Monarch Resorts said full completion of a $400 million expansion to its Black Hawk, Colorado casino will be delayed until the middle of next year, but the Reno-based company expects the bulk of the development to open by the spring.
The issue surrounds a contentious relationship that has developed between Monarch and PCL Construction Services, the project’s general contractor. PCL filed a lawsuit against Monarch on Aug. 30.
However, in a statement Tuesday, Monarch said the casino operator will continue to work with the construction company to finish the expansion at Monarch Black Hawk, which includes a 23-story, 500-room hotel tower and an enlarged gaming area that is more than double the current size.
“Our disappointment with the ongoing construction delays at the expanded Monarch Casino Black Hawk is palpable,” Monarch officials said in a statement. “Importantly, other than a delay of the finished project, the customer experience should not be impacted at the property, now or in the future.”
On its second quarter earnings release in July, Monarch said it has spent $365 million of a budgeted $430 million to $442 million on the expansion. Black Hawk, which draws business from its location 50 miles west of Denver, is one of Colorado’s three casino communities located in historic mining towns.
In Tuesday’s statement, the Monarch said it believed the lawsuit by PCL was “principally an effort to deflect attention from their failures to deliver the completed project in a timely and cost appropriate manner.” The casino company said it would “detail their numerous contract and performance breaches” when it answers the complaint.
News of the lawsuit drove Monarch’s shares down almost 4% on Tuesday. The company’s stock price, traded on the Nasdaq, rallied somewhat on Wednesday to close at $43.03, up 87 cents or 2.06%.
Jefferies gaming analyst David Katz said in a research note Tuesday that investors had been hopeful the Black Hawk expansion would be done by the end of the year, allowing the property’s results to be included in Monarch’s 12-month totals for 2020. The company also operates the Atlantis resort in Reno.
“We remain optimistic for the ultimate performance of the project but the further pushing out of completion coupled with the premium valuation suggest near term weakness,” Katz told investors.
He added the company’s comments seemed to indicate the disagreements with the contractor were based on delays in construction and increased costs. He said there have been delays with the project over the past two quarters.
“The update is negative for the company given the magnitude of the growth expected from the project,” Katz wrote. However, he told investors that he remains confident that Monarch can get to $100 million in annual cash flow, “potentially just a little later than expected.”
Monarch said in its statement the hotel, expanded casino, restaurants and certain public areas should be fully open in the first quarter of 2020.
“The remaining remodeling of some areas of the existing casino is expected to be completed in the second quarter of 2020,” the company said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
