Officials Declare MGM Accountable to Host City Agreement in Potential Springfield Casino Sale
A little while back, rumors emerged that MGM Resorts International (NYSE: MGM) might be considering selling off its regional casinos in Ohio and Springfield, Massachusetts. Authorities in Springfield planned on holding MGM accountable to the terms of their host city contract in the event a deal goes through.
In March, there was speculation that MGM could be looking to unload MGM Springfield and MGM Northfield, a racino near Cleveland in Ohio. MGM Springfield, MGM’s first traditional casino in Massachusetts, opened in August 2018 but hasn't met the company's targets for performance.
Recently, in an interview with Western Mass News, Michael Fenton, the Springfield City Council President and head of the casino oversight committee, said MGM doesn't have the authority to just leave the city without consequences.
"I don't think the public should be overly-worried," Fenton told the news outlet. "We have protections in place at the city and state level to ensure no sudden, unilateral actions from MGM."
The Massachusetts casino cost MGM $960 million to construct. MGM sold the property to MGM Growth Properties (MGP) for $400 million in 2021. VICI Properties (NYSE: VICI) bought MGP that year, which handed them control over the assets of MGM Northfield Park and the Springfield casino as well as other MGM facilities.
How MGM Can Make Amends to Springfield
Although MGM hasn't openly admitted its intentions to sell the two casinos in question, there's still the possibility. To make Springfield less uneasy about a potential sale, the operator could try and court a gaming industry buyer. Since MGM is likely aiming for a sale in this scenario, that would make sense.
What's more, it's vital MGM looks for a buyer who can keep the Springfield casino's zoning as a gaming venue. So, a non-gaming company buying the property might be unsuitable.
If they're to find a purchaser for MGM Springfield’s operating rights, the names haven't surfaced yet. But, given the property's gaming-centric zoning, Penn Entertainment (NASDAQ: PENN) might be disqualified due to their operation of Plainridge Park Casino in Massachusetts.
It's plausible that the Native American gaming entities in New England might be interested in purchasing MGM Springfield, but for now, it's merely conjecture.
Springfield Demands Same Execution Level as MGM
As Fenton stated, if MGM opts to abandon Springfield, the city hopes to hold the replacement operator to the same high standards as MGM. Under the host city accord, MGM must offer annual payments of $25 million to various city organizations and organize 12 major performances each year at venues close to the casino. Fenton mentioned a new gaming operator in Springfield would need to meet the same conditions.
The chances of a transaction centering around MGM Springfield are on the table, but experts believe the gaming industry's M&A activities are hindered by high interest rates. This could discourage potential suitors, especially those in need of external financing for the purchase, potentially narrowing the pool of potential buyers to cash-rich entities.
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Source: www.casino.org
