Changing Casino Landscape Forces Owners' Hands

St. Louis’ multibillion-dollar gambling market is the nation’s sixth largest, but growth here is slowing, which reflects the rest of the state and many other regional gambling markets, the St. Louis Post-Dispatch reports. 

According to the report, Missouri Gaming Commission figures show that casino revenue in the state over the four most recent fiscal years fluctuated between $1.7 billion and $1.8 billion. The figure for fiscal 2012 was $1.79 billion.

Those figures include revenue from St. Charles' Ameristar Casino, which is in the process of being sold to Pinnacle Entertainment—also owners of St. Louis Lumiere Place and Lemays River City casinos—and Maryland Heights' Hollywood Casino.

The decline in revenue is forcing casino officials to rethink their strategy.

According to the Post-Dispatch report, Penn National, the company that owns Hollywood Casino, is spinning off many of it properties into a real estate investment trust, or REIT. Penn executives have said the move will limit capital needs to the cost of equipment, fixtures, furniture and licensing.

From the story:

Choosing that route puts Penn on the same track as hotels, offices and malls that sell their properties to REITs, then lease them back to operate as before. Penn’s plan is to split into two public companies this year and put its properties into a REIT owned by existing shareholders.

Analysts have said success by Penn could persuade other casino operators to free up capital to fund expansions, pay down debt or return cash to shareholders.

Meanwhile, Pinnacle, which is trying to buy Ameristar, is adhering to the "build it and they will come in droves" strategy, the Post-Dispatch report.

Pinnacle plans to buy shares of Ameristar for $26.50 per share, and will take on $1.9 billion in debt. 

The deal must be approved by Ameristar shareholders. Ameristar currently has eight casino-hotel properties, including one in St. Charles. 

For more on this story, read the St. Louis Post-Dispatch.