If there’s one jurisdiction the Cordish Company knows better than any other, it’s the company’s home base of Maryland. So when Maryland legalized gaming in 2008, it was a foregone conclusion that Cordish would bid for a license.
Most people assumed that since the company was born and raised in Baltimore, that Cordish would go after the license in the city. But with a 67 percent tax rate and a separate payment to the city of Baltimore on top of that, Cordish aimed at what the company considered the most lucrative license available, the one designated for Anne Arundel County.
Although there was no provision in the law for specific racetrack locations, Laurel Park Racecourse, a thoroughbred track located in Anne Arundel County, was thought by many to have the inside track on that license.
But no one knows Maryland politics—and markets—like David Cordish, the company’s chairman and CEO. Nestled next to Arundel Mills Mall, the most popular tourist attraction in the state (14 million visits annually), the site for Maryland Live! is also in the middle of one of the must affluent counties in the country, just south of Baltimore near the international airport. The market for the casino is virtually untapped, and extends in a cone-like shape towards suburban Washington.
Rob Norton, the president and general manager of Maryland Live!, believes it could be one of the most successful casinos in the country, with a total investment in excess of $500 million. It certainly will be one of the largest.
“We’ll open in June with 3,100 machines,” he says of the currently slots-only casino, which is permitted 4,750 games when fully open in the fall. “I can’t find another casino anywhere that opened with that many slots.”
Of the five casinos in Maryland, two are currently open: Penn National Gaming’s Hollywood Perryville on I-95 just south of the Delaware border; and Ocean Downs racetrack, outside of Ocean City on the state’s Eastern Shore. (The other two locations are in Baltimore, where the partnership of Caesars Entertainment and Rock Gaming have apparently won a license, and Rocky Gap State Park in the far western corner of the state, with Lakes Entertainment taking control there.) Norton believes the casino most impacted, however, will be West Virginia’s Charles Town, also owned by Penn National, in the eastern part of the state.
“I think Perryville will also be impacted, to some extent, and so will the Delaware properties, because they both pull from the Baltimore area as well,” Norton says. “But I think Charles Town pulls from both Baltimore and Washington, D.C., which are both segments of our target market.”
But with one of the highest tax rates in the United States, Maryland Live! will have to be creative when it comes to marketing and rewarding customers. Norton says the rewards program will be equivalent to the competition.
“We will have a reward structure,” he says, “but when you are operating in a 67 percent tax bracket, everything has to be re-evaluated. The one thing that we do have going for us is that free play is not counted into gross revenue, similar to Pennsylvania. So although we don’t get a marketing subsidy from advertising like West Virginia or New York gives, we do have the ability to use free play and reward people based upon free play, because it’s not taxed, since it’s not part of gross revenue.”
But Norton says most casinos in the market operate on a level playing field.
“You have to remember who we’re competing with around here,” he explains. “We’re competing against West Virginia, which has a tax rate in the mid-to-high 50s, as well as Pennsylvania and Delaware, which are both are in the mid-to-high 50s. So I think we’ll be fine, from a competitive point of view.”
The Name Game
Norton says the name of the casino is the Cordish signature.
“The Live! brand really is a very powerful brand,” he says. “If you think about all the different Live! venues that exist around the country, here in Inner Harbor, at the Power Plant Live!, and Louisville Live!, they’re all over, and I think the real crux of the Live! brand is that it is just that: it is excitement, it is live.”
Even with the adjacent mall, Maryland Live! has a wide selection of non-gaming amenities. Like all Cordish developments, restaurants play a big role at Maryland Live! Bobby Flay brings Bobby’s Burger Palace as the property’s nod to the “celebrity chef” trend. Area favorites like the Eastern Shore’s Phillip’s Seafood and Baltimore steakhouse the Prime Rib are combined with one of America’s most popular family restaurants, the Cheesecake Factory. A Live! Market Buffet completes the lineup.
Since Cordish is all about entertainment, the facility features several lounges and the R Bar, a lounge that features electronic roulette as part of the attraction. The Ram’s Head Center Stage is a 500-seat theater that will present live music and comedy in the heart of the casino.
Norton says the company has more land to develop, but that currently a hotel is not needed, since there are 1,400 hotel rooms within minutes of Maryland Live! That said, Norton says there is a master plan for the property that includes hotels, convention and meeting space, and more.
With a price tag in excess of $500 million and a high tax rate, some question whether there’s enough market and revenue to succeed. Norton says the company is comfortable with the finances.
“We put a lot of work and effort into the feasibility studies here,” he says. “And I think all of our projections and forecasts are on the conservative side, and the finances make absolute sense on the very conservative side. So I think there’s a lot of potential upside because we didn’t overestimate what we could earn here.”
David Cordish says the company took on no debt to develop the property, financing it solely from cash on hand, so there will be no pressure to repay the money spent developing Maryland Live!
“I’m proud of the fact there’s no loan,” he says. “It’s almost ready to open and we haven’t borrowed anything. How many gaming companies can say that?”
Joe Weinberg, who oversees the project as president of the Cordish gaming and lodging division, says the construction process has gone smoothly—and quickly.
“The Maryland Live! facility will have gone from start of construction to opening in 12 months,” he says. “So that’s 2 million square feet in 12 months, from soup to nuts. After going through all the political attempts to slow down the project through referendums and court cases, we will get it up and running in one year. So yes, we’re proud of what we’ve accomplished here.”
One of the oddities of some of the high-tax gaming states is that the state government owns the slot machines. In Maryland, like some other states, state officials arrange the purchase of the machines. While this sounds like a disaster waiting to happen, Norton says that was not the case with Maryland Live!, but it was a different kind of operation than he was used to at his previous stops at Isle of Capri Casinos and MTR Gaming.
“It’s the first time I’ve operated in a state where they have purchased the machines, and the state was so actively involved in the procurement and selection,” he explains. “Obviously, you have to start with the fact that we’re the highest effective tax rate in the country. But in reality, after you get past that, the state’s actually very good to work with here. They’ve truly taken the partner approach, and I look forward to them continuing that attitude and that direction, because it makes the day-to-day operation, even in a high-tax jurisdiction, enjoyable.”
It turns out that rather than outright purchases, the state leased all of the slots, giving it the opportunity to rotate to new machines and game themes as they become available.
“We have selected machines from 12 different manufacturers in this property,” he says. “We did have to get a couple licensed, but the state was willing to work with us on manufacturers that were not licensed when we started the process. So I honestly feel, at the end of this process, we have probably the best slot floor in the country.”
The partnership with the state was very productive, says Norton, even though the state technically decides what machines to buy.
“The final decision on purchases is the state’s decision,” he says. “However, they leaned on our suggestions heavily. We ran a complete market assessment and analysis, and presented that to the state with what we thought was the best mix and why we thought it was the best mix. They agreed with our assessment and went forward with making the selections based upon that.”
While table games are currently not permitted in Maryland, Norton says he knows where tables will go if a bill ever passes legalizing them. In the meantime, he’s got a wide selection of electronic table games.
“We’re installing a full pit of Interblock games that have proven to be popular with players,” he says. “Those games are using real decks of cards and dice. It’s a technically a machine because the random number generation is being driven through the shuffler and the dice.”
Technology, however, is part of the allure of Maryland Live!, says Norton.
“Look at the technology that we’re employing in the facility,” he says. “The integrated media systems that we have can actually tie to the games and bring the images up to the screens and be able to coordinate with actual shows. The outside of the casino is simply a wall of video screens that is completely programmable. It’s all coming in here. Sometimes the electronics are just part of the décor. At Maryland Live!, it’s part of the event. So you know we’re going to deliver excitement to our customers.”
With most Northeastern casinos, the core customers can be targeted by drawing a 20-30-mile circle around the facility. That’s not much different with Maryland Live!, but Norton believes his property can penetrate down into the affluent suburbs of Washington, D.C. With Charles Town being the closest casino, at about 50 miles, Norton is planning on marketing heavily to that market, whether it’s print, TV or sports sponsorships. It’s built into the property’s master plan that was based on the original legislation that limited casinos to five locations.
In April, however, the House and Senate considered a bill that would create a sixth casino location, in Prince George’s County, an eastern suburb of Washington—an option that would upset all the projections made for Maryland Live! The Cordish Company is adamantly opposed to such a bill, saying another casino location isn’t fair to the companies that won bids under the stipulations of the original law.
“The Prince George’s bill is extremely unfair,” he insists, “particularly when you consider that the state did a comprehensive study on where gaming should go and how it should be introduced into the state of Maryland back a number of years ago. That legislative effort identified five locations that could co-exist without significant cannibalization of each other, and to truly maximize the state’s revenue. Even with that consideration, a tax rate of 67 percent was pretty daunting. So, the initial bidding process wasn’t a wild success.
“So at this point, to change the rules, after a company like the Cordish Company has put in such significant investment to build this facility, I think, first of all, is unfair. And secondly, I think could be detrimental to the state and to the gaming businesses. Ocean Downs, from what I understand, is already financially struggling. And Perryville isn’t exactly raking it in. Another license would be devastating to the entire industry.”
While the House approved the bill, the Senate never got a chance to vote on it as the legislative session expired in early April. But there’s a chance it could be revived in a special session.
While Norton is appreciative of the companies that gave him the opportunity to advance his career, he’s most excited about working for Cordish.
“This is such a great company,” he says. “It’s truly a family company, and they make everyone feel welcome. At the same time, it’s very competitive, because all the people who work here are competitive.”
In fact, the three senior executives at Cordish have all been collegiate All-Americans—Cordish (lacrosse), Weinberg (basketball) and Norton (tennis). When they get together at a company picnic, the challenges are laid down.
Operationally, Norton says the company turns on a dime.
“While I never worked for a huge company,” he explains, “there was always a hierarchy you had to penetrate if you wanted to do something different. Here, I just call Joe and run it by him. If he agrees, we do it. So we can respond to marketing ideas and competitive pressures much more quickly.”
Weinberg agrees that the smaller size of the company works in its favor both in operations and development.
“It gives us, I think, a big strategic advantage,” he says. “We do extensive analysis, but we look at it and our decision-making process is very streamlined. We’re very liquid as a company, so if we think a project makes sense, we can put our own capital in and make it happen very quickly.”