[toc]We knew someone would bid on the first satellite casino in Pennsylvania on Wednesday. We just did not know how much the price tag would be.
Well, Penn National decided it would either go big or go home. The Hollywood Casino owner bid a whopping $50.1 million for the right to build a mini casino in Yoe, Pennsylvania. That number easily bested the three other bids for a Category 4 casino. The company now has until Jan. 12 to pay. If they do not, the next-highest bidder gets a shot at the first license.
What adds a wrinkle to this story is that Penn National is so staunchly opposed to these mini-casinos it is actually suing the state. The concept of a satellite casino is not the issue for Penn. Rather, it is the perceived unfair treatment of Hollywood Casino, the only central Pennsylvania casino, who is not as protected by legally mandated buffer zones as the 11 other Pennsylvania casinos.
Casino is expensive pawn in crucial chess game
If one casino has more at stake than the rest when it comes to these new satellite properties, it is Hollywood Casino. To illustrate the point, take a look at the map of areas available for satellite casinos provided by the Pennsylvania Gaming Control Board:
White spaces are municipalities that did not opt-out of satellite properties. Blue municipalities are those that did opt-out. Finally, the yellow circles represent the 25 mile buffer zones around Category 1 and 2 casinos.
You’ll notice the lone yellow circle near the middle of the state. That is Hollywood Casino. In a recently filed lawsuit, Penn National contends the buffer zones show preferential treatment to other casinos.
Based on their proximity to one another, these casinos have a much larger buffer zone. Meanwhile, Hollywood could theoretically be attacked on all sides.
Yoe, PA home of first satellite property
With a winning bid of $50.1 million, Penn National, aka Mountainview Thoroughbred Racing Association has rights to a satellite property near Yoe, Pennsylvania. The town is roughly 50 miles south of Hollywood Casino. It is also just 20 miles north of the Maryland state line.
The $50.1 million price tag is the amount Penn needs to pay for the rights and license to build the casino. The roperty can hold anywhere from 300-750 slot machines. If any bidder wants to add up to 30 table games, they can do so by applying for an additional license, which costs $2.5 million.
The large price tag is just the beginning of costs for the proposed property. Penn National will also need to pay the cost of building a property. That is, if they ever get around to building it.
Penn National owes money soon, but has a while to submit application
The turnaround time to pony up the $50 million is short. Penn has until just Jan. 12 to pay in full. However, after that, there is a little more time on the clock.
According to information on the Pennsylvania Gaming Control Board press release about the bid, the company has six months to submit a complete application. Per the press release:
“The application will contain the precise site of the proposed Category 4 casino, as well as detailed plans and information concerning the proposed building plan, amenities, employment projections and other related information. Once the application is received, the Board will post public information about the project on its website for interested persons to review.”
Given the lawsuit, it seems possible Penn National is willing to pull the trigger on a property. However, given the application window, this could be an attempt to preserve their territory and buy a little time rather than an earnest attempt at building a casino.
Shortly after the auction ended, Penn National’s Senior Vice President for Public Affairs Eric Schippers issued the following statement to Online Poker Report:
“We’re happy to be the winning bidder. However, as reflected by our pending Federal lawsuit against the Cat4 provisions in the Gaming Act, we’re not happy to have to be in the situation of paying this much to help protect our flank at Hollywood Casino.
The Gaming Act put us in the perverse position of having to essentially bid against ourselves to protect our market share in Central Pennsylvania. Nonetheless, we think the area we’ve selected will provide us the best opportunity to play both defense and offense in terms of maximizing our combined investment in Pennsylvania and we’ll be seeking to generate incremental value for our shareholders.”
Next auction is Jan. 24
Now that Penn National marked its territory, the Mountainview Thoroughbred Racing Association cannot bid on any other satellite properties in the initial round of auctions.
The next auction will take place on Jan. 24. Once again, only existing Category 1 and 2 casinos are allowed to bid on properties. Before you assume Penn National is down with big bids though, think again.
Last month Penn National announced it is acquiring Pinnacle Entertainment. As part of the multi-billion dollar deal, Penn National will take control of The Meadows Casino. As a result, the group effectively has a second shot to fire. The Meadows can use the license associated with its property to stake claim on another satellite venue.
It will be two weeks before we will know if another massive bid happens. However, it is safe to assume Penn National is calculating the risk and reward for these latest moves, so what may seem like a big sum might be well worth the money once initial bidding wraps this spring.