MGM Resorts shocked the industry on Tuesday by pulling out of the competition for a downstate New York casino license. This unexpected move signifies the abandonment of their extensive $2.3 billion strategy to upgrade and expand Empire City racino, a vision that had been in the pipeline for several years.
The decision to withdraw came just before MGM was to submit a revised application to New York’s Gaming Facility Location Board (GFLB). MGM had initially submitted its application in late June, joining seven other contenders in the intense race for the coveted license. However, despite passing the local committee phase in September, MGM chose not to update its economic forecasts to meet the competitive environment and instead opted to retreat, leaving only three finalists in the fray.
MGM remarked on the evolving competitive dynamics: “The newly defined competitive landscape – with four proposals clustered in a small geographic area – challenges the returns we initially anticipated from this project.”
An additional challenge arose when the State of New York issued new guidelines indicating that MGM would only qualify for a 15-year license, not the 30-year term initially expected. MGM noted that this, combined with the current real estate partner in Yonkers, VICI, resulted in a proposition that no longer aligned with their capital strategy.
MGM’s withdrawal is notable as it represents the third major casino operator to exit the New York licensing battle this year. Preceding MGM, Las Vegas Sands exited over concerns about the potential legalization of iGaming in the state. Wynn Resorts followed suit in May, pointing to an unstable political and communal landscape as their reason for stepping back.
Despite advancing through the initial selection rounds, MGM’s CEO, Bill Hornbuckle, had previously hinted at dissatisfaction with the new licensing terms during a banking conference in early September. The revised terms tied capital investments too closely to the approval process, frustrating applicants like MGM who had submitted their bids under different expectations.
Initial plans for MGM included a June 2027 opening, which had received a unanimous 6-0 vote of support from the community advisory committee (CAC). However, the necessity to adhere to the current 55% tax rate under the new license terms was a significant factor in their withdrawal decision.
MGM’s exit brings up crucial concerns for the remaining applicants regarding the financial feasibility of their proposals. MGM’s concerns over return on investment resonate, especially as they manage other large-scale projects in Japan and Dubai, alongside renovations at its MGM Grand in Las Vegas.
Of the final four, MGM had the lowest projected construction costs at $2.3 billion. In stark contrast, Bally’s Bronx projected $4 billion, Resorts World NYC estimated $5.5 billion, and Metropolitan Park envisioned a whopping $8 billion investment. Resorts World, already operating as a racino, anticipates a casino opening by July 2026, while Bally’s and Hard Rock are embarking on new projects that will require years before they become profitable.
The competitive landscape now sees Hard Rock stepping up with renewed confidence, as expressed in a message to iGB. They stated, “We have submitted our supplemental and feel confident that we have put a compelling proposal for the state to consider. Post the closing last week of our transformative Bally Intralot transaction, we have a fantastic balance sheet with more than a $1 billion of cash and available credit facilities ready to commit to the project.” Bally’s financial readiness, coupled with their community investment programme, signals their strong position in the Bronx bid.
With MGM stepping aside, three contenders remain for the trio of available licenses, yet only two will ultimately be selected. The GFLB will continue to evaluate the revised applications until the deadline on December 1.
This development underscores the intense competition and high stakes involved in securing a casino license in New York. As the process continues, all eyes are on the remaining contenders to see how they will navigate the complexities and challenges of establishing their presence in one of the most lucrative gaming markets in the United States. The outcome will not only shape the future of gaming in New York but also set a precedent for future licensing processes in similarly competitive environments.
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