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The situation is worse in Biloxi, where management indefinitely postponed a potential $1 billion redevelopment project. I think a big part of the issue there is that Harrah’s Grand Casino Biloxi is located at the eastern tip of Biloxi, at the base of the U.S. 90 bridge. That bridge was obliterated by Hurricane Katrina, leaving the Grand and the neighboring Isle of Capri stranded at a dead end a few miles from the main I-110 entrance to the market, and competing from a difficult position. The Isle of Capri, in fact, has reportedly laid off 200 workers.
The property sitting at the end of I-110 is MGM Mirage’s Beau Rivage — basically a smaller version of Bellagio but without the dancing fountains — which doesn’t help matters. While the U.S. 90 bridge is out, the burden would be on Harrah’s to build a reason to drive past Beau Rivage. And that’s a losing proposition.
Harrah’s not likely to shed casino hereÂ
BILOXI – The private equity groups buying Harrah’s Entertainment may sell off properties to lower their debt, but they will probably hold on to Biloxi, according to casino analysts.
It boils down to taxes.
The percentage that Mississippi takes off the top is significantly smaller than most other states with gambling. In addition to that, the federal government offers big deductions for investment on the Coast.
The Gulf Opportunity Zone Act, which is intended to spur rebuilding after Hurricane Katrina, allows casino companies to deduct up to 50 percent of the cost of a hotel or other building in its first year of service. President Bush signed legislation Wednesday that extends the deduction two years until Dec. 31, 2010.
The new owners, Apollo Management Group and Texas Pacific Group, are expected to keep the current management of Harrah’s in place. Harrah’s is buying land around its Grand Casino Biloxi where it plans a major investment. The company sold its Gulfport property and then bought the property of a competitor in Biloxi.
“They’ve kind of doubled down on Biloxi,” said Matt Sodl, managing director of Innovation Capital.
Harrah’s has put the Biloxi expansion on hold and not said when it plans to go forward with any development. The company’s market share on the Coast is significantly less than what it was before Hurricane Katrina when it operated two larger casinos. The extension of the federal tax credit increases the likelihood of an expansion. On the other hand, the higher debt load could stifle new investment. Read the rest of this entry »
