Wynn Boston Harbor a good fit for MGM Resorts, analyst says

MGM Resorts International could generate higher returns on investment if it acquired Wynn Resorts’ unfinished Boston Harbor project, a gaming industry analyst told investors Monday.

John DeCree of Las Vegas-based Union Gaming said an MGM move into Boston makes sense for both MGM and Wynn, but a major obstacle stands in the way: Massachusetts gaming regulations prohibit a company from having more than one license to operate, and MGM is just months away from completing its $960 million resort in Springfield in western Massachusetts.

Is MGM interested in acquiring Wynn Boston Harbor, the $2.4 billion project in Everett on the Mystic River? MGM officials “will not comment on rumors and speculations,” a company representative said in response to an emailed inquiry Monday.

Wynn CEO Matt Maddox declined to be interviewed Monday, but Maddox told the Massachusetts Gaming Commission on Thursday that he’d be compelled to listen to offers for the Boston Harbor property. The company faces an ongoing investigation into allegations of sexual misconduct by the company’s former chairman and CEO, Steve Wynn, and accusations that he hid from regulators a $7.5 million settlement with one of his victims.

“Our company stands for quality and five-star service and is uniquely situated to deliver one the best integrated resorts in the world for both customers and employees in Everett, Massachusetts,” Maddox said.

“We remain very excited about the Boston market,” he said. “However, our obligation to shareholders is always to maximize the value of our assets and to mitigate risk.”

Boston better

DeCree’s report, issued Monday morning, said the Springfield project “was a great fit for MGM when the license was awarded in 2014, but MGM is a vastly different company today.”

“In 2014, MGM’s total leverage was six times and the company generated $1.5 billion of domestic (cash flow),” the report said. “Today, MGM’s balance sheet is 4½ times leveraged and going below four times in a hurry. The company now generates over $2.5 billion of domestic cash flow and has significantly expanded its presence on the East Coast with MGM National Harbor and The Borgata. As a substantially larger enterprise, we believe MGM is a good fit for Boston.”

He estimated MGM could generate more than a 10 percent increase on return on investment if it took on the Boston location instead of Springfield. DeCree’s report cites a greater opportunity to cross-market other MGM properties in New Jersey, Maryland and Las Vegas.

He said Wynn Resorts may want to exit the Massachusetts market because of the investigations into Steve Wynn, who left the company and sold his shares, and because of a different investment strategy by Maddox.

“Local regulators continue to pursue an in-depth investigation into the company and its suitability,” DeCree said. “The political climate has become unfavorable for Wynn in Boston and rather than waiting around, the company could exit. Further, the company is refocusing its strategy, which doesn’t appear to include regional U.S. gaming.”

DeCree said there are other potential suitors for the Boston Harbor project. 

He listed Las Vegas Sands Corp., which has ample cash to make a deal, but showed no interest in the market when competition began for licensing; Caesars Entertainment Corp., which was in the midst of bankruptcy proceedings when Massachusetts first accepted bids from casino operators; and Genting, the Malaysian company that is building Resorts World Las Vegas on the Strip and has a racetrack gaming operation in New York.

Genting had partnered with the Mashpee Wampanoag tribe on a casino development in southeastern Massachusetts, but that project failed to launch without federal trust land.

Las Vegas Sands spokesman Ron Reese told the Review-Journal the company would not be interested in purchasing Wynn Boston Harbor if it were put up for sale. Spokesmen for Caesars Entertainment Corp., Boyd Gaming and Genting declined to comment on their potential interest in Wynn Boston Harbor.

Buyers for Springfield?

DeCree suggested the easiest course for MGM to pursue the Boston property would be to sell the Springfield development and, in effect, trade up.

“The cleanest way for an MGM-Wynn trade in Boston to go off without a hitch would be if MGM found a buyer for its Springfield project,” DeCree said. “We think Springfield would be a compelling opportunity for a number of prospective buyers.”

He listed Penn National Gaming — which already is licensed in Massachusetts and would have to effect its own trade to make a deal — Boyd Gaming, Eldorado Resorts or three major tribal casino operators as prospective buyers if MGM put a for-sale sign on Springfield.

Tribes operating the Mohegan Sun and Foxwoods in Connecticut are prospects as well as Florida’s Seminole tribe, which has used the Hard Rock Hotel brand on some of its properties.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter. Review-Journal staff writer Todd Prince contributed to this story.

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