MGM Resorts International announced it was acquiring a New York casino and racetrack, located just 15 miles from Times Square, and opening the populous New York City market to the gaming giant.
The Las Vegas-based casino company, along with its real estate investment trust, MGM Growth Properties, said Tuesday that it was buying the Empire City casino and racetrack in Yonkers for $850 million.
The two companies – MGM Resorts owns 70 percent of MGM Growth – entered into an agreement which stipulates the REIT will buy back the property associated with Empire City and lease the operations to the gaming company.
“This acquisition represents an excellent opportunity to further solidify our presence on the East Coast, and in particular, expand our reach into the high-density New York City region,” MGM Resorts Chairman and CEO Jim Murren said in a statement.
On the East Coast, MGM Resorts already operates the Borgata in Atlantic City and MGM National Harbor in Maryland. The company is also in the process of building the MGM Springfield in Massachusetts, which is expected to open in August.
The company expects that $260 million of the total $850 million transaction will be in MGM common stock. The company will pay another $50 million if Empire City is awarded a license for live table games by the end of 2022 and if the company accepts the license by the end of 2024.
Jefferies Research gaming analyst David Katz, in an investors note, said the transaction “provides incremental geographic exposure for the MGM branded system and incremental rent growth” for MGM Growth.
“Although the ultimate valuation is accretive, the entry multiple for MGM is high, and the use of stock in the purchase could offset the positive aspects in the near term,” Katz said.
Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said the transaction “positions MGM to take advantage of potential changes in New York’s gaming legislation, both with respect to table games and sports betting.”
Empire City sits on 97 acres of land in Yonkers, and is within proximity of “16 million eligible gaming customers in southern New York,” MGM said.
The casino offers more than 5,200 slot machines and electronic gaming tables, several restaurants, year-round live harness racing, and both harness and thoroughbred simulcast horse racing.
For the last 12 months ending in March, Empire City reported approximately $230 million in net revenues and approximately $70 million in adjusted cash flow.
The transactions, which are subject to regulatory approval, are expected to close in early 2019.
Empire City is currently owned by the Rooney family, which bought the facility in 1972. The Rooney’s own the National Football League’s Pittsburgh Steelers. In November, the Rooney’s hired JPMorgan to find a potential buyer for the property.
Deutsche Bank gaming analyst Carlo Santarelli told investors the deal was “straight forward” for MGM Growth Properties and benefits the casino operator through the sports betting opportunity in New York and it “strengthens MGM’s northeast presence.”
Shares of MGM Resorts closed at $31.30 on the New York Stock Exchange, down 15 cents or 0.48 percent. MGM Growth shares, also traded on the NYSE, closed at $29.69, up 31 cents or 1.06 percent.
“All told, though the Empire City acquisition could create incremental shareholder value over time, we expect the deal to receive a lukewarm reception from MGM stakeholders,” Wieczynski said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
