Should MGM trade their share of Borgata for the 87 Acres under the abandoned Echelon Place

MGM MIRAGE and Boyd Gaming each own 50% share in Borgata, the newest nicest and most profitable casino in Atlantic City. MGM also owns enough land to build another casino (72 acres). The Borgata has weathered AC meltdown better than most other casinos partly because it is not on the boardwalk. Most analysts believe that the AC market will never expand because of massive competition from all states within driving distance of AC.

MGM MIRAGE must leave New Jersey in order to tighten the business relationship with Pansy Ho, the daughter of Stanley Ho who held the gaming monopoly for 40 years in Macau. The father (now age 88) had business relationships with the Chinese organized crime (shocking news). New Jersey gaming commission wants hearings regarding the relationship. MGM must take a bath on their AC property in order to get out of NJ before they have their Initial Public Offering in Hong Kong.

So far Nevada and Mississippi have not challenged MGM MIRAGE relationship with Pansy Ho.

Since they are going to take a bath anyway, should MGM MIRAGE trade their 50% share of Borgata and the land for the 84 acres on north strip containing the shell of the Echelon property. Boyd is unlikely to be able to restart this project for years (if ever). Boyd would low an albatross, have a money making property which would help in their pursuit of Station Casinos, and MGM would control almost the entire North strip (west side) for nearly a mile.

Borgata clears about $1 billion (gaming and non-gaming).

Not to derail this thread, but...

Quote: pacomartin

The Borgata has weathered AC meltdown better than most other casinos partly because it is not on the boardwalk. Most analysts believe that the AC market will never expand because of massive competition from all states within driving distance of AC.

It will be interesting to see what the analysts have to say after Revel opens next year. It's on the boardwalk next to Showboat, and it looks like it will be huge.

Quote: pacomartin

should MGM MIRAGE trade their 50% share of Borgata and the land for the 84 acres on north strip containing the shell of the Echelon property. Boyd is unlikely to be able to restart this project for years (if ever).

Borgata clears about $1 billion (gaming and non-gaming).

I would say it looks like a great deal for Boyd. They get control of an operation that makes money.

In the immediate future looks like a bad deal for MGMM. They'll be losing a half billion dollar share in a property, and gaining a peace of land it will cost them more money to complete the Echelon project. I just dont see any benefit for them at the moment. From what little I can gather it might be better for MGM to sell %1 of Borgata to Boyd, and keep raking in the money as a silent partner, if this is possible. With Boyd running the show it might be a way to get around the problems with the Gaming Comission.

Quote: Croupier

I would say it looks like a great deal for Boyd. They get control of an operation that makes money. In the immediate future looks like a bad deal for MGM.

I agree that Boyd would make out, but it would be a better deal than selling the property for $100M. I don't think that NJGCB would go for the silent partner thing. On the other hand what if Harrah's decides to go to Asia. They control almost half the market in AC. What is NJ going to do then? Only three years ago that land under Echelon was worth over $2.5 billion.

I hope they finish Revel, but Fountainbleau was this far along when it was abandoned. The owners have slowed down construction to stretch out the cash they have on hand until they can secure long-term financing to finish the job. In January 2009 they announced that Construction will continue on the core, shell structure and enclosure. Work on the interiors will be delayed and those crew members will be temporarily laid off until the interiors are restarted.

The ArticleHere looks at the MGM's options in a little more detail, and has helped me understand the situation a little better. Looks like the MGM is going to fight it all the way. If the Nevada Gaming Commision had the regulatory stance of its New Jersey counterpart, the Strip might look a little different.

Borgata has been one of Atlantic City’s most profitable casinos but has lost revenue along with other casinos there, as the recession and competition from newer casinos in neighboring states have taken their toll.

While the above statement is true, Borgata has done much better than any other company in AC. Perhaps public opinion will be so strong against the NJGCB that it is worth it. If MGM-MIRAGE operates in Connecticut, Michigan, Nevada it will be funny if they are prohibited from New Jersey.


It is possible that MGM MIRAGE would only trade their half interest in the Borgata for the 84 acres in North Vegas strip. They could keep the 72 acres in Atlantic City in case the situation imporoves and the gaming board has a change of heart. In this case I think Boyd should still take the deal, because their improved short term financial position would great increase their odds of taking over Station Casinos in March. If they get station casinos they get 5 major casinos outright, 3 for 50% share, and 10 smaller casinos. In addition they get the land that Station was going to develop as Viva Resort . The risk with Fountainbleau and Circus circus land, and the investor who bought Sahara is that when development starts up again the Harmon Street Corridor will be the focus. Eventually forming more of a 2.5 mile by 2.5 mile squarish district rather than a 4.5 mile strip.

There is a rumor that Harrah's may try and purchase a 32.5 percent stake in Melco Crown Entertainment, a publicly traded company that owns the City of Dreams and the Altira Macau. The stake in Melco Crown is held by Australian billionaire James Packer's gaming company, Crown Ltd. Since MGM MIRAGE is overseeing less than 10% of AC business but Harrah's is doing over 40% they obviously can't force Harrah's out of the business.