Malaysian casino op­er­a­tor bet­ting big on U.S. mar­ket

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - BRUCE EIN­HORN AND CHRISTO­PHER PALMERI BLOOMBERG NEWS

Las Ve­gas will be get­ting its first new casino on the Strip in a decade. And the only casino cur­rently op­er­at­ing in New York City, at the Aqueduct Race­track in Queens, is get­ting an up­grade to in­clude a 400-room ho­tel with a celebrity-chef restau­rant.

They’re both part of the huge U.S. ex­pan­sion plans of the Gent­ing Group, a Malaysian con­glom­er­ate that’s seek­ing to move be­yond its Asian roots — not just in New York and Las Ve­gas, but in Mi­ami and sub­ur­ban Massachusetts as well.

“We want to di­ver­sify the port­fo­lio, spread out the risk and be able to lever­age in­ter­na­tional travel by hav­ing the right as­sets in the right cities,” said Ed­ward Far­rell, pres­i­dent of Gent­ing Amer­i­cas.

In 2020, Gent­ing plans to open the 3,000-room cen­ter­piece of its U.S. strat­egy on the north­ern end of the Las Ve­gas Strip, where con­struc­tion on the $4 bil­lion project has re­cently started, Far­rell said.

The Strip hasn’t seen a ma­jor ho­tel open­ing since 2009, and with no new projects on the hori­zon, Gent­ing is po­si­tion­ing it­self well, said Brent Pirosch, di­rec­tor of gam­ing con­sult­ing at real es­tate bro­ker­age CBRE Group in Las Ve­gas. He said the com­pany will ben­e­fit from a planned ex­pan­sion of the city’s con­ven­tion cen­ter and the ar­rival of the Na­tional Foot­ball League’s Raiders, sched­uled to move from Oak­land into a new $1.7 bil­lion sta­dium nearby.

“It will be the new­est and one of the best of­fer­ings out there on the Strip,” said Gent­ing Amer­i­cas’ Far­rell.

Gent­ing’s Re­sorts World New York City at Aqueduct gen­er­ates plenty of pro­ceeds: Last year it had gam­bling rev­enue of $826.5 mil­lion, ac­cord­ing to Bloomberg In­tel­li­gence, 13 per­cent more than At­lantic City’s big­gest casino, MGM Re­sorts In­ter­na­tional’s Bor­gata Ho­tel Casino & Spa, and 26 per­cent more than the casino rev­enue of Wynn Re­sorts Ltd.’s flag­ship Las Ve­gas prop­erty.

“Now it’s a good re­gional gam­ing prod­uct,” said Far­rell,

who said the ho­tel is due to open in mid-2019. “It will be much more of a des­ti­na­tion, a full en­ter­tain­ment fa­cil­ity.”

Re­sorts World pays 70 per­cent of its gross to New York State, ac­cord­ing to the com­pany, which says it has paid more than $1.9 bil­lion to New York’s Lot­tery Ed­u­ca­tion Fund since open­ing in 2011. The casino of­fers elec­tronic slots and other games but isn’t al­lowed to have live ta­ble games.

Like other casino op­er­a­tors, Gent­ing is im­ple­ment­ing a hub-and-spoke model, said Michael Pol­lock, man­ag­ing di­rec­tor of Spec­trum Gam­ing Group, a N.J.-based con­sult­ing firm that has done work for the com­pany. The model op­er­ates by hav­ing prop­er­ties in densely pop­u­lated ar­eas that help to build de­mand for Las Ve­gas through loy­alty pro­grams that re­ward fre­quent cus­tomers. That helps build rev­enue on both ends of the busi­ness, Pol­lock said.

“You en­cour­age your higher spend­ing, most prof­itable cus­tomers to stick with you,” he said. “Peo­ple in Queens will play more of­ten if they can earn points re­deemed in Las Ve­gas.”

Yet Gent­ing has had less suc­cess with other parts of its U.S. strat­egy. A $1 bil­lion project with the Mash­pee Wam­panoag tribe for a re­sort with three ho­tels and a casino, about 40 miles south of Bos­ton, is be­ing de­layed by a le­gal chal­lenge over the tribe’s right to op­er­ate it. The tribe is con­test­ing the chal­lenge, and a de­ci­sion by the U.S. Depart­ment of the In­te­rior has been de­layed, ac­cord­ing to a state­ment by Cedric Cromwell, the tribe’s chair­man.

Fur­ther de­lays in re­solv­ing the dis­pute could be costly

for Gent­ing. The group has in­vested $347.4 mil­lion in prom­is­sory notes is­sued by the tribe, Gent­ing Malaysia said in a fil­ing with the Malaysian stock ex­change on July 7, not­ing that re­cov­ery de­pends on the case’s res­o­lu­tion. Gent­ing said in a state­ment that the new dead­line for par­ties to file replies to op­pos­ing sub­mis­sions in the case is Oct. 30.

A plan to build a large casino at the site of the former Mi­ami Her­ald build­ing, which Gent­ing pur­chased for $236 mil­lion in 2011, is also in limbo, with Florida law­mak­ers balk­ing at pro­pos­als to ex­pand gam­bling in the city. Gent­ing’s Far­rell said there’s lit­tle rea­son to ex­pect the com­pany will be able to move ahead.

“The like­li­hood of any­thing ma­jor hap­pen­ing in south­ern Florida is very slim,” he said.

De­mand for Mi­ami prop­erty has waned. The city’s con­do­minium boom, which fu­eled much of the con­struc­tion, led to a glut in res­i­den­tial high rises, and now many devel­op­ers are putting off new projects.

The down­town Mi­ami site has at­tracted in­ter­est from

would-be buy­ers, ac­cord­ing to Far­rell, who de­scribed it as a “pre­mier piece of prop­erty.”

“We have had sev­eral op­por­tu­ni­ties to sell that we have not ac­cepted,” he said. “We are go­ing to hold on to our prop­erty and see what hap­pens.”

Gent­ing, through an af­fil­i­ate, owns 88 per­cent of Em­pire Re­sorts Inc., which is build­ing a $1.2 bil­lion casino re­sort in the Catskill moun­tains out­side of New York. Also branded as a Re­sorts World prop­erty, it is ex­pected to open in March.

In­for­ma­tion for this ar­ti­cle was con­trib­uted by Chong Pooi Koon and Ster­ling Wong of Bloomberg News.

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