Mini-Casinos approved in NJ

Proving that the system can change, as long as it’s a nonsensical change that won’t help anyone already in the market, New Jersey has approved mini-casinos for Atlantic City. From the AC Press:

Gov. Chris Christie signed a law Wednesday evening allowing two smaller-size casino hotels to be licensed in Atlantic City. The pilot program, under a bill championed by Sen. Jim Whelan, D-Atlantic, means applications can be submitted immediately for the two casino licenses.

Interested developers include Hard Rock Cafe International, which has discussed building a $450 million casino in line with its themed restaurants.

via New Jersey Gov. Chris Christie enacts Atlantic City ’boutique casinos’ bill – pressofAtlanticCity.com: Breaking News.

I’ve been talking about what a lousy idea mini-casinos are for about a year now.

Here are two blog posts I did last year that explain exactly why mini-casinos are a bad idea: right here and right here.

I haven’t seen any numbers that would make an investment of $450 million work out. Anyone CEO who attempts to spend $450 million to build a casino with 200 rooms and 500 (or so) slots when Resorts Atlantic City, with 950 rooms and 2,200 slots, just sold for $31.5 million should be fired immediately. Paying fourteen times the price for less than one-quarter of the footprint is beyond delusional.

Is there anyone who really thinks someone’s going to invest $450 million in a property that can’t possibly give them any return on investment? There’s got to be something else going on here.

Like I said before, Nevada’s got its problems, but no one is getting up in the legislature and saying that the solution is to build two more Casino Royales.

4 Responses to 'Mini-Casinos approved in NJ'

  1. FoolsGold says:

    Perhaps there is something artificial about the numbers or at least that the numbers are being viewed as artificial. Is it that if one spends 450 million for a tiny footprint one is then a player? Or is it that the ultimate view is to drag the shareholders into bankruptcy court and wind up with a faux-450 million dollar price tag?

  2. FoolsGold says:

    Or perhaps the concern is solely with the tax revenue and its political allocation? Find suckers to put up 450MM for a mini-casino, but rake in tax revenue and have power over its disposition in the time prior to the casino’s eventual bankruptcy and re-financing?
    Just as our drug enforcement laws support a core population of police, lawyers and judges perhaps our gambling laws support a core population of politicians, revenue agents and lobbyists. Therefore the wisdom of 450MM for a mini casino is determined solely by the effect on the beneficiaries, not the investors.

  3. dave202 says:

    Completely agree with you. Your analysis is right on and it makes you wonder what these Wall St. whizzes are thinking! Why spend $450 million when you can buy the Marina (or the Hilton) for $25 million (OK let’s push it to $35 million), put $150 million into it and have one of the gems of AC in an area that is jumping with the Borgata and Harrah’s? The ROI isn’t nearly as high, and there’s already a database! What are we missing? That said, I wish the Hard Rock luck, because I think it will be quite successful in AC, but could make more money by buying one of the hurting properties. And of course I didn’t even mention the additional 5 percent tax on GGR that the “small” casinos will pay!

  4. FoolsGold says:

    I think it may hinge on the fact that the people investing the 450MM will be investing someone else’s money, not their own. Perhaps that is the key here. Otherwise I can’t see the slightest reason anyone should even consider the notion much less actually go through with it.