Indiana’s 300-Acre Grand Victoria Casino & Resort Property to Trade for $43M

September 14, 2010
By Barbra Murray, Contributing Editor

The Grand Victoria Casino & Resort in Rising Sun, Indiana, is on the verge of changing hands. Full House Resorts Inc. has entered into definitive agreements with Grand Victoria Casino & Resort L.P., an entity of Chicago-headquartered HGMI Gaming Inc., to purchase the Cincinnati, Ohio-area property. Once all ducks are in a row, the gaming asset will trade for $43 million.

Home for the Grand Victoria is a 300-acre site fronting the Ohio River, approximately 40 miles southwest of Cincinnati. In addition to the 40,000-square-foot Grand Victoria Riverboat Casino, the property features a 201-room hotel with restaurants and meeting space, as well as the multi-purpose Grand Theater venue and an 18-hole golf course with clubhouse.

Full House’s acquisition of the Grand Victoria is contingent upon a few factors, one of which entails the company getting its hands on a loan to supplement the $20 million in cash it plans to pull from its pocket for the purchase. The company, having turned to Wells Fargo Securities L.L.C. to orchestrate the financing, foresees securing the necessary debt by mid-October.

“Under the leadership of HGMI Gaming Inc., the property is well-run and well-maintained,” Andre M. Hilliou, Chairman and CEO of Full House, asserts in a prepared statement. “The current property management is very strong; however, we believe that we can leverage our knowledge and proven track record of managing properties catering to local customers in competitive environments to further improve the profitability of the Grand Victoria, and we expect to see immediate returns on our investment.”

Full House has not disclosed the specific details of its plans to improve the Grand Victoria’s profitability but those plans will certainly have to take into consideration the fact that the gaming destination is not alone in its market. Situated in a Cincinnati suburb an approximately 100-mile drive southwest of Indianapolis, Ind., and a 100-mile drive north of Lexington, Kentucky, the Grand Victoria is not an international gaming destination like Atlantic City or Las Vegas, but it certainly has competition with which to contend–even if it consists of just two other properties. Location is everything and the Argosy Casino Hotel & Spa in Lawrenceburg, Indiana has it. Argosy is nearest to Cincinnati, followed by the Grand Victoria and the Belterra Casino Resort & Spa in Florence, Ind.

Yet, it is much more than placement within close proximity to Cincinnati that may present somewhat of a challenge for the Grand Victoria. Size also matters. Argosy is the largest of the three properties. “Argosy, in addition to opening a new barge, increased its parking capacity in 2009, which would be a negative for the other two properties,” Jacob Oberman, Director of Gaming Research & Analysis with real estate services firm CB Richard Ellis’ Global Gaming Group, told CPE. “Historically, patrons might have bypassed Argosy because of the lack of sufficient parking accommodations.” But, now that there is ample space for vehicles–not to mention other enhanced facilities–following Argosy’s $300 million expansion, many gamblers are likely to adhere to the closer-is-better premise. And you just can’t argue with the numbers. While revenue has predictably declined across the board during the recession, Argosy still comes out on top. Revenue for July of this year at the Belterra and Grand Victoria was approximately $16 million and $13 million, respectively, according to by the Global Gaming Group’s calculations. At Argosy, however, revenue reached about $36.1 million. “The discrepancy is more than what would have been expected if Argosy had not expanded,” Oberman noted.

Within the next few years, all three of the Cincinnati-area casinos may have a problem on their hands. “Voters in Ohio approved four stand-alone casinos, and one is licensed in Cincinnati by Rock Gaming L.L.C. principal Dan Gilbert, so that property has the future potential to be a competitor.”

The Grand Victoria, Belterra and Argosy are hardly alone in the plight that awaits them; tough times are ahead all around–still. “In general, our thesis about regional casinos is that 65 percent of their gaming revenue comes from customers 50 years of age or older, and over the last couple of years, they have seen the biggest component of their retirement savings–real estate–go down dramatically, and that has caused a problem for casinos,” said Oberman. “Revenue is going down and down and down because baby boomers are concerned about having money for retirement. And we don’t see home values increasing dramatically, so regional gaming revenue will continue to be challenged; we’re likely to see further decline in regional markets, in general.” On the upside, the global economic crisis did not wreak the same brutal havoc on the regional casinos as it did on gaming meccas Las Vegas and Atlantic City. As is often the case in any number of scenarios, it’s all relative. The immediate future may not be so rosy, but one can bet that the gaming market will eventually make a big comeback.

Full House anticipates closing its acquisition of the Grand Victoria in the first quarter of next year.