Start spreading the news. After nearly a decade of false starts, an agreement has been reached to bring slot machines to New York City. The deal, reached in early August by Gov. David A. Paterson and legislative leaders, gives Genting New York, a subsidiary of Malaysian parent company Genting Berhad, the right to install 4,525 video slot machines at Aqueduct racetrack in Queens.
If all goes as planned, slot machines could be up and running within a year.
Key to getting the deal done was Genting’s promise to pay a $380 million licensing fee upfront, providing the state with desperately needed funds. Genting also says Aqueduct stands to generate more than $1.5 million a day in tax revenue for the state.
Genting promises to turn the aging Aqueduct into a first-class showplace, with a three-story atrium at the entrance, a high-end gambling area, top-notch restaurants, a climate-controlled sky bridge to the nearby subway station and a shuttle to John F. Kennedy International Airport.
Genting likely won’t have to dig too deeply for the upfront payment, judging by the performance of its new $4.4 billion Sentosa resort in Singapore. That property generated $370 million in cash flow in its first quarter, according to Union Gaming Research. Some 25 casinos or slot parlors within 100 miles of Aqueduct, located on 192 acres in Ozone Park. Once the casino is completed, Aqueduct would become the first video slot parlor in the city.
As for potential visitation numbers, they are compelling. More than 1.5 million people live within five miles of the racetrack, with some 5.6 million living within 10 miles.
“There are very few opportunities like Aqueduct now or in the future,” Michael Pollack, managing director of Spectrum Gaming Group, told the New York Times.
“It’ll be the first casino in New York City. That’s enormous.”
In the New York Lottery’s recommendation to Paterson, Lottery Director Gordon Medenica praised Genting New York as the right company for the job.
“Genting New York was not the only bidder for this project: it was the best bidder for this project. And Genting New York is not the only winner of this process; the people of New York, through jobs, economic activity and aid to education, are the big winners.”
Cloudy outlookContinued economic uncertainty appears to have casinos only keeping a tight rein on capital spending for slot machines.
One Slot-machine maker International Game Technology saw quarterly profit rise as tax gains and cost cuts offset a drop in revenue, but its outlook disappointed investors and its shares fell 3.6 percent.
The company raised the lower end of its fiscal 2010 earnings outlook to 82 cents per share from 77 cents, but left the top end unchanged at 85 cents a share.
Analysts, on average, had projected full-year earnings of 89 cents a share.
“Our customers continue to spend capital at a conservative pace in an uncertain economy,” IGT CEO Patti Hart said during a conference call. “Right now they all feel like they would be spending ahead of a cycle.”
For its fiscal third quarter ended June 30, IGT’s net income increased to $92.1 million, or 31 cents a share, up from $60.6 million, or 20 cents a share, a year earlier.
Other slot makers reported a similarly challenged North American replacement market.