Orange Capital, calling itself “unsatisfied,” has renewed its pestering of Pinnacle Entertainment to convert itself into a REIT. Orange claims that share value could be increased 60% to 90%. Unfortunately for Pinnacle customers, REITs are required to return 90% of taxable earnings to shareholders, which could have a deleterious effect on Pinnacle’s casinos, known for their quality.
It’s not like Pinnacle is on its uppers. Net revenue in the most recent quarter grew 108%, thanks to the absorption of Ameristar Casinos and to some recent cost-saving measures. (Not enough to stave off a $2.3 million loss, though.) “While so far trends are looking better than the second quarter, the change has not been meaningful,” said CFO Carlos Ruisanchez. Other than Ameristar East Chicago, the company’s best-performing assets continue to be its market-dominating, Auberge-branded casinos in Baton Rouge and Lake Charles, Louisiana.
Pinnacle reported that it has achieved $58 million in cost savings to date, which was less than what Wall Street was expecting. The Ameristar properties are no part of the mychoice loyalty-card system and Pinnacle has made considerable progress installing a universal player card system across its Midwestern properties, among other synergies. The company also booked $260 million this quarter for the sale of Lumiere Place to Tropicana Entertainment, making the balance sheet look that much better.
* Include Penn National Gaming out of Atlantic City, as the malapropism would have it. The company has shown scant interest in the Boardwalk since a deal to buy Bader Field went south. History has vindicated Penn’s decision. Despite having numerous development projects spinning like plates (including two racinos in Ohio), Penn posted a second-quarter profit. “Incremental cost efficencies” got some of the credit for those good numbers.
* Australia‘s video-poker industry is marking its 20th anniversary with controversy, what else? Detractors complain that a 3,000-machine reduction of the industry, enacted 10 years ago, is still 500 machines shy of fulfillment. Industry representatives point with pride to the $5.4 billion in taxes their machines have plowed into the economy.
“That’s almost 50 cents in every dollar spent on a gaming machine goes to the government. The government then in turn use that to pay for police, hospitals, health and any other public services, so there is a significant positive return to the community,” said Australian Hotels Association spokesman Ian Horne. “It is horrendous to think that you would literally punish an industry, for what reason, when we’re talking about the significant contribution it makes in terms of employment, investment and contribution to the government through taxation.”
United Communities‘ Mark Henley kvetches in return that the economic impact is overstated: “For every extra $1 million spent on pokies there’s about three jobs created. That same $1 million spent in cafes, on a range of personal services, health services is going to provide nearer 22-23 jobs, so in fact what we see is that the money spent on pokies is in fact reducing employment in this state.” Henley’s got a high-profile ally in Sen. Nick Xenophon, who wants to cap bets at $0.95 USD. But with 13,000 machines nationwide Down Under, it’s pretty clear that “pokies” are there to stay.
