, which sits directly across the Potomac River from Alexandria, Va., is located just 70 miles from PENN's Hollywood Casino at Charles Town Races. PENN had recently earned about one-fifth of its annual EBITDA from its Charles Town racino.

PENN had hoped to score a victory of its own when Maryland rendered its licensing decision. PENN had proposed to build a $700 million Hollywood-branded property at its Rosecroft Raceway, about four miles from National Harbor. Should PENN have been granted the gaming license, it would have been able to preempt the development of a competitor's casino at National Harbor.

MGM National Harbor will not be permitted to open before the earlier of July 2016, or the 30th-month anniversary of the third-quarter 2014 opening of Horseshoe Baltimore, which is being developed by Caesars Entertainment (CZR). While MGM National Harbor's opening is some two-and-a-half years away, it has already garnered considerable media attention because of its proximity to the nation's capital.

Also in contention for the Prince George's County gaming license had been privately held Greenwood Racing, the operator of the successful Parx casino near Philadelphia, PA. A Parx-branded casino, which also had been slated for a Fort Washington location, would have entailed a budget of $760 million.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, the author did not own any of thestocksmentioned.

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