Will It Be Revere or Everett?

September 11, 2014
By

The Massachusetts Gaming Commission (MGC) and major players from both the Everett and Revere casino bids packed into the South Boston Convention Center on Monday morning to begin what many have been waiting years to find out – who will get the Greater Boston casino license.

Those who are wishing to get that question answered, though, will still have to wait through a week of presentations, discussions, questions, conditions and analysis.

And on Monday and Tuesday, that’s precisely what happened as Commissioners began presenting detailed reports on five aspects of the casino applications – comparing and contrasting the Wynn (Everett) and Mohegan Sun (Revere) projects.

Commissioners Jim McHugh and Enrique Zuniga began the Commission presentations Monday with McHugh giving his investigation into Building/Design and Zuniga evaluating the Financing. Commissioners relied upon a rating system within each presentation that included: Insufficient, Sufficient, Very Good  or Outstanding. Many of the presentations also ended up with a combination of two.

When the day had ended on Monday, Wynn had been sent back to the drawing board for his design and Mohegan Sun had gotten rave reviews for their campus-style layout. Meanwhile, Wynn was given very high marks for his financing plan and his company’s financial stability, while Mohegan Sun was scourged for its complex finance structure.

Tuesday’s meeting followed with presentations by Commissioner Gayle Cameron on Mitigation, Commissioner Bruce Stebbins on Economic Development, and then an Overview of the whole process conducted by all four Commissioners. Former Chair Steve Crosby had been assigned the Overview report, but after recusing himself from the Region A discussions, it was agreed that the remaining four Commissioners would finish the report together.

While the discussions came too late for comprehensive coverage in the paper, the ratings in each category were released Tuesday morning.

In Economic Development, Stebbins gave Wynn the nod with a Very Good rating and Mohegan Sun a slightly lower rating of Sufficient/Very Good.

“[Mohegan] identified the significant economic benefits a gaming facility could have on the Host Community (and surrounding area) through employment/payroll, purchasing of goods and services and visitation to the area from casino visitors. However, overall projected impacts are less than Wynn,” Stebbins wrote.

Wynn took a beating in the Mitigation category – getting an Insufficient/Sufficient rating. That, however, was not unexpected as his agreements with surrounding communities were far less generous and his traffic plan has been roundly criticized for not dealing comprehensively with Sullivan Square in Charlestown.

“[Mohegan] has committed to constructing transportation improvements at numerous locations to mitigate their offsite impacts, encourage alternate modes of transportation, and improve deficiencies in the existing transportation system,” read Cameron’s report. “The mitigation proposed adequately addresses proposed impacts. [Mohegan] provided comprehensive responses and analysis of the potential impacts to housing, schools, and emergency services, and has committed the appropriate levels of mitigation to address impacts.”

Wynn’s troubles in mitigation were alluded to right off the bat on Monday when Commissioner McHugh penalized Wynn in the Building/Design category for not blending in with the community well due to traffic in Sullivan Square and a building design that didn’t fit the region.

“It is a generic design and does not reflect something unique to Massachusetts,” McHugh said of the Wynn building – even criticizing Wynn’s trademark Bronze Wynn Glass. “More importantly, it doesn’t reflect the energy that company is capable of creating. This is one of the most innovative companies for design of its facilities…The insufficiency is due to the design, but is primarily because of Sullivan Square. I say that, but it is not entirely in Wynn’s hand to fix, but it has to be addressed.”

McHugh praised Mohegan’s design, especially the parasol-like supporting structures that tie into Revere Beach and the whole beach experience. He was also very high on the campus layout and the landscaping plan.

However, a drastic difference in the two was also laid out when the true and actual budgets were discussed – with the Mohegan project coming in at $527 million and Wynn at $1.05 billion. Additionally, McHugh detailed that the per room cost of the project would be about $220,000 per room for Mohegan and Wynn would be $635,000 per room – primarily because Wynn plans a 5-star hotel and Mohegan a 4-star and 3-star.

McHugh said it was an indication of how the two business models differed.

“The per room cost is recognized as giving an idea of the quality,” he said. “It is clear that the emphasis in Wynn is a very upscale place and the Mohegan Sun a middle approach to things. That’s clear in the property and is reflected in the numbers.”

Later in the day, Zuniga presented his Finance report, and while Design was a headache for Wynn, Finance was a migraine for Mohegan.

Zuniga compared the two plans and discussed how Wynn’s financing plan was more straight forward while Mohegan’s was very complex and contained some risky elements – such as a multi-million dollar equity stake by hedge fund partner Brigade Capital that could be called back in five years with approval of the Mohegan board, a board that is controlled by Brigade.

Zuniga and other Commissioners were also concerned about the numerous commitments and partners – including a land lease to Suffolk Downs that could balloon to as much as $80 million per year.

In the end, he said he would want to see at least $100 million more in capital to be comfortable that the project could be pulled off.

“Something tells me we’ll have see what they tell us,” he said. “I would be looking for $100 million more in additional equity and us to be in a position to approve all traditional lenders and the Commission approving any transfer of ownership.”

Read the report, “Overall, Wynn’s proposal is very good with outstanding elements, namely the ability to obtain project capital, commitment to spend (materially more) required capital and their view of the potential market opportunity of a Region A location. While the Applicant has demonstrated the necessary financial capability to develop and operate their proposed complex, its funding plan is complex (i.e. multiple parties with investment in and operational responsibilities for various project components) and by some measures highly leveraged. This complexity will likely reduce the degree of flexibility that the Applicant requires to efficiently (including timing) and effectively respond to marketplace changes that will likely occur over the term of the license, including immediately after opening.”

Zuniga also was very down on Mohegan’s Market Assessment, indicating their expected revenues were too high in virtually every market.

“Their market strategy is not consistent with what they can do,” he said – hanging and Insufficient rating on the Market Analysis section.

After those four sections had been reviewed, it left both proposals basically even within the Commission presentations – as Wynn took quite a lashing for Mitigation on Tuesday but recovered with an edge on Economic Development.

The Overview category basically consisted of answers to eight questions – two questions posed by each of the four Commissioners.

In those ratings – which hadn’t been discussed publicly by press time – Mohegan got Sufficient ratings on six of the questions. Both applicants tied in their ratings on the first, third and seventh questions. However, Wynn scored consistently higher in the Overview ratings and even got an Outstanding score for a question about how he plans to develop a “destination resort casino” and not a “convenience casino.”

“Wynn’s approach to the concept of a destination resort clearly focuses on a marketing plan designed to attract travelers from distant locations, principally those in Asia, and bring them to the facility for an extended stay,” read the report. “The plan is comprehensive and well integrated into the application’s overall concept.”

All of that said, Commissioners – particularly Interim Chairman McHugh – cautioned observers not to keep score like it was a football or baseball game. He said the ratings given out in the presentations could change after the next process, which includes both applicants responding to suggested conditions and other statements. That part of the process was to take place today, Wednesday, Sept. 10. Once the applicants responded to those conditions and questions, the public portion of the meeting was set to resume.

It is not certain where the next part of the process will lead to, but Friday is targeted as the date to award the license. That, though, is not set in stone and the Commission has allowed for additional time going into the middle of next week – if necessary.

“What has occurred is the beginning of presentations,” said McHugh at adjournment on Monday. “The views expressed here today by Commissioners are the first time we’ve heard such opinions. They are not necessarily going to be that of all the Commission. It’s important to understand that.”

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