Resorts World Catskills Casino Resort Posts $139M Net Loss in 2018
John Jordan | March 2019
MONTICELLO—The old gaming adage: “The House always wins,” doesn’t apply yet to the Hudson Valley’s only full-licensed casino gaming resort. The $1.2-billion Resorts World Catskills Casino Resort lost nearly $139 million last year and a total of $185 million in the last two years.
According to a 10K filing with the Securities and Exchange Commission on March 15, 2019 by Resorts World Catskills’ parent Empire Resorts, Inc., the casino resort posted a net loss of $138,696,000 in 2018, a 199.3% ($92,352,000) increase over the $46,344,000 net loss posted in 2017.
The long-anticipated casino first opened for business on Feb. 8, 2018 and now features more than 100,000 square feet of Las Vegas-style gaming including 2,150 slot machines and more than 150 live table games.
Empire Resorts states in the SEC filings that the main casino gaming facility generated $178.2 million in gross gaming revenue in fiscal 2018. Resorts World Catskills Casino posted $156,546,000 in gaming revenue in 2018.
The Monticello Casino and Raceway generated $32.5 million in gross gaming revenue during fiscal 2018 as compared to $60.5 million in fiscal 2017. Empire Resorts has announced that it will close down the gaming component of Monticello Casino and Raceway on April 23. The harness track generated $5.3 million in gross revenue in 2018, a slight decrease from the $5.8 million posted in 2017. The harness track at the site will remain operational.
In addition to its gaming area, the casino resort also includes 10 varied bar and restaurant experiences, a 332-room all-suite hotel, which also includes 27 premium accommodations consisting of garden suites, penthouse suites and two-story villas, Crystal Life Spa, two fitness centers, and the 2,500 seat RW Epicenter. The exclusive Palace High Limit Gaming Area is designed for top-tier players and features private gaming salons and a VIP lounge.
The integrated casino resort destination also includes The Alder, an adjacent 101-room lifestyle hotel featuring hospitality entertainment concepts. This year, the destination resort will also include a Rees Jones- redesigned golf course and the adjoining The Kartrite Resort and Indoor Waterpark is set to open shortly. The Kartrite resort is not owned by Empire Resorts.
Empire Resorts in the SEC filing section titled “Risk Factors” noted that the casino faces stiff competition from online gaming as well as from bricks and mortar casino facilities in Pennsylvania, Connecticut and New Jersey and video gaming facilities in New York State, including Empire City Casino in Yonkers, which is now owned by MGM Resorts.
Empire Resorts painted a somewhat grim picture if revenues at the complex in the Town of Thompson do not improve.
The company stated that its “substantial indebtedness and other financial obligations, and the restrictive covenants under the agreements governing the principal indebtedness, could require a substantial portion of our cash flow from operations be dedicated to the payment of interest and principal on our indebtedness and the payment of rent, thereby reducing our funds available to us for other purposes.”
Those factors could limit Empire Resorts ability to borrow money for working capital, capital projects, including the golf course project, debt service requirements, rent payment requirements, strategic initiatives and other purposes.
If conditions worsen, Empire Resorts states in the filing, it could possibly result in a default of its debt agreements, the casino lease or its Alder (hotel) lease.
Empire Resorts later stated that if sufficient cash flow is not generated, it could be forced to seek additional financing in the debt or equity markets; delay, curtail or abandon altogether its development plans; refinance or restructure all or a portion of its indebtedness or sell selected assets.
Another potential risk factor cited in the SEC filing is if New York State were to push up the time line to allow for additional casino gaming in Downstate New York.
The Gaming Act granted a seven-year grace period for the four casinos granted licenses before the state could grant a casino license for a downstate operator.
In the SEC filing, Empire Resorts states, “We can provide no assurance that the New York State government will not change this law and issue additional Gaming Facility Licenses before the expiration of this seven-year exclusivity period. We expect the pressure on the New York State government to issue additional licenses before the seven-year exclusivity period will intensify as larger, well-established competitors, like MGM Resorts International, enter the New York market.”
Empire Resorts noted, “If the New York State government were to allow additional competitors to operate in our area or in other regions of New York through the grant of additional Gaming Facility Licenses, we would face additional competition, which could significantly increase the already intense competition in the northeastern United States and cause us to lose or be unable to gain market share.”
Empire Resorts in its SEC filing stated that it expects the development projects at the resort will cost approximately $928 million, which includes $765 million of anticipated costs for construction of the development projects, $68 million for interest expenses, $51 million for the Gaming Facility License fee and $44 million of original issue discount and financing and legal fees.
The company began construction of The Alder in March 2018 after signing a guaranteed maximum price agreement with its construction manager, which was amended to $35.2 million in December 2018. During the fall of 2018, the company signed a contractor agreement for the golf course project for a total cost of approximately $21.2 million.
As of Dec. 31, 2018, Empire Resorts incurred an aggregate total of $867.3 million related to the development projects, including $704.7 million of capitalized development projects costs, of which approximately $699 million was reclassified to property and equipment upon the opening of the casino and The Alder, $67.6 million of interest expense related to bank debt for the development projects, $51 million for the Gaming Facility License and incurred $44 million of debt issuance costs related to the development projects.
The adjoining $180-million Kartrite Resort & Indoor Waterpark is scheduled to open for business this April. The development is the latest creation of Ken Ellis and Arthur Berry III, co-owners of Camelback Resort. The Kartrite Resort & Indoor Waterpark will feature a two-acre, four season waterpark and a hotel with 324 guest suites.