Deputy Editor
MGM sent shockwaves through the New York gambling market on Tuesday evening, announcing it had withdrawn its application for one of the three downstate casino licenses. As an existing stakeholder with its Empire City property, MGM had been considered a clear favorite to be selected. Each of the licenses represents a multi-billion-dollar commitment, with potential upside to match. However, MGM Resorts International says it no longer sees a full-scale resort in Yonkers as a winning proposition.
MGM Empire City and Resorts World currently offer slots-only gambling to New Yorkers on a limited scale. That toehold was presumed to offer the two an advantage over the other bidders, which needed to sway local interests in favor of allowing an entirely new gambling property. Only two other bidders succeeded in that, leaving four finalists and three New York casino licenses. With MGM dropping out, the remaining three are all but certain to be approved.
Local politicians have not responded favorably to the news. In particular, MGM’s withdrawal of its application means Bally’s proposal in the Bronx is no longer fighting with Hard Rock’s Metropolitan Park plan for the final slot.
What makes that particularly controversial is that Bally’s selection will lead to a $115 million payment to the Trump Organization. Bally’s acquired land for the casino from the Trump Organization, and included that $115 million as a conditional payment in the event of Bally’s selection as a licensee. The unexpected move by MGM has left some public figures, including the Mayor of Yonkers, speculating about the possibility of undue influence by the President.
MGM painted its decision as a financial one in a press release.
Today, MGM Resorts made the difficult decision to withdraw its application for a commercial casino license in Yonkers, New York. Since submitting our application in June, the competitive and economic assumptions underpinning our application have shifted, altering our return expectations on the proposed $2.3 billion investment.
The newly defined competitive landscape – with four proposals clustered in a small geographic area – challenges the returns we initially anticipated from this project. Also, our proposal to renovate and expand Empire City Casino was predicated on the receipt of a 30-year commercial casino license but based on newly issued guidance from the State of New York we now expect to qualify for only a 15-year license. Taken together, these events result in a proposition that no longer aligns with our commitment to capital stewardship, nor to that of our real estate partner in Yonkers, VICI.
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Did Political Pressure Cause MGM to Withdraw its Bid?
Both Yonkers Mayor Mike Spano and County Executive Ken Jenkins released statements openly questioning the motivation behind MGM withdrawing its bid.
Spano said it “defies all logic,” calling it a “betrayal.”
“I am calling on Governor [Kathy] Hochul to launch an independent investigation into this process,” Spano said. “…People need to be assured that there is no linkage between MGM’s decision and massive financial benefit to Donald Trump. MGM has publicly acknowledged that Empire City cannot survive without a full gaming license, so why are they signing their own death warrant?”
Jenkins echoed those thoughts.
“Frankly, this decision makes little sense — especially after MGM had just been celebrating its advancement through the first round of the process,” he said. “I share Yonkers Mayor Mike Spano’s concern that there appears to be more to this story — potentially political influence or pressure from the Trump Administration, or even the president himself, that forced MGM’s hand to default to Bally’s — a move that could result in a profit of roughly $115 million for Trump.”
Licenses Not Guaranteed, Even With Three Left
The race for three available Downstate casino licenses had been shaping up as game of musical chairs, but now it looks like everyone gets a seat. After local committees nixed several high-profile Manhattan bids, four finalists remained. Someone was going to be left out of the market, creating a situation much like a poker tournament bubble, where the difference between third and fourth was a multi-billion-dollar opportunity versus many millions of dollars wasted on a failed application.
As noted above, MGM Empire City and Resorts World NYC were considered to be essentially automatic choices. That seemingly left Mets owner Steve Cohen’s Hard Rock Metropolitan Park bid and the Bally’s bid vying for the last license.
Evidence pointed to Cohen’s bid as the favorite.
“Steve Cohen’s proposal is the strongest contender — by a pretty large margin,” one former N.Y. State Racing & Wagering Board chairperson said.
Now, thanks to MGM, Bally’s may have flipped from an underdog to a favorite.
Still, the Gaming Facility Location Board isn’t required to award three licenses. They may award up to three. So, despite the way seemingly becoming clear, there’s no guarantee Bally’s wins a license by default.
If MGM’s withdrawal does trigger an investigation, that process is likely to weigh heavily on what happens from here on. However, if that’s to be the case, it will have to happen quickly. The Gaming Facility Location Board has been instructed to decide on license winners by December 1.
Image credit: Laslovarga/Wikimedia Commons (license)
