MGM Resorts International (MGM) recently inked an agreement with Peterson Companies to set up a high-end resort casino at National Harbor. Developed by Peterson Companies, the upcoming facility will have approximately 4,000 VLTs and 250 table games along with several other upscale amenities.
However, the completion of the deal is subject to the Maryland governing body’s legislation allowing a sixth casino license at National Harbor, a competitive tax rate for an international-level destination resort and nod to a state-wide referendum by Maryland voters.
MGM Resorts owns and operates 15 properties located in Nevada, Mississippi and Michigan, and had 50% investments in three other properties in Nevada and Illinois in the United States, as of November 3, 2011. We believe that in order to grow its brand beyond the highly competitive existing market places, the company is targeting other locations.
The resort will be situated on the Beltway Parcel at National Harbor which shares easy connectivity with several gateway cities. Management commented that the region will cater to the locals of Virginia and DC. Moreover, the upcoming property will also find visitors from the 40 million national and international tourists who stopover at Washington, DC every year.
The compelling geographic location of National Harbor complex has made it a lucrative target for expansion. The site displays several retail outlets and top-notch hotels including the Gaylord National Resort and convention center that also has a financial interest in this upcoming resort casino along with Peterson.
The latest deal is in sync with the MGM’s strategy to grow through geographical diversification. In late 2011, MGM signed an agreement with Creative Casinos for a minority equity interest, which will provide exposure to the Southwest Louisiana and Texas markets.
Washington, DC based privately owned real estate developer Peterson Companies also remains hopeful of collaborating with MGM given the latter’s proven track record in the casino business.
MGM Resort, which competes with the likes of Wynn Resorts Ltd. (WYNN), currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We are maintaining our Neutral recommendation on the stock over the long term.
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