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    Monday, July 22, 2024

    Mohegan’s shrinking property portfolio only a pause, Pineault says

    Ray Pineault, Mohegan’s president and chief executive officer. (The Day file photo)

    Mohegan ― By year’s end, Mohegan’s portfolio of properties will have shrunk from eight to five properties.

    But its revenues figure to keep soaring.

    The tribally owned gaming and entertainment company’s most recent development, Inspire, a nearly $1.7 billion integrated resort that opened this year in Incheon, South Korea, promises to start turning a profit before too long. Next year, the company expects its bid for a New York City casino license to move forward.

    Mohegan’s been bolstered big-time by the advent of online casino gambling, which it now operates in three jurisdictions: Ontario, Canada, and Pennsylvania as well as Connecticut.

    In a recent interview in his office in the Mohegan Community and Government Center, Ray Pineault, Mohegan’s president and chief executive officer, said the company’s not fretting about anything, including its nearby competition, Foxwoods Resort Casino, whose owners are partnering on the development of an indoor waterpark resort.

    Mohegan’s shrinking portfolio does not signal a retrenchment, Pineault said.

    The timing of the end of Mohegan’s relationships with the three properties it’s shedding is largely coincidental. Agreements under which Mohegan managed the Cowlitz Indian Tribe’s ilani Resort Casino in Ridgefield, Wash., and Resorts Casino Hotel in Atlantic City, expire next month and in December, respectively.

    Following a transition period, Mohegan’s operation of Mohegan Casino at Virgin Hotels Las Vegas will revert to Virgin Hotels by the end of the year. When it opened in 2021, the casino was hailed as the first Indian-run casino in the Strip corridor and a sign of Las Vegas’ post-pandemic recovery.

    In the final analysis, Pineault said, the Las Vegas venture involving three entities ― Mohegan, Virgin Hotels and Hilton’s Curio Collection ― was flawed.

    “You need to be the one entity to control the whole thing,” he said. “The three parties didn’t have the same interests.”

    Mohegan first signed an agreement with the Cowlitz tribe in 2004, helping the tribe develop ilani Resort Casino and managing it since its 2017 opening. Cowlitz tribal leaders decided more than a year ago to transition the casino to a “self-managed enterprise.”

    Similarly, Mohegan signed on to manage a then-struggling Resorts Casino Hotel in 2012, making it the first Indian-operated casino in Atlantic City. Mohegan also acquired a 10% ownership stake it will retain.

    “We took them to profitability,” Pineault said. “They have an experienced team there now.”

    When the three properties drop off its portfolio, Mohegan still will operate two casinos it doesn’t own: Fallsview Casino Resort and Casino Niagara, both in Niagara Falls, Ontario, and both owned by the Ontario Lottery and Gaming Corp.

    Pineault said Mohegan has no intention of forsaking management deals.

    “We’re not getting out of the management or development business,” he said. “These aren’t perpetual deals. ... We’re always looking for opportunities, both here and internationally.”

    Cash cows: Inspire, digital division

    Mohegan’s focus has most recently been on Inspire, the South Korean resort, which Pineault said is about 90% “there,” with some retail shops and other amenities still being built out. Inspire’s foreigners-only casino debuted Feb. 3, and much of the rest of the resort opened a month later.

    In the fiscal year that ended March 31, during which Mohegan generated a record $461.7 million in net revenue, Inspire brought in $35.9 million.

    During the interview, Pineault said Inspire is projected to be profitable in “the near future.” In March, analysts with CBRE Capital Advisors predicted the resort will achieve positive cash flow within its first three years of operation.

    Less than three years after its launch, there’s no denying that online casino gambling has been a raging success in Connecticut, one of a handful of states that have legalized the activity. It’s benefited the Mohegan and Mashantucket Pequot tribes, respective owners of Mohegan Sun and Foxwoods.

    In the quarter that ended March 31, Mohegan Digital generated $38.8 million in net revenue, a year-over-year increase of 70.8%. Since the end of the quarter, the division has launched operations in Pennsylvania, where Mohegan owns and operates Mohegan Pennsylvania, a racetrack casino in Wilkes-Barre.

    While some in the gaming industry fear online gambling will take a toll on physical casinos’ earnings, Pineault said he’s not worried that will happen.

    “Digital gaming has introduced new guests to Mohegan, and some guests have transitioned to digital,” he said. “The test is whether it’s good overall for Mohegan, and it has been. Overall, the (gaming) market has grown. ... I don’t think bricks and mortar ever goes away. People want the big bang, the splash, the show (at casinos).”

    On the horizon

    Next up for Mohegan is its partnership with the Soloviev Group, which has proposed Freedom Plaza, a multi-billion-dollar integrated resort on the east side of midtown Manhattan. Mohegan would operate a casino as part of the project, which hinges on, among other things, Mohegan securing a gaming license from the state.

    As many as 12 applicants are expected to seek up to three downstate licenses the state could grant.

    “We’re working closely with Soloviev, local politicians and getting community approval,” Pineault said. “But the state hasn’t set a deadline yet for responses to its RFA (request for applications). We’re continuing to refine ours.”

    He said Freedom Plaza’s affordable housing component is “a tremendous advantage for us’’ given New York’s desperate need for affordable housing.

    Both houses of New York’s legislature recently approved a bill that would accelerate the timetable for awarding the casino licenses. The measure, which Gov. Kathy Hochul is likely to sign, according to reports, would require bidders to file applications by Aug. 31. The New York Gaming Facility Location Board would be required to make recommendations by Dec. 31, 2025, and the New York State Gaming Commission would have to award the licenses by March 31, 2026.

    Closer to home, Mohegan’s development of the former Norwich Hospital property in Preston also lies ahead. A 2017 agreement called for Preston to turn over the 393 acres to the Mohegan Tribe once it had been environmentally cleaned. The parties are now waiting for the state to certify the cleanup has been accomplished.

    The original plan for the property called for Mohegan to market it to developers interested in building such attractions as a theme park, an indoor waterpark and a hotel as well as a marina on the Thames River.

    “We’re going to look at development opportunities,” Pineault said, adding current interest rates and economic uncertainty could delay things.

    In the meantime, Foxwoods’ partner, Great Wolf Resorts, is putting up a waterpark adjacent to the Mashantuckets’ casino.

    “Kudos to the Mashantuckets, Rodney (Butler, the Mashantucket chairman) and Jason (Guyot, Foxwoods’ president and CEO),” Pineault said. “This region could probably support two waterparks.”

    b.hallenbeck@theday.com

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