LAS VEGAS -- A New York-based investment fund, which owns 4.4 percent of Pinnacle Entertainment, Inc., wants the Las Vegas-based regional gaming operator to spin off its casinos into a real estate investment trust.

In filing with the Securities and Exchange Commission Monday, Orange Capital said it believes Pinnacle could be more valuable to shareholders by splitting the company into a trust, referred to as a REIT.

“Based upon management’s track record and its past communications with investors, we believe Pinnacle is open to ideas that enhance shareholder value,” Orange Capital managing partner Daniel Lewis said in a letter to Pinnacle CEO Anthony Sanfilippo and the company’s board members.

Pinnacle operates 14 casinos in nine states, including two small Northern Nevada properties.

Last year, Penn National Gaming, Inc. spun off the real estate associated with 21 of the company’s 29 casinos and racetracks into Gaming & Leisure Properties Inc. Penn National operates the casinos on a lease agreement with the REIT.

In March, hedge fund Elliot Associates acquired a 5 percent ownership stake in Boyd Gaming Corporation, leading analysts to speculate that the investor will encourage Boyd’s properties to be spun off into a REIT.

By law, REITs don’t pay federal income taxes. With real estate as their primary source of income, REITs are required to distribute at least 90 percent of their taxable earnings to shareholders.

Gaming & Leisure Partners paid out $1.05 billion in dividends this year to shareholders, or $11.92 per share.

Pinnacle released a statement that acknowledged the filing from Orange Capital, but didn’t take a stand on splitting into a REIT.

“The company is committed to driving value for all Pinnacle shareholders and will continue to take actions and review all strategies to achieve this important objective,” the company said in its statement. “Pinnacle values the views of its shareholders and regularly engages in a dialogue with its shareholders to solicit feedback on its strategy and performance with the goal of enhancing value. The board of directors and management team of the company regularly review its strategic priorities and opportunities, and assess a variety of value creating options.”

Last year, Pinnacle completed a $2.8 billion buyout of regional gaming rival Ameristar Casinos, which doubled the size of the company.

Pinnacle said the company’s share price is up about 65 percent since the deal was announced in December 2012.

Orange Capital said that despite the Ameristar deal, the company “is valued at a significant discount to (its) closest peer, the combined Penn National Gaming, Inc., and its real estate owner, Gaming &Leisure Properties Inc.

“We believe there is a compelling case for Pinnacle to separate its owned real estate into an independent publicly listed real estate investment trust,” Lewis wrote. “We believe the entities on a combined basis would have an improved credit profile with less exposure to the volatile high-yield debt markets.”

A year ago, Orange Capital was supportive of a proxy fight led by investor Jason Ader against slot machine manufacturer International Game Technology. Orange Capital owned 1.4 percent of IGT’s stock.

In the letter to Pinnacle, Orange Capital said it has certain derivative agreements that could increase the company’s holdings to 6.7 percent.

After news of the SEC filing was released, investors drove shares of Pinnacle up $1.24, or 5.62 percent, to close at $23.32 on the New York Stock Exchange Monday.

Macquarie Securities gaming analyst Chad Beynon told investors that REIT conversion was “unlikely” for Pinnacle because the company has several properties described as net operating losses, which are cash shields from federal taxes.

“We are positive on Pinnacle for noncatalytic reasons such as continued synergies from the Ameristar deal, cash generation and deleveraging and positioning in properties with healthier demographics in relation to peers,” Beynon said.

Game Account Network (GAN), the tech company controlled by members of the Smurfit family, has signed an agreement to develop a gaming website for a major US casino owned by the family of former US ambassador Dan Rooney.
GAN, which supplies software for both “simulated” online gaming such as non-cash poker games, as well as for real gambling in regulated markets, has teamed up with the Rooneys’ Empire City casino at the Yonkers Raceway in New York.

Flotation
The company, which listed in the Aim market in a €90 million flotation in November, is also in talks with a number of multi-state casino operators in the US, where it has partnered with nine major casinos, including Foxwoods casino in Connecticut.
GAN yesterday announced its first set of annual results as a listed entity, with sales more than doubling to £12.3 million and pretax profits reaching £1.6 million. The company’s backers also include Dermot Desmond and Andrew Black of Betfair.
Dermot Smurfit Jr, the company’s chief executive, said yesterday users of its online simulated gaming services have an average spend of more than three times as much as gamers spend on social media sites such as Facebook. GAN’s services are often delivered under another company’s brand as “white label” services.
The company is also eyeing up expansion into the Asian market, and Mr Smurfit said it was at an “early stage” in talks with several potential partners. He added however the company’s focus remains on the US.

CEO Comment John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented, "Higher operating expenses at both Atlantis and Monarch Black Hawk, combined with flat consolidated revenue, drove declines in Adjusted EBITDA and net income in the first quarter of 2014 compared to the same quarter last year. The severe winter weather adversely impacted our Monarch Black Hawk operations throughout the quarter. Black Hawk had 50% more snow days than last year's first quarter and all but one weekend during the 2014 first quarter was impacted by adverse weather.

"Our redesign and upgrade of the Monarch Black Hawk casino facility is progressing as planned. To accommodate construction, we have had to reduce the number of slot machines on the gaming floor by approximately 13%. To minimize additional disruption, we are staging the work in three equal phases. Completion of each phase will take approximately six to seven months and we expect to finish the first phase in the third quarter of 2014.

"We have also begun excavation work on the 1.5 acre land parcel contiguous to the Monarch Black Hawk facility to build a new parking structure. Construction of the new parking structure is the first step in our city approved master plan to transform Monarch Black Hawk into a full-scale casino resort.

"Finalization of the master plan's detailed design has taken longer than originally anticipated due to modifications we are making to further enhance and value engineer the project. Once the detailed plans are completed, we will announce the project's cost estimate and construction timeline.

"Upon completion of the expansion, we believe Monarch Black Hawk will present best in class gaming, lodging and food and beverage offerings to our Black Hawk guests while providing an attractive return on investment for our investors."

Summary of 2014 First Quarter Operating Results For the 2014 first quarter, consolidated net revenue of $45.5 million declined 0.2% year over year driven by lower revenue from Monarch Black Hawk. The 3.1% increase in revenue from the Company's food and beverage operations was more than offset by a 2.6% decline in casino revenue and a 12.6% decline in hotel revenue during the quarter. The decline in hotel revenue was driven primarily by the loss of a large convention in Reno. Consolidated promotional allowance decreased by $1.0 million or 9.2%.

The Company generated consolidated Adjusted EBITDA of $10.3 million in the first quarter of 2014, a decline of $1.8 million, or 14.7%, over the same period a year ago.

Casino operating expense as a percentage of casino revenue was 41.7% for the first quarter of 2014 compared to 39.2% in the first quarter of 2013. Food and beverage operating expense as a percentage of food and beverage revenue for the 2014 first quarter decreased slightly to 40.5% from 40.7% in the 2013 first quarter. Hotel operating expense as a percentage of hotel revenue increased to 29.8% for the first quarter of 2014 compared to 26.4% for the prior year.

Selling, general and administrative ("SG&A") expenses for the 2014 first quarter increased $1.0 million, or 7.8%, over the 2013 first quarter, driven primarily by higher salaries, wages and benefits; repairs and maintenance; marketing; and, utilities expense.

Credit Facility During the 2014 first quarter, the Company made net principal payments of $4.9 million which reduced the amount outstanding on its credit facility to $48.9 million at March 31, 2014, compared to $71.8 million outstanding as of March 31, 2013. Capital expenditures of $5.0 million in the first quarter of 2014 were funded from operating cash flows and primarily represent costs related to the Monarch Black Hawk master development plan including the ongoing redesign and upgrade of the existing facility.

Interest expense for the 2014 first quarter decreased to $0.3 million from $0.6 million for the first quarter of 2013 due to a lower interest rate driven by our lower leverage combined with lower outstanding borrowings in the 2014 first quarter compared to the 2013 first quarter.

Casino’s two major Latin American subsidiaries – Grupo Pao de Acucar and Almacenes Exito – have both reported strong profit growth for their first quarter.

GPA (also known as CBD), Brazil’s largest retailer, saw its net profit jump up 23% to 338m reais, helped by a more aggressive price strategy and a cost-savings programme. EBITDA grew by 22% to 1.05bn reais, while revenue was up 12% to 16.6bn reais, helped by like-for-like growth of 6.3%.

The group also gained market share, although its gross profit margin was hurt by its tactics. Sales were up at all its banners – GPA Food reported a 9.1% rise, Viavarejo saw 6% growth, and Nova Pontocom was up 54.1%.

Meanwhile, Exito – Colombia’s largest retailer, saw its net profit grow by 10.8% to 98.9bn pesos. Sales for the period were more modest, rising by just 1.3% to 2.64trn pesos. Like-for-like sales in the home market were down 3.2%, but they rose by 5.9% in neighbouring Uruguay (in local currency terms).

Kingston Heritage – The question will be short and simple.

But the answer could frame Kingston’s casino debate for years to come.

About a dozen people spoke at a special council meeting April 29 to formally decide whether Kingston should hold a casino referendum in the October municipal election. Most citizens spoke in favour of the idea.

Coun. Rob Hutchison, who first introduced the referendum motion to unanimous council support in mid-April, described the public meeting as intense. “People really care and they came out and expressed their opinions. Councillors demonstrated they really care too.”

After just over an hour of hearing from the public, councillors voted 11-0 to approve a referendum bylaw.

Two councillors did not take part in the vote. Coun. Bill Glover was absent, while Coun. Liz Schell declared a potential conflict of interest as her son works for the Ontario Lottery and Gaming Corporation.

Councillors also made one key change to the ballot question. The wording was shortened to improve the clarity. The reference to “excluding” the downtown from having a casino was removed.

The referendum sentence now reads: ‘Are you in favour of a casino in Kingston.’ Yes or No.

Coun. Hutchison says a referendum is the best approach to handling the contentious issue. “It’s not perfect but it is the better way to go, and we knew that citizens wanted to have a say and this gives them that opportunity.”

“It’s great to see that people support the decision that council made. I think it’s the right decision,” agreed Mayor Mark Gerretsen.

Most politicians were of the opinion that the fewer words on the ballot, the easier it will be for voters to understand and for the next council to have a clear outcome. “We can deal with excluding the Central Business District through the planning process,” explained Coun. Hutchison.

Kingston businessman Paul Fortier doesn’t see the need for a referendum, pointing to council’s decisive vote in 2012 to pursue a gambling facility. But with the question now approved, Fortier says he will be lobbying Kingstonians to support a casino for the jobs and economic benefit.

“We are branding Kingston to be an entertainment destination. Doesn’t it make sense that a casino would complement that?”

Fortier is worried a referendum could generate “fear mongering” among voters. “Casino and evil don’t go hand in hand. There are many positive benefits to having a casino in downtown Kingston.”

Coun. Hutchison is worried that pro-casino lobbyists will have more money to spend on a campaign to try and influence voters in the lead up to the referendum. Election rules allow registered lobbyists to spend up to $43,000. “That could be a problem,” he added.

Coun. Brian Reitzel is a casino supporter who also supported a referendum, though he doesn’t think it will change anything because voter turnout won’t exceed 50 per cent – the magic number needed to make the results binding under provincial rules. “To me, it’s not the tipping point.”

However, Mayor Gerretsen, who also supports a casino, says the results may not be legally binding but councillors would be wise to follow the outcome. “I think it has to be politically binding no matter what. I will respect what 50 per cent plus one of the people say.”

It will fall to the next council to decide whether Kingston should continue pursuing a privately-owned gambling centre.

LAS VEGAS -- Baccarat results helped Nevada casinos end 2014’s two-month gaming revenue slide in March.

But analysts said there were other positive indications, beyond the totals produced by the high-end card game, that point toward an overall market turn-around.

The Nevada State Gaming Control Board said Tuesday gaming revenue statewide increased 7.6 percent to $982.2 million during the month. On the Strip, gaming revenue increased 10.9 percent to $560.7 million.

The figures followed statewide gaming revenue declines of 13.7 percent in February and 2.7 percent in January.

Nevada gaming results — primarily the Strip — were helped along by special events, new attractions and large conventions that brought more visitors to town.

In turn, while year-over-year baccarat revenue increased 39.9 percent in March, blackjack revenue jumped 6.1 percent, craps revenue grew 36 percent, and slot machine revenue was up 3.8 percent.

Control Board Senior Research Analyst Michael Lawton said slot machine wagering figures on the Strip have increased for three consecutive months, offering a sign that visitors are spending more on gaming and not just nongaming amenities.

As for baccarat, the game which has been credited with keeping the casino industry afloat in the aftermath of the recession, revenue grew to $101.8 million on wagers of $703 million, which was relatively flat total compared to March 2013. Casinos held 14.47 percent of all wagers, as opposed to 10.25 percent last year.

“Baccarat was a good month, but there were other positive metrics,” Lawton said.

Special events included the large ConExpo-Con/Agg construction trade show at the Convention Center in early March; the opening of The Linq retail, entertainment and dining attraction on the Strip; the annual NASCAR Sprint Cup event, and several college basketball tournaments.

“The Las Vegas Strip numbers were pretty solid,” Union Gaming Group analyst Robert Shore told investors. “Historically, March has been one of the strongest months for Las Vegas demand.”

Shore noted the Strip’s slot machine volume, but also said the market “is becoming younger, increasingly international, more affluent,” and spends most of their money on restaurant offerings and nightlife attractions.

“This new demographic isn’t generally spending time on slot machines,” Shore said.

Clark County as a whole saw gaming revenue increase 9.5 percent as every reporting segment, except for Mesquite, reported an increase. North Las Vegas casinos experienced the highest percentage revenue increase in the county, up 15 percent. Downtown Las Vegas casinos also experienced a double-digit revenue increase in March, 12 percent.

The control board said the state’s three Internet poker websites collected $926,000 in gaming revenue, an increase of 12.2 percent over February’s results. For the first 11 months that Internet poker has been legal in the state, total revenue has been $9.4 million.

Shore said multistate gaming compacts are needed for Nevada to grow its Internet poker player pool.

While Southern Nevada basked in the glow of positive gaming revenue results, Northern Nevada slipped.

Reno casinos saw gaming revenue tumble nearly 11 percent, same as Washoe County as a whole.

Gaming taxes collected through April 25 based on the March revenue figure was $84.1 million, a 7.39 percent increase over the same month a year ago. For the first 10 months of the fiscal year, gaming tax collections are up less than 1 percent.