In an even more surprising development than Steve Wynn getting voted out of Foxborough, the seemingly leading contender for a western Massachusetts casino abruptly withdrew from the fray last Friday night. In a stunning abdication, Ameristar Casinos CEO Gordon Kanofsky allowed that he didn’t feel had his company had enough of a chance to emerge victorious in Springfield — despite having only two rivals. One of them, MGM Resorts International, has a balance sheet sodden with long-term debt. The other, Penn National Gaming, is so promiscuously committed to new casino projects — and so beleaguered on its new frontiers in Maryland and Nevada, that you wonder how much capital and managerial focus it can muster for Springfield, especially as it’s presently trying to split itself into a pair of symbiotic companies, one a REIT and one a casino operator.
Having left $16 million on the table in land purchases, Ameristar balked at putting another $675,000 into the kitty for various and sundry applications processes. Such flip-floppery shakes one’s faith in the company’s leadership. However, since Ameristar and MGM share a player-marketing relationship, perhaps MGM CEO Jim Murren made it worth Kanofsky’s while to turn tail and run. Or possibly Ameristar’s confidence waned in inverse proportional ratio to the project budget, last sighted at $910 million … insanely high for a regional, semi-rural casino and comparable to the imprudence that marked Sands Bethlehem‘s runaway cost. Or perhaps, as residents and Ameristar veep Troy Stremming suggest, The Fix Was In.
Of course, Springfield isn’t the only player in the game. Hard Rock Entertainment is stalking the region, looking for a new site, Holyoke having become Splitsville. Then there’s the long-mooted Mohegan Sun project in Palmer. Given the Mohegan Gaming Authority‘s ongoing financial struggles, it’s a surprise that anyone continues to take this paper tiger seriously, but so they do. Looking at Ameristar’s budget and probable return on investment (i.e., low), Deutsche Bank analyst Carlo Santarelli deemed the company’s retreat “prudent.” He also thinks there may be an ulterior motive for Kanofsky (left) dumping Springfield: a clearing of the decks in order for Ameristar to attempt a REIT split such as the one Penn is attempting. Based on the pogo-stick effect the REIT announcement had on Penn’s stock, the notion of Ameristar execs suddenly having dollar signs dancing in their heads — and expansion be damned — seems the most credible of all.
What will Ameristar do next? Two words: “Special dividend.” You read it here first.
