Lakes Entertainment Inc. is so disappointed with how its investments in Ohio’s casinos have turned out that it says they are a “value of zero.”
Lakes is an investor in the Horseshoe Casino Cleveland and Rock Ohio, which also owns racinos in the state, including the Thistledown Racino.
In a report to the SEC, Lakes wrote, “Based on current information provided by Rock Ohio Ventures, Lakes has determined that there is now significant uncertainty surrounding the recovery of Lakes’ investment in Rock Ohio Ventures.
It added, “The Ohio gaming properties have not performed as expected which has led to forecasted potential working capital requirement issues that did not exist in prior quarters, based on information previously available to Lakes. As a result, Lakes determined that an other-than-temporary impairment had occurred and reduced the carrying value of the investment in Rock Ohio Ventures to its estimated fair value of zero as of September 28, 2014.”
Rock Ohio CEO Matt Cullen contested this evaluation in a statement: Due in part to the rapid expansion of 11 new gaming properties in Ohio since 2012, our gaming investments in the state have produced lower than anticipated revenues.” He added, “However, we are confident in our properties and believe there is room for growth in the maturing Ohio gaming market. We continue to focus on long term growth in a stabilized competitive market now that all anticipated gaming facilities in Ohio have opened.”
The Cleveland casino’s revenues have fallen each year since it opened four years ago. Its revenues this year are 20 percent lower than last year.
Lakes contributed $2.4 million toward the campaign that helped persuade the public to pass the constitutional amendment that allowed the four casinos in the state’s four largest cities to be built.
The Cleveland Horseshoe’s first phase was to build a casino on several floors of the historic Higbee Building, with the phase two goal being to build a permanent casino along the Cuyahoga River. That second phase still awaits the right market conditions, according to Horseshoe Casino General Manager Marcus Glover.
The Hollywood Casino Columbus reported the highest revenue among Ohio’s casinos last month, however that revenue was down from the same period a year ago.
The only casino in Ohio to show a gain was the Horseshoe Casino Cincinnati, which earned $15.8 million last month, compared to $13.95 million in 2013.
The decline can probably be attributed to the competition among so many venues, according to Steve Gallaway of Gaming Market Advisors. “When you add (new gambling venues) to a market, it will negatively impact the competitors already open,” he told the Columbus Dispatch.
Among the state’s four casinos, revenue was $62.8 million, a 10 percent decline from 2013.
According to Gallaway, if you factor in the state’s seven racinos, gaming revenue is actually up 30 percent from a year ago. “That demonstrates there’s still growth, and the market is still maturing,” he said.
