NEW YORK (TheStreet) -- Penn National Gaming (PENN_) is making a risky bet, announcing Friday morning that it is entering the Las Vegas market. But while on the surface this deal may seem questionable given the state of the Las Vegas local gaming business, it could turn out to be a jackpot.
Penn National, which predominantly operates in U.S. domestic markets, purchased M Resort for $230.5 million. M Resort opened in March 2009 and is located about 10 miles south of the Las Vegas Strip. The property was developed by the Marnell Group, and houses 390 rooms, 1,900 slots, 64 table games and 14 poker tables.
There's no denying the Las Vegas locals market is in tatters. In July, downtown casinos reported a 19% plunge in gaming revenues, North Las Vegas tanked 23.6%, the Boulder Strip declined 16.9%, and the balance of Clark County was off 12.7%.
Casino operators have also been looking to distance themselves from Vegas. Wynn Resorts(WYNN_) has expressed interest in moving its headquarter from the gambling hub into Macau, China; Las Vegas Sands(LVS_) is considering changing its name to Sands International or Sands Resort International; and MGM Resorts International(MGM_) changed its name recently from MGM Mirage, to reflect its growing presence outside of the Vegas Strip.
Still, Penn's purchase of the resort-casino, could be a smart move. The company was able to acquire a location in Vegas, which has been one of their long-term goals, for significantly less then its development costs. It's unlikely Penn will have to invest much in maintenance of the casino over the next several years, either.
"While Vegas has issues, there are not a lot of good deals out there, and this was one of them," says Sterne Agee analyst David Bain.
M Resorts cost $1 billion to build, and Anthony Marnell III spent an additional $240 million for the land. Penn now gets a relatively brand new casino for a fraction of the total cost of the project, and less than even the price of the land itself.
"The acquisition gives Penn the ability to enter the Las Vegas market, diversify its portfolio and offer its database of regional customers an asset to visit in Las Vegas," J.P. Morgan analyst Joseph Greff wrote in a note. "We'd highlight Penn's stellar track record of capital allocation and smart, free cash flow per share accretive acquisitions."
Penn National, which predominantly operates in U.S. domestic markets, purchased M Resort for $230.5 million. M Resort opened in March 2009 and is located about 10 miles south of the Las Vegas Strip. The property was developed by the Marnell Group, and houses 390 rooms, 1,900 slots, 64 table games and 14 poker tables.
There's no denying the Las Vegas locals market is in tatters. In July, downtown casinos reported a 19% plunge in gaming revenues, North Las Vegas tanked 23.6%, the Boulder Strip declined 16.9%, and the balance of Clark County was off 12.7%.
Casino operators have also been looking to distance themselves from Vegas. Wynn Resorts(WYNN_) has expressed interest in moving its headquarter from the gambling hub into Macau, China; Las Vegas Sands(LVS_) is considering changing its name to Sands International or Sands Resort International; and MGM Resorts International(MGM_) changed its name recently from MGM Mirage, to reflect its growing presence outside of the Vegas Strip.
Still, Penn's purchase of the resort-casino, could be a smart move. The company was able to acquire a location in Vegas, which has been one of their long-term goals, for significantly less then its development costs. It's unlikely Penn will have to invest much in maintenance of the casino over the next several years, either.
"While Vegas has issues, there are not a lot of good deals out there, and this was one of them," says Sterne Agee analyst David Bain.
M Resorts cost $1 billion to build, and Anthony Marnell III spent an additional $240 million for the land. Penn now gets a relatively brand new casino for a fraction of the total cost of the project, and less than even the price of the land itself.
"The acquisition gives Penn the ability to enter the Las Vegas market, diversify its portfolio and offer its database of regional customers an asset to visit in Las Vegas," J.P. Morgan analyst Joseph Greff wrote in a note. "We'd highlight Penn's stellar track record of capital allocation and smart, free cash flow per share accretive acquisitions."
Penn National, which predominantly operates in U.S. domestic markets, purchased M Resort for $230.5 million. M Resort opened in March 2009 and is located about 10 miles south of the Las Vegas Strip. The property was developed by the Marnell Group, and houses 390 rooms, 1,900 slots, 64 table games and 14 poker tables.
There's no denying the Las Vegas locals market is in tatters. In July, downtown casinos reported a 19% plunge in gaming revenues, North Las Vegas tanked 23.6%, the Boulder Strip declined 16.9%, and the balance of Clark County was off 12.7%.
Casino operators have also been looking to distance themselves from Vegas. Wynn Resorts(WYNN_) has expressed interest in moving its headquarter from the gambling hub into Macau, China; Las Vegas Sands(LVS_) is considering changing its name to Sands International or Sands Resort International; and MGM Resorts International(MGM_) changed its name recently from MGM Mirage, to reflect its growing presence outside of the Vegas Strip.
Still, Penn's purchase of the resort-casino, could be a smart move. The company was able to acquire a location in Vegas, which has been one of their long-term goals, for significantly less then its development costs. It's unlikely Penn will have to invest much in maintenance of the casino over the next several years, either.
"While Vegas has issues, there are not a lot of good deals out there, and this was one of them," says Sterne Agee analyst David Bain.
M Resorts cost $1 billion to build, and Anthony Marnell III spent an additional $240 million for the land. Penn now gets a relatively brand new casino for a fraction of the total cost of the project, and less than even the price of the land itself.
"The acquisition gives Penn the ability to enter the Las Vegas market, diversify its portfolio and offer its database of regional customers an asset to visit in Las Vegas," J.P. Morgan analyst Joseph Greff wrote in a note. "We'd highlight Penn's stellar track record of capital allocation and smart, free cash flow per share accretive acquisitions."
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