The Massachusetts Gaming Commission on Tuesday voted three to one to approve a US$1.6 billion Wynn Resorts Ltd casino (pictured in an artist’s rendering) for the city of Everett, north of Boston.
The decision will have to be formalised on Wednesday.
The decision immediately caused controversy, with local media quoting Boston Mayor Martin J. Walsh, complaining that Wynn Resorts had made an “unacceptable” offer to the City of Boston regarding so-called mitigation payments.
These are typically monies pledged by a developer to a local government and set aside for use in the communities that will host a big infrastructure project such as a casino. They are designed to lessen any inconvenience and any short-term negative economic impact that the project might have on the host community.
Mayor Walsh added however: “Everything is on the table at this point, and we have never closed the door to engaging in discussions with Wynn.”
Carlo Santarelli of Deutsche Bank in New York, said in a note to investors: “The vote ends an extended period of discussions and officially ends the Boston area licence debate. The process however is not over as the vote to repeal gaming remains on the ballot for November. We see the likelihood of a repeal as low.”
The bank said that assuming the repeal initiative is voted down, Wynn Resorts was anticipated to begin work on the project in early 2015, with a projected opening in mid-2017.
Mr Santarelli added: “While we anticipate, given surrounding population density and demographics, a healthy cash on cash return, we think the stock debate centres largely around uses of capital. We think some will make the case that a capital return via a [share] buy back, with Wynn Cotai [a casino resort being developed by Wynn Resorts’ Macau subsidiary] on the horizon and undervalued, could have ultimately proven to be a more sound return on invested capital.”
Cameron McKnight and Rich Cummings of Wells Fargo Securities LLC in New York, estimated that based on Wynn Resorts’ financial projections, the project is worth US$5 to US$10 per share at Wynn Resorts’ present value.
Wynn Resorts’ shares were trading at US$179.87 on Nasdaq in New York at close of business on Tuesday, down 0.47 percent.
“Net-net, we view the award as slightly positive for Wynn shares,” wrote Mr McKnight and Mr Cummings.
The Wynn Resort in Everett was likely to take 36 months to construct and would contain 504 hotel rooms, 3,242 slot machines and 168 gaming tables, said Wells Fargo.
Additionally, the resort would offer 10 food and beverage outlets including a nightclub, 77,000 square feet (7,154 sq metres) of retail space and 33,000 square feet of meeting space, said the brokerage.
