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MGM Resorts To Sell Share In The Borgata After Selling Borgata Land In Atlantic City

Posted on July 29th, 2010

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Las Vegas-based casino company MGM Resorts International has sold a piece land in Atlantic City for $73 million. The land, a portion of MGM’s total estate holdings in Atlantic City, is where the Borgata Hotel Casino & Spa is situated. In a statement Tuesday, MGM named the buyers of the Borgata land as Vornado Rea;ty Trust and Geyser Holdings. The buyers, after having duly inspected the property, announced Tuesday that they will move ahead with the deal and said the purchase is likely to be finalized before the end of this year. The transaction must still go through the Casino Control Commission and Division of Gaming Enforcement of New Jersey for approval.

The total land area sold is about 11.3 acres which puts the property at a price of almost $6.5 million per acre. MGM spokesman Gordon Absher said the company is also planning to sell its fifty percent share in the Borgata casino and disclosed that representatives of the company are currently negotiating with potential buyers. The recent moves of MGM are a consequence of the objections of New Jersey’s casino regulators over MGM’s business association with Pansy Ho, the daughter of Macau’s gambling mogul Stanley Ho, who is allegedly cuddling criminal gangs in Macau, Asia’s foremost gambling destination.

MGM has partnered with Pansy Ho in operating the MGM Grand Macau. The regulators have not been convinced of the suitability of Ho as a business partner of MGM and challenged the casino company to break off its business ties with Pansy Ho or sell its ownership in the Borgata. In a report sent to MGM in May 2009 and made public in March, the New Jersey Division of Gaming Enforcement said that Stanley Ho allows mobs of criminals to “operate and thrive” inside his casinos in Macau and that Pansy Ho is still dependent on her father and his money. The regulators decided that Pansy Ho is not a suitable business partner of MGM Resorts in its business venture in Macau.

Stanley Ho is a powerful figure in Macau and has monopolized the gambling business in the Chinese enclave for many years before the Chinese authorities decided to open Macau to foreign investors. The older Ho has denied the allegations linking him to Chinese organized crime. MGM, likewise, said it is not guilty of any illegal activity and its record in running the MGM Grand Macau with Pansy Ho is clean. The company decided to maintain its business partnership with Pansy Ho and opted to give up its half interest in the Borgata and leave Atlantic City.

The MGM’s spokesman said that after the Tuesday sale, MGM Resorts is still owner of roughly 85 acres of land in Atlantic City with a great potential for development. Around 70 acres of that land are next to the Borgata. MGM Resorts also owns fifteen casino properties in Nevada, Michigan and Mississippi and is co-owner of three other properties in Illinois, Nevada and Macau. The sale of the Borgata land will not affect the owner of the other half of the Borgata, Boyd Gaming Corp., according to the spokesman. Boyd Gaming, as a co-owner, has a right of first refusal to buy MGM’s ownership.

MGM and Boyd launched the Borgata in 2003 and now, seven years after, the casino is still operating successfully. Its high-end hotel has created a demand from sophisticated clients. The economic recession has caused havoc in Atlantic City’s gambling industry and the recent upsurge of gambling options in New Jersey’s neighbouring states has kept the casinos under severe pressure. New Jersey’s neighbours including Pennsylvania, Delaware and West Virginia have just legalized table games and their casinos are already offering a wide selection of table games that were once only found in Atlantic City casinos.

As the recession and the growing competition caused gaming revenues at the boardwalk’s eleven casinos to plunge to an all-time low, only the Borgata experienced a slight decrease. While the other casinos posted double-digit drops, the Borgata recorded only a 2.3 percent decline. A very recent announcement from New Jersey Governor Chris Christie has disclosed his plan of taking over Atlantic City in an attempt to boost its economy and give it a new image.