As original completion date passes, Biloxi’s Margaritaville casino remains on holdBy Maria Burnham, AP
Monday, June 28, 2010
Hopes fade for quick restart on Harrah’s casino
JACKSON, Miss. — A sign still welcomes passers-by to the future site of Margaritaville Casino & Resort in Biloxi, but most people agree the project doesn’t have a chance of getting built any time soon.
“Odds that this project gets built in the next five to 10 years are slim to none,” said Joel Simkins, senior vice president of Macquarie Capital USA.
When announced in 2007, Margaritaville — a joint venture of Harrah’s Entertainment and entertainer Jimmy Buffett — was expected to cost more than $700 million and open by spring 2010.
But shortly after the announcement, the economy went south and Harrah’s, the world’s largest casino resort company, found itself teetering on the edge of bankruptcy.
Analysts place at least part of the blame on investors’ decision to take the company private in January 2008 at a cost of $30.7 billion, including debt and transaction costs.
The timing severely restricted cash flow just as the recession hit its largest gambling and resort markets.
The company formally sidelined the project later in 2008.
Harrah’s spokeswoman Jacqueline Peterson said Wednesday the project remains on hold. The company has not scaled down the project from its original $700 million estimated cost.
The decision to delay Margaritaville is likely one reason Harrah’s avoided bankruptcy, said Dennis Farrell, managing director of gaming, lodging and leisure for Wells Fargo Securities.
“They walked the line of bankruptcy, but survived,” Farrell said. “I think that project was initially conceived at the beginning of the buyout. Then they saw their bottom line shrink.”
The company continues to labor under significant debt. As of March 31, it had $19.3 billion in long-term debt, regulatory filings show.
The company says it remains committed to building Margaritaville, but posted on its Web site “at this time, we do not have a date for when construction will resume.”
Almost everyone seems to agree the project would have an overwhelmingly positive impact on tourism, if it’s built.
“Our mayor used to say as long as the construction cranes are there, there’s still hope. Then they took the cranes away,” said Vincent Creel, spokesman for the city of Biloxi.
It all boils down to money, and Harrah’s doesn’t have it right now, Creel said.
Removing the construction cranes is another sign of how cash-strapped the company is. The cranes were costing about $30,000 a month in rent.
“Harrah’s has told us they love the concept, they love the location, but they just don’t have the money,” Creel said.
As originally conceived, Margaritaville would have been developed on 46 acres along U.S. Highway 90, the former sites of the Grand Casino and Casino Magic. Harrah’s-owned Biloxi Grand Casino reopened after Hurricane Katrina across the street in its renovated Bayview Hotel property, which survived the storm. It would have had about 100,000 square feet of casino floor, 250,000 square feet of retail space and almost 800 hotel rooms.
Real estate giant Simons Property Group, which owns or operates millions of acres of retail space worldwide including the 2.3 million square-foot Houston Galleria, was to handle the retail development.
The resort’s theme was based on songs by Buffett — a Pascagoula, Miss., native — the most famous of which is “Margaritaville.”
At the time of its announcement, the project was heavily touted as part of the coast’s revitalization after Hurricane Katrina.
“Margaritaville Casino & Resort promises to be a destination resort which will be amongst the finest in the Southeastern United States,” Harrah’s central division president John Payne said at the time.
That could still be the case if the project gets back on track, said Beverly Martin, executive director of the Mississippi Casino Operators Association.
The Margaritaville brand, associated with Buffett, could attract a wider customer base than typical for existing casinos, Martin said.
“We’re hopeful the project will get back on track. We’ve been through a lot; and we’re still going through a lot,” Martin said of tourism on the coast, whose latest challenge is the BP oil spill in the Gulf of Mexico.
If Harrah’s does go ahead with the casino, it will not have start from scratch with the regulatory process, said Allen Godfrey, deputy director of the Mississippi Gaming Commission.
The commission views the project as temporarily suspended, he said.
Work on foundations, pilings and ironwork had begun when the projected was halted.
“It’s just sitting there,” Biloxi’s Creel said. “It’s a shame.”
Tags: Accommodations, Biloxi, Jackson, Mississippi, North America, United States