National Real Estate Investor: Casino development hits jackpot in U.S. real estate

DENVER -- Results of the 1999 Hospitality Real Estate Counselors Inc. (HREC) Annual Casino Development Survey indicate that approximately $6.7 billion in casino development is currently under construction or future development in the United States. According to the survey, the bulk of this development -- which represents 14 gaming projects, approximately 1.2 million sq. ft. of casino space and 13,500 hotel rooms -- is taking place in Colorado, Indiana, Iowa, Louisiana, Michigan, Mississippi, Nevada, and New Jersey.

The survey does not include the impact the Venetian and Mandalay Bay casinos in Las Vegas, or the Beau Rivage casino in Biloxi City, Miss., have had on the industry. These three projects which total $3.1 billion in development costs, added to the $6.7 billion under construction, would yield approximately $10 billion in total recent casino development nationwide.

Colorado, Louisiana, Michigan, Nevada, New Jersey, and South Dakota all have legalized land-based casino laws. Illinois, Indiana, Iowa, Louisiana, Mississippi, and Missouri have what is known as dock-site casino laws which require all casinos to be built on a body of water.

According to Andy Sabatini, an associate with HREC, slow growth of casinos can be attributed to the legality of gambling. "Deadwood, S.D., was the first jurisdiction outside of Nevada to have legalized gaming," he says. "Now, many state governments are looking at [gambling and casinos] and saying, `Well, if they get gaming in every backyard who's going to support it?'" Sabatini notes that several states (including California and Florida) are currently in legal battles in attempt to legalize gambling and casinos.

The $900 million MGM casino in Detroit, one of the largest projects currently under construction in the United States, will house 800 hotel rooms and approximately 100,000 sq. ft. of gaming space. (The city of Detroit is experiencing a sizable amount of casino building; please see our Detroit pullout section in this issue for more.)

In addition, the survey also identifies an additional $2.3 billion in proposed casino development that, when completed, will account for 670,000 sq. ft. of additional dedicated gaming space and more than 6,000 hotel rooms.

The survey does not reflect potential Indian gaming projects which, depending on the outcome of current California legislation, could inflate HREC's numbers by more than $1 billion in new casinos or expansions over the next five years. In addition, several states are trying to enter into agreements between Indian tribes and state governments that would allow casino development.

Top Five U.S. Casino Projects Under Development

(Ranked by Project Cost)

Project Name               Operator         Cost     Sq. Ft.
& Location                               (millions)

MGM                          MGM            $900      100,000
Detroit

New Aladdin                Aladdin          $826      116,000
Las Vegas

Paris                   Hilton Hotels       $760       85,000
Las Vegas

The Borgata              Boyd Gaming/       $750      100,000
Atlantic City, N.J.     Mirage Resorts

Detroit Entertainment   Circus Circus/      $715      100,000
Detroit                 Atwater Group

Project Name            Completion Date
& Location                (Projected)

MGM                          1999
Detroit

New Aladdin                  2001
Las Vegas

Paris                        1999
Las Vegas

The Borgata                  2002
Atlantic City, N.J.

Detroit Entertainment        1999
Detroit

Source: 1999 HREC Annual Casino Development Survey