Everything’s coming up Penn

As befits a proud papa, Penn National Gaming has been showing Wall Street analysts around its newest offspring: Hollywood Casino Toledo. The metrics are pretty awe-inspiring. Already the customer database is approaching 50,000 players and 47% of all slot play is rated — far more than at Penn’s Harrisburg racino in its early going. Good for Penn (and bad for Detroit) is the news that a third of all players at H’wood Toledo are from Michigan, and there’s been some seepage from northern Indiana, too. Restaurant covers are greater than expected. While the casino could increase its installed slot base (2,000 boxes) by 40%-50%, management is presently being a mite cautious, adding just 45 slots.

Shortly after Deutsche Bank‘s Carlo Santarelli passed through, J.P. Morgan‘s Joseph Greff got the red-carpet treatment. He praises the casino-floor layout, likening the overall design to Penn’s Kansas Speedway casino. Even though MTR Gaming‘s new Columbus-area racino at Scioto Downs has what Santarelli calls “first-mover advantage” on in-progress Hollywood Columbus (left), he still predicts the latter will generate pre-tax ROI of 30% (!) when it opens in November. Interestingly, Penn built two Buckeye State casinos for $720 million combined, while some of its larger competitors don’t seem able to budget so much as a slot parlor for less than $800 million, then wonder why their return on investment is disappointing.

Earlier, Greff sat down with Penn COO Timothy Wilmott (right) and CFO William Clifford, and “came away feeling good” about his 2012-13 forecasts. Unlike MGM Resorts International, Caesars Entertainment and Las Vegas Sands, Penn is taking a pass on Canadian expansion, citing the high cost of admission and taxes too step for their liking. However, it’s not ruled out going for a second venue in the usurious Maryland market. No Massachusetts casino openings are expected until 2016, so possess your souls in patience, New Englanders. Penn may spend as much as $50 million to refresh its newest acquisition, Harrah’s Maryland Heights, which has a reputation for being stuck back in the Nineties. Even if that brings the purchase price effectively to $660 million, Penn has relatively little reason to fear a mass exodus of players. The nearest Caesars-owned property (Harrah’s Metropolis) is 180 miles distant, meaning that Total Rewards members are S.O.L., left high and dry by an absconding Gary Loveman. Evidently, nothing was said regarding the fate of Penn’s Alton Belle but, considering the baleful situation in Illinois, where Penn is highly exposed, I expect that to go on the block as soon as Penn takes the keys to its new St. Louis riverboat.

Gary has already left the building in Maryland Heights, where casino revenues took a prompt dive, down 5.5%. Pinnacle Entertainment‘s River City (+9%) also gobbled up business from Ameristar St. Charles (-3%) and Pinnacle’s own Lumiere Place (-5% and by the lowest-grossing casino in the market; a big miscalculation by ex-CEO Dan Lee). Statewide, Isle of Capri Casinos had the best month (up 7%), its boats performing steadily.

What Wilmott and Clifford didn’t — and didn’t need to — tell Greff was that new gains in Kansas are coming primarily at the expense of its own Argosy Riverside (right), in Kansas City, down an appalling 24%. Even with a 7% drop, Harrah’s North Kansas City is now well outpacing Argosy and closing the gap on Ameristar Kansas City, off 13% last month. Given its small revenue base ($7 million), a 2% slippage at Isle of Capri Kansas City is like losing a hangnail. But Argosy has been averaging a 25% falloff over the last three months, ever since Hollywood Casino at Kansas Speedway opened. If Penn doesn’t make a hard decision on the riverboat’s future, the market soon will.

Perhaps feeling the hot breath of Penn (and MGM) on its neck in Massachusetts, Ameristar Casinos is upping the ante on its Springfield investment. The company is proposing to spend $50 million to create a new overpass and exit lanes to its casino site. (Mohegan Sun has floated a similar offer to Palmer.) Lack of freeway access doomed MGM’s Brimfield proposal and the fly-by-night David Nunes project in eastern Massachusetts simply begs a similar question. City officials are already warming to the Ameristar pitch — which doesn’t exactly hurt the company’s chances with the Massachusetts Gaming Commission. Hey, when you can get 50 mil in new infrastructure (and jobs) on the private sector’s dime, what’s not to like?

Men of privilege. Despite copious hand-wringing from Ira Schulman about what a wretched investment Rivers Casino was, that hasn’t stopped Neil Bluhm‘s minions from buying out what’s left of the late Don Barden‘s stake, giving them nearly 90% ownership. It also means that owning a casino in Pennsylvania is now entirely the province of rich, white men. As irrational and unlikely as R. Donahue Peebles‘ Philadelphia bid is, one almost feels like rooting for it on principle.