Malaysian casino giant Genting says it will move forward with more modest plans for its downtown Miami site. Globally, the company is seeking to expand.
Miami Mayor Tomas Regalado hasn’t seen them. Neither has Miami-Dade Mayor Carlos Gimenez.
Nearly six months after the Genting Group failed to get legislative approval for a massive destination casino resort on the downtown Miami Herald site, both mayors are among the many who said they have heard nothing from the Malaysian company about its scaled down vision for a project without a casino.
Speaking publicly for the first time since the legislative defeat, Genting executives told the Miami Herald they remain committed to Miami and are slowly moving forward with a plan that could be presented to the city later this year or early next. Preliminary plans call for a luxury hotel with fewer than 500 rooms — about one tenth of its original proposal — plus two condo towers. The total space devoted to restaurants and boutiques would be no more than 100,000 square feet, or about the size of a small department store.
Genting is vetting about a dozen luxury hotel brands that have expressed interest in the project; once a flag is chosen, the plan will move forward, said Christian Goode, president of Resorts World Miami.
The hope is to start demolition in May 2013 when the Herald vacates the bayfront land it now occupies. Genting paid Herald parent McClatchy Co. $236 million for the 13.9-acre site in 2011.
Gone — at least for now — are the grandiose development plans for a $3.8 billion resort with 5,200 rooms.
“We’ve listened and we’ve heard what people said,” Goode said. “This will complement the existing downtown skyline. We want to make sure we put a project forward that everybody is happy with and that adds value to the city of Miami.”
But design changes may not be enough. Genting still needs to mend fences in Tallahassee, where it has appointed has appointed veteran Republic lobbyist Brian Ballard to lead its Tallahassee team and and is funding the study of a potential voter referendum on whether casino gambling should be allowed. And it has yet to quell concerns from local politicians like Regalado, who says he no longer favors the project he once supported.
“They probably thought if they offered jobs and economic development, that would be a deal that nobody could reject,” Regalado said. “I guess they were shocked they could not get what they wanted. It’s not going to be a free ride from the city. They have to really show this project is what the area needs.”
There’s no doubt Genting arrived in the U.S. intent on taking advantage of the struggling economy as it sought to expand its international gaming operations.
The promise of multi-billion dollar investments and hundreds of new jobs was supposed to rally support for destination resort casinos. Initially, the strategy seemed to work in both Florida and New York. But Genting’s plans in both markets have hit a wall, and some observers say the perception lingers that Genting is out of touch with U.S. politics.
“They were bullies who thought they could buy their way in,” said Chad Beynon, vice president and senior gaming analyst for Macquarie Capital. “They missed the mark in how they viewed the government’s needs and what the people want.
“Genting wants to be a major global player, but it’s just going to take time for people to accept them as one,” Beynon said. “They don’t have the brand recognition of an MGM, Bellagio or Wynn.’’… People know what they’re getting with those brands. With Genting it’s still an unknown player.”
Genting executives haven’t acknowledged any missteps. Speaking about Florida, the company says its short-term goals have changed, but the long-term ambitions have not.
“We’re here for the long haul,” Goode said. “We still think a large destination resort is something that would have a very dramatic positive impact on the South Florida economy. But we’ve moved on and realized there is a different path.”
Though the company has invested about $500 million in Miami real estate, its investors always knew approval for a destination gaming resort might take years, said Melvyn Boey, analyst with Bank of America Merrill Lynch in Asia, who follows all of the Genting companies. Over the last year, parent company Genting Berhad’s stock has performed in the same range as its gambling peers, dropping about 10 percent.
“The reaction of the share price in the last 12 months shows that investors weren’t putting too much hope in Florida,” Boey said. “Unless an offer they can’t refuse pops up, Genting has the balance sheet to continue to hold as long as they have hope that within five years the laws will change,” Boey said.
Florida isn’t the only place where Genting may have to wait. In New York, Genting’s negotiations with Gov. Andrew Cuomo over a $4 billion plan to create a convention center and hotel adjacent fell apart last month. (The complex was to have been built at Aqueduct Racetrack in Queens, where Genting last year opened Resorts World New York.) At issue was whether Genting would maintain exclusive rights to gambling in New York City should efforts to expand gambling statewide be approved by the state legislature. Now Cuomo has vowed to launch a competitive bidding process.
After the deal collapsed, The New York Times sparked a public backlash when it reported that Genting and other gambling interests contributed $2 million to a business and labor coalition closely aligned with Cuomo’s agenda.
“That whole thing could hurt gambling development in New York,” said John Kempf, gaming industry analyst with RBC Capital Markets. “Gambling is one of those industries nobody wants.”
Still, Resorts World New York has been a success. Since opening last fall, the casino at Aqueduct racetrack has reported the country’s top gross slots revenue and is on track to hit around $700 million for the year. In less than eight-and-a-half months, Resorts World New York has sent more than $311 million in taxes to the state, the company said.
But without the promise of a bigger prize, Genting itself is losing money on the New York operations, paying nearly 70 percent of its revenues to the government — an equation no one else in the industry was willing risk, analysts said.
“I think they’re willing to take the initial losses to be part of this game,” Kempf said. “There are very few really high-growth gaming markets left.”
With $3 billion in its reserves, Genting continues to look for opportunities across the globe. This summer the company acquired a 10 percent stake in Austrialian casino operator Echo Entertainment and is seeking government approval to expand that share, potentially setting off a takeover battle for the gaming company that runs four casinos in Sydney and the state of Queensland. Almost anywhere the possibility of new casinos comes up — from Taiwan to Japan and Korea — Genting is one of the first mentioned. Genting is also expected to bid for a license in Massachusetts as part of a joint venture.
Closer to home, a recent deal in the Bahamas shows how the Genting model can work best in a place where the political leaders already embrace casinos.
Bahamian officials rolled out the welcome mat when Genting last month announced a joint venture with RAV Bahamas to build Resorts World Bimini Bay at the Bimini Bay Resort & Marina. The $24 million boutique casino is expected to create at least 300 new jobs and boost tourism.
Even before the casino opens its doors in December, Bahamas Tourism Minister Obie Wilchcombe is lobbying Genting to build a second casino on Grand Bahama Island, where the company built and operated the Lucayan Beach Resort and Casino in Freeport during the 1980s..
But at only 10,000 square feet, Bimini Bay isn’t going to provide a windfall. It’s real benefit, say industry analysts, is increased recognition in Florida.
“I wouldn’t look for the property to be a huge cash cow; it’s really more about building a brand presence in the marketplace,” said Christopher Jones, gambling industry analyst with Telsey Advisory Group in New York. “You could build the biggest, nicest casino in the Caribbean and it would never be what a casino could be in Miami.”