MGM Resorts International was selected by the leadership of Springfield, Mass., Tuesday to represent the state’s third-largest city in the race for a single casino project in western Massachusetts.
Springfield Mayor Domenic Sarno announced MGM Resorts’ selection and endorsed the company’s plans to build an $800 million hotel-casino on 10-acres site that was damaged by a tornado in 2011.
MGM Resorts beat out a competing proposal from Penn National Gaming.
“Today is a great day for both MGM Resorts and the city of Springfield,” MGM Resorts President Bill Hornbuckle said in a statement. “We have worked very hard to prove our project worthy of this opportunity. It has been an extraordinary journey thus far, and we look forward to the next phase.”
The agreement with MGM Resorts needs approval from the Springfield City Council and by city voters, before the company can compete for the lone western Massachusetts gaming license. Hard Rock International has proposed a casino in West Springfield and Mohegan Sun wants to place a casino the town of Palmer.
The state’s 2011 gambling law allows for up to three regional resort casinos, including one in western Massachusetts. The state’s gambling commission will make the final determination, likely in early 2014.
Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said he favors MGM Resorts chances versus the competition, given the size and scope of the project.
He said the company’s brand and the Springfield mayor could influence the selection.
“While certainly not a game changer for a company that generated 2012 (cash flow) of roughly $2 billion, today’s selection serves to make us incrementally more positive on the MGM story,” Wieczynski said. “Ultimately, we believe the project should be able to generate (cash flow) in the range of $120 million to $160 million, representing a return on MGM’s initial investment of 15 percent to 20 percent.”
Penn National’s proposal called for an $807 million casino and hotel project on a 13.4-acre parcel in the northern end of Springfield on land housing a newspaper and a bus terminal.
Sarno told The Associated Press he never seriously considered negotiating host community agreements with both companies although that was an option.
Contact reporter Howard Stutz at email@example.com or 702-477-3871. Follow @howardstutz on Twitter.