Vornado Realty Trust (NYSE:VNO), one of the largest US commercial real estate developers, believes Manhattan is the logical choice for a new casino in the New York City area, and it wants in on the action.
In his annual letter to shareholders, Vornado Chairman and CEO Steven Roth said his company has been approached regarding possible development of an integrated resort in Manhattan. It was reported earlier this year that a real estate firm was evaluating the idea of a gaming venue in the Herald Square area in Midtown Manhattan. That’s a potentially attractive location for a casino, because the new property could be located near where Broadway, 6th Avenue, and 34th and 47th Streets intersect.
Manhattan has, by far, the largest number of hotel rooms, restaurants, museums, tourist attractions, and the region’s transportation network was designed with Manhattan as its hub,” said Roth in the investor letter. “We have heard the chatter and have been approached.”
He did not specify which parties his company has had talks with. Bally’s (NYSE:BALY), Las Vegas Sands (NYSE:LVS), and Wynn Resorts (NASDAQ:WYNN) are rumored to be pursuing the third New York City casino license.
For Vornado, Competition Abounds
Vornado faces competition on multiple fronts regarding a Manhattan gaming venue. Multiple real estate companies reportedly have interest in being part of such a project, and rival L&L Holding Co. is believed to be mulling the Herald Square area, too.
Additionally, should either Sands or Wynn win the third New York gaming permit, there are no guarantees either of those companies would want to engage a landlord and take on the long-term fixed costs of consistent rent obligations. Both operators own the property of their gaming venues — both in the US and abroad — and neither have a tradition of working with real estate investment trusts (REITs).
Plus, there are no guarantees Manhattan will even be the selected borough for a new gaming venue. In fact, some prior media reports indicate Manhattan, along with Nassau and Westchester counties, are likely off the table for a fresh casino, leaving the outer boroughs of Brooklyn, the Bronx, Queens, and Staten Island as contenders. Roth sees things differently.
“It makes perfect sense for the third and final license to go to Manhattan. Being the center of everything, Manhattan will generate, by far, the highest revenue for our education system; after all, aren’t we in it to maximize the tax revenue?,” argues the Vornado boss.
New York’s recently passed budget sets the stage for a third casino in the largest US metropolitan area, and it appears to be a foregone conclusion as to the winners of the initial pair of downstate gaming permits.
Aqueduct Raceway and MGM Resorts International’s Empire City in Yonkers currently operate as slots-only venues. There is momentum to permit those properties to function as full-scale casinos, meaning there will be just one license left to award to a new entrant to the market.
As for Vornado, while it’s not a traditional gaming REIT, it’s not inexperienced in the industry, either. It previously held a portion of the land of MGM’s Borgata in Atlantic City, NJ, which was unencumbered last November.