MGM Resorts (NYSE:MGM) is betting big on East Coast gaming with a recent buyout of the half of Borgata it didn't own in Atlantic City, a resort near Washington D.C., and another under construction in Springfield, Massachusetts. And after seeing success in Atlantic City and Washington D.C. the company wants more exposure to the market.
On Tuesday, the company released a proposal for a $675 million resort in Bridgeport, Connecticut, not far east of New York City. The resort doesn't yet have approval from the state, but management is pushing hard to push the project forward. If they're successful, this could be another huge hit for the company on the East Coast.
What MGM wants to build
The Bridgeport resort would be a partnership between MGM and developer RCI. They're proposing a resort that would have 300 hotel rooms, a 100,000 square foot casino, 30,000 square feet of retail space, and a 700 seat theater among other attractions.
A message from the developers said they expect the project to contribute $50 million in licensing fees to the state and bring over 5,000 new jobs. But approving the resort may not be that simple.
The hurdle MGM Resorts has to overcome
What's standing in the way of MGM Resorts building in Connecticut is the State of Connecticut's agreement with the Mashantucket Pequot and Mohegan tribes who have exclusive rights to develop casinos in the state in return for 25% of their gaming revenue.
The real story behind MGM's move in Connecticut may be that the two tribes are attempting to build a resort only 20 miles from Springfield Massachusetts, where MGM is spending around $1 billion to build a resort and casino. MGM's Connecticut proposal is like a tit for tat if the new resort near Springfield moves forward.
It's not quite clear if Connecticut would have the political will to allow the new MGM development anyway. The tribes are certainly going to challenge it and they hold the development exclusive right now. But adding two new resorts in a small state may be bad for everyone by over-saturating the market, so both sides could benefit from backing down.
Is MGM Resorts really serious about Connecticut?
I don't doubt that MGM Resorts would be more than happy to build a resort in Connecticut. MGM National Harbor near Washington D.C. has been such a financial success that it makes sense to grow more in the region. But the company would also likely be happy if Springfield can be built without a new tribal casino down the road.
At the end of the day, this may be a ploy to get the tribes to back down from their development plans. And with East Coast gaming already getting to a point of saturation, it may be wise for gaming companies not to overbuild, costing them hard earned profits earned in the region lately.