Vote paves way for LV-style casinos in Ohio - Business

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Nov. 05, 2009
Copyright © Las Vegas Review-Journal

Vote paves way for LV-style casinos in Ohio

By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL

OWNERSHIP COMBO: CASINOS AND HOOP TEAMS

Owning an NBA franchise and a casino is becoming common.

If Ohio casinos come to fruition, Cleveland Cavaliers owner Dan Gilbert has the right to build and own gambling halls in Cincinnati and Cleveland.

Gilbert, who financially backed Ohio’s casino referendum with Penn National Gaming, would join the Maloof family, which owns the NBA’s Sacramento Kings and the Palms.

Other casino operators have partial ownership in NBA teams.

Silverton owner Ed Roski Jr. owns a small percentage of the Los Angeles Lakers and Harrah’s Entertainment Chairman Gary Loveman owns roughly a 2 percent stake in the Boston Celtics.

HOWARD STUTZ/LAS VEGAS REVIEW-JOURNAL

Cleveland Cavaliers owner Dan Gilbert, left, is congratulated by Tom Whatman, who ran the campaign team for Issue 3 on Wednesday in Cleveland. The issue, backed by voters, will allow one casino in each of Ohio's four largest cities. The casinos offer the prospect of 34,000 jobs.
Photo by The Associated Press

Ohio voters Tuesday said they want to see four Las Vegas-style casinos built in the Buckeye State, but residents are still a long way from the first slot machine pull.

Investors in Penn National Gaming and Nevada's slot machines makers, however, are already stacking their chips.

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Tuesday night's vote in Ohio reversed two decades of opposition to gambling in a state where residents rejected casino measures on four different occasions.

However, with the state facing a budget deficit and 10 percent unemployment, Ohio voters approved a referendum by a 53 percent to 47 percent margin that will allow one casino in each of the state's four largest cities. The casinos offer the prospect of 34,000 full- and part-time jobs.

"This is not going to be a savior by any means, but it's another brick in the wall," referendum backer Dan Gilbert, owner of the National Basketball Association's Cleveland Cavaliers, told The Columbus Dispatch on Tuesday night.

Construction on casinos in Cincinnati, Columbus, Toledo and Cleveland may not take place until next year, with openings in 2012. Ohio political leaders who opposed the referendum may be exploring legal challenges or could launch another referendum to replace parts of the measure.

"Although we expect legal challenges and market infrastructure to take 24 months, the development is bullish for Penn," Oppenheimer gaming analyst David Katz told investors.

Penn National, a racetrack and regional casino giant, bankrolled the campaign in support of the referendum, along with Gilbert, who is the founder and chairman of Quicken Loans.

Penn National will own and operate the casinos planned for Toledo and Columbus, investing at least $600 million to build the two facilities. It's estimated that each casino could house between 2,000 and 5,000 slot machines and 50 to 100 table games.

Ohio is requiring a $50 million licensing fee for each casino with a minimum investment of $250 million per location. The tax rate on gaming revenues will be 33 percent.

Still, analysts said resort-style casinos in Ohio are a slam dunk.

"The passage is a positive for Penn and for the equipment companies as it opens up a new market," Susquehanna Financial Group gaming analyst Robert LaFleur said.

Several analysts, including Katz and Janney Montgomery Scott's Brian McGill, said the casinos' opening could add up to $5 a share to Penn's stock price.

Investors agreed Wednesday.

Shares of Penn National, up as much as 10 percent during the day on the Nasdaq National Market, closed at $28.19, up $1.99, or 7.6 percent.

Some analysts thought that Penn National could end up operating Gilbert's casinos in Cincinnati and Cleveland.

"Clearly, we believe this is a home run for Penn National, but we believe there could be even more incremental opportunities in a potential management contract with Gilbert's properties, given his lack of experience in casino operations," Macquarie Securities gaming analyst Joel Simkins said.

Investors are also bullish on slot machine makers' prospects in Ohio, where up to 20,000 new slot machines could be added at the four casinos.

"Ohio represents a meaningful new market opportunity for gaming equipment and technology providers," Roth Capital Markets gaming analyst Todd Eilers said in a research report.

Ohio residents are expected to vote on a gaming referendum next year that could add 17,500 slot machines to the state's seven racetracks.

"With the passage of full casino gaming it might be less likely that there will be voter appetite to approve slots," Union Gaming Group principal Bill Lerner said.

Nevertheless, Tuesday's vote boosted equipment makers' stocks prices. Shares of International Gaming Technology closed at $18.60, up 8 cents, or 0.43 percent. Bally Technologies was up 72 cents, or 1.73 percent, to close at $42.41 while WMS Industries finished at $40.77, up 32 cents, or 0.79 percent. All three company stocks are traded on the New York Stock Exchange.

Ohio will become the 39th state to legalize casinos and would join neighboring casino states Indiana, Michigan, Pennsylvania and West Virginia.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. wow listen to the nevadans wrote on November 05, 2009 03:01 PM: The casino business in Nevada is now in our home state and now I will not have to spend another day in scum, hooker, thiefing, rude, its about me not u, NEVADANS, Nevada. Vegas my money goes east now for sports bets. Bob wrote on November 05, 2009 02:10 PM: 34000 new jobs???????? Come on. What bank will lend you the money right now???????? Harry Reid isnt there to strong arm the blue suits. Quit cheering and start thinking about the affects of Obamacare and Cap and crap. You will never open if these pass. Your fixed costs will skyrocket. Hello??? American Gaming Guru wrote on November 05, 2009 11:03 AM: Gaming has become the single greatest way for politicians to tax its citizens without actually raising tax rates. It amazing that the citizens of Ohio took the bait! happy jack wrote on November 05, 2009 10:42 AM: Is this Ohio's idea of diversifying their economic base and creating new jobs? Why are these companies doing this ? is there something wrong with people coming to LV to lose your money? or does Ohio have an uneducated work force like LV, willing to work for low wages? Anyone tell them about tip sharing plans? Don Best wrote on November 05, 2009 09:21 AM: Funny how Ohio is an economic disaster. In 2000 and especially 2004, they were the key to W winning the White House. This single state could have mitigated, even prevented our pathetic hopeless wars in Iraq and Afghanistan. But no, even as jobs were fleeing the state, Ohioans voted for "safety". OK, Ohio, with W's keen mind in charge, you're now broke, safe but broke, and hoping casinos are your salvation. Don't think so. All you are doing is creating minimum wage, tip dependent dumbbell jobs. Ask people in Vegas how that's working out... Artie wrote on November 05, 2009 07:53 AM: Roll out the red carpet for the hookers, panhandlers, crooked politicians and increased drug activity. This is why voters turned down all these attributes in prior referendums. What's changed now?? Did Ohio voters just decide to sell their souls to the devil?? Wake up Ohioans $$$ talks from Penn National Ken wrote on November 05, 2009 07:35 AM: The problem they will have is how much patrons will spend. I'm all for casinos in Ohio but they will attract the welfare crowd 24/7 vs. a place like AC which has trash come in during the day and real money come in at night. They'll have the numbers but not much revenue and all of that will have to go to cops and treatment programs. Vivian wrote on November 05, 2009 07:33 AM: How sad. How truly sad. Almost all states in the union look to gambling to create jobs..... and destroy lives and take from the poor and gullible. A sign of the decline of a once great nation. Joe Bama wrote on November 05, 2009 07:22 AM: Gamblers special from Mcaren to Toledo?Well anyway good for Ohio everybody knows casinos are a good source of revenue for states.hee hee hee Thomas A. Carpenter wrote on November 05, 2009 04:24 AM: I wish them well and hope it turns out better than Atlantic City !