For MGM Resorts and for Creative Casinos’ Dan Lee, it’s a match made in heaven. The deal announced last week, which will make the large Las Vegas gaming company a co-owner with Creative Casinos in the new Mojito Pointe resort in Lake Charles, Louisiana solves problems for both entities.

MGM Resorts has been looking to expand its mid-America operations in order to spread its influence wider and make its new M life rewards system more successful. Mojito Pointe will complement MGM’s Beau Rivage property in Biloxi to give it a firm grasp on southern gamblers.

For Lee and his estrangement from Pinnacle Entertainment, Mojito Pointe is something of a payback. The site for Mojito Pointe was previously the site that Pinnacle had reserved for its second Lake Charles casino, Sugar Cane Bay. When the company decided to forego the project and relinquished the license, Lee won it in competition with several other projects. Now, his agreement with MGM means he won’t have to build an entirely new management team, and has one of the most successful casino brands.

The announcement, however, was a little light on details about exactly who owns what and how much investment money MGM Resorts is bringing to the table. Nonetheless, MGM Resorts Chairman and CEO James Murren is excited about the deal.

The relationship with Creative Casinos is another milestone for our company," said Murren. “It provides MGM the opportunity to expand the reach of MGM's brands into an important regional market and promotes our efforts to further grow our M life customer loyalty program.”

According to a press release issued by MGM Resorts, the company will operate the property, but Creative Casinos will develop and own it. Mojito Pointe will not be the name of the property, and instead it will be named for one of MGM’s most popular brands. It will contain 400 hotel rooms and a casino with approximately 1,500 slot machines and 50 table games. The press release did not mention how the project was being funded or if MGM needed to invest any money. Morgan Stanley was cited as Creative Casinos’ financial advisor.

Dan Lee says the arrangement makes sense for both sides.

“"We are thrilled to welcome MGM Resorts International as an investor and as manager of Mojito Pointe,” he said. “MGM is the largest casino operator in Las Vegas and is known for some of the most iconic brands in the gaming industry. MGM's brands reflect the high quality and luxury that we want to build into Mojito Pointe and, as one of the world's largest hospitality companies, MGM has a wealth of resources and experience that will result in the best possible project for Lake Charles. For example, our strategic partnership brings MGM's unique marketing knowledge, including access to regional marketing offices that have operated for more than 20 years. M life will further enhance the appeal of Mojito Pointe, offering our guests access to approximately 41,000 guest rooms on the Las Vegas Strip, as well as leading regional properties such as Beau Rivage in Biloxi and the Gold Strike in Tunica. We look forward to working with MGM to open and operate Mojito Pointe.”

The 242-acre site is adjacent to Pinnacle’s L’Auberge du Lac, which Lee developed as head of the company. The project needed voter approval, which was achieved in an April referendum. Construction will begin by the end of the year, with completion slated for mid-2013.

Las Vegas’ Union Gaming Group gave the deal a positive spin, while contending that the deal requires some kind of investment by MGM.

“We presume MGM's cash exposure is relatively modest in the context of its balance sheet and the project's scope,” the company wrote in a note to investors. “When combined with an attractive management contract, other brand and/or technical service fees, and access to a Vegas super-feeder (Houston-Austin-San Antonio, Texas) it becomes quite attractive in our view. Such a structure seemingly gives MGM exposure to a strong, important, under-penetrated region while allowing it to preserve liquidity for other potential development initiatives globally (through MGM and MGM Hospitality). We additionally believe that MGM's involvement makes the project more favorably financeable.”

Because Texas is a huge market for Las Vegas casinos, Union Gaming believes the deal is particularly attractive to MGM.

“The relevant feeder market for Lake Charles is the Houston MSA and we believe that with the addition of better supply, San Antonio and Austin would become more notable contributors,” it said. “Each of these markets are also important feeders for Las Vegas, MGM's most important market.”

The threat of Texas legalizing gaming is still there, but not as serious as it was in the past, says the group.

“Texas gaming expansion failed to gain traction yet again in 2011,” said Union. “The next legislative session in the state is 2013 which represents a risk for Lake Charles should a gaming measure(s) be proposed and ultimately pass. We think the risk is manageable though for a number of reasons, some of which stymied the initiatives (again) in 2011. These include the increasingly socially conservative complexion of the legislature; a legislature with 25 percent of the House (the first hurdle of passage) that are religiously inclined; a required super-majority vote in the legislature followed by a referendum; the death of proponent Rep. Edmund Kuempel, who led the critical House Licensing and Admin. Procedures Committee; and withdrawn support from typical sponsor—Senator John Carona.”

By Staff