July 10 (Bloomberg) -- The Mohegan Tribal Gaming Authority, owner of Connecticut’s top-grossing casino, is accelerating its push outside the state as competition threatens to lure more players from its home turf.
The authority, owned by the state’s 2,000-member Mohegan tribe, delivered a 10,000-page bid last week to New York regulators for a $550 million casino in Thompson, on the site of the former Concord Resort in the Catskills. It’s also proposing to build casinos in Philadelphia and Boston.
“There’s going to be casinos in these places,” said Mitchell Etess, a former Trump executive who has been with the authority for 18 years and became chief executive officer in 2006. “The key for us is to grow in a way we can manage successfully.”
Doing nothing is a bigger gamble. New venues in nearby states mark a fresh competitive threat to Connecticut’s two casinos, where slot-machine revenue has shrunk by a third since 2006. Business in the state has already been hurt by the addition of slots at horse tracks in New York, casinos in Pennsylvania and, most recently, table games in Rhode Island.
Mohegan owns one of the largest casino resorts in the U.S., the 4.5 million-square-foot Mohegan Sun in Uncasville, Connecticut, 125 miles north of New York City. Connecticut’s slot revenue, from Mohegan and Foxwoods Resort Casino, fell 8 percent to $441 million in the first five months of this year, extending a seven-year slide.
The authority’s expansion began with the 2006 opening of the Mohegan Sun at Pocono Downs in Plains Township, Pennsylvania. It also manages the Resorts Casino Hotel in Atlantic City, New Jersey. Still, Connecticut accounted for 78 percent of the authority’s $1.3 billion in revenue last year.
“Keeping focused on the Northeast makes the most sense for us,” Etess said in a telephone interview. “It’s where our brand is most known.”
Etess is pursuing what he calls a “capital light” growth strategy, looking for partners to help finance projects that amount to more than $2 billion in total.
The authority, which has about $1.7 billion in debt outstanding, has refinanced its borrowings on multiple occasions since the 2008 recession, extending maturities and removing lender restrictions that limited capital spending.
In Massachusetts, where it is one of two contenders, along with Wynn Resorts Ltd., for a Boston-area casino, Mohegan has partnered with the New York-based hedge fund Brigade Capital Management LLC, which would own 60 percent of the proposed $1 billion project. Mohegan would own half of the proposed Catskills resort, along with developer Louis R. Cappelli.
Etess said he’s confident Mohegan can come up with its share of the costs.
“We’re not doing anything we can’t afford,” he said.
The expansion strategy is far from a sure thing.
Within a few years, nine new casinos could be battling for gamblers in New York, Massachusetts and Pennsylvania. Already two bidders, Wynn and Penn National Gaming Inc., have dropped out the contest for the downtown Philadelphia project, citing potential saturation. Mohegan, with a 16 percent interest in a $500 million proposal there, is one of four remaining bidders, according to regulatory filings.
Mohegan has proven to be a solid casino operator, with a per-slot machine win of $304 a day in 2013, or 24 percent more than Foxwoods, according to Dennis Farrell, an analyst in Charlotte, North Carolina, with Wells Fargo Securities.
The company has also focused on non-gambling amenities, he said. Its 10,000-seat arena in Uncasville hosted rocker Bruce Springsteen for two concerts in May, and welcomed pop singer Katy Perry this week.
The ability to draw top acts could give Mohegan a leg up against other bidders, Farrell said.
“If you want a premium experience, Mohegan is a frontrunner for that,” he said.
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