Friday, December 19, 2003
Copyright © Las Vegas Review-Journal

Park Place formally floats Mall of America casino idea

Park Place Entertainment Corp. joined a Minnesota state legislator Wednesday in proposing a Las Vegas-style casino at the Mall of America that could generate revenues of $1 billion a year.

"We believe the Mall of America would be a very attractive market, but I can't emphasize strongly enough it's up to the Legislature and the people of Minnesota if they want more gambling in their state," said Park Place spokesman Robert Stewart.

The company in September announced it was exploring an against-the-odds possibility of building a major casino resort at the Mall of America.

Rep. Lynda Boudreau of Faribault, Minn., combined plans for a Las Vegas-style casino with a proposal Wednesday to pump $250 million a year from new gambling taxes into college scholarships in Minnesota.

Stewart said Park Place is confident the casino would contribute jobs and other economic benefits to Minnesota while being a very attractive opportunity for his company.

Park Place, which operates Caesars Palace casino in Las Vegas and Caesars Atlantic City, released an economic analysis of a proposed Mall of America casino prepared by Ernst & Young.

The national accounting firm estimated that the proposed 160,000-square-foot casino with 5,000 slot machines -- a size that would make it one of the largest casinos in the United States -- would raise more than $1 billion a year in revenue.

The market impact was based on potential visitor interest, with Mall of America's 40 million visitors a year leading Orlando, Fla.'s 38 million, Las Vegas' 35 million and Atlantic City's 32 million.

The Ernst & Young study estimated the state could take 30 percent of that revenue, or $300 million a year, in taxes.

Some Wall Street analysts who asked not to be named said that could generate an added cash flow, a key measure of profitability, of $150 million to $250 million a year for Park Place, up 15 percent to 25 percent from its current cash flow of about $1 billion a year.

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, however, cautioned while the opportunities at Mall of America are substantial for Park Place, it is premature to estimate the proposed project's impact on the company.

"The casino is contingent on (passing) legislation in Minnesota. The potential is there for them operating adjacent to Mall of America, but to get there, we'll have to see the legislation and tax rates that are enacted," he said.

The proposed casino would be owned by a new state corporation and leased to a gaming company such as Park Place, which is the leading candidate based on its association with Simon Property Group, which operates the Forum Shops at Caesars and Mall of America.

University of Nevada, Las Vegas professor and casino industry expert Bill Thompson said a state corporation has to own any such casino because Minnesota does not allow casino gambling and only permits a lottery that is run by the state.

"Such an arrangement is not done in any other part of the U.S., albeit two provinces in Canada use the arrangement," he said.

Furthermore, Thompson said the revenue projections are overly optimistic.

"They are projecting per-machine revenues better than Foxwoods (in Connecticut) and as good as any in New Jersey. This is bizarre," he said.

"Midwest slot machines do one-third to one-half of what they're projecting, and they're going to have the biggest Indian casino only 10 miles away," Thompson said, referring to Mystic Lake Casino, operated by a Sioux tribe.

Thompson said the state of Minnesota is interested in the proposal because "it gave away the shop to the Indians" who pay nothing to the state from their six casinos.

"Now they want to figure out how the state can get revenues," he said.