Gateway Casinos & Entertainment Ltd.’s senior management says investments in its properties bodes well for future growth as it prepares to merge with Leisure Acquisition Corp. (LACQ-Q), creating a new $1.46-billion public company.
The firm will merge into a new unit of GTWY Holdings, Gateway’s parent company, and be listed on the New York Stock Exchange if the deal closes as expected in the second quarter of this year.
“We had our eyes on Gateway almost immediately following the closing of our IPO,” Leisure CEO and incoming vice-chairman Daniel Silvers said during a Jan. 7 investor conference call to discuss the deal.
Burnaby, B.C.-based Gateway operates 14 casinos in the province, 11 in Ontario and two in Alberta under four brands. It has also developed five proprietary food and beverage brands for its properties.
“For each of our properties, we have focused on creating a gaming and entertainment destination that caters to the local community,” said Gateway president and CEO Tony Santo, who will retire and give way to Leisure director Marc Falcone once the transaction is completed.
Gateway’s past and current performance
Gateway has doubled its properties, almost tripled its number of slot machines, more than doubled its gaming tables and added 56 food and beverage outlets across British Columbia and Ontario over the past six years.
“The disciplined execution of our near- and long-term strategies has created significant value and returns over the years for all of the company’s shareholders,” said Gateway executive chairman Gabriel de Alba.
“Gateway has built tremendous momentum and established a solid foundation for ongoing growth.”
Gaming is managed by individual provinces in Canada. The company has long-term operating agreements of approximately 20 years with British Columbia Lottery Corporation and Ontario Lottery and Gaming Corporation.
It doesn’t pay a gaming tax for food and beverage, entertainment or other revenue generated at its properties.
Ontario’s relatively large population and limited gaming supply make it the province with the greatest growth opportunity.
“To attract and engage our primary local gaming customers, we deliberately set a strategy to bring together U.S. sector best practices and revenue generation by combining gaming, food and beverage, and other entertainment offers to create compelling local entertainment destinations,” said Santo.
“We have developed four principal gaming brands: Grand Villa, Starlight, Cascades and Playtime. Our properties have been strategically branded according to the market size, market growth potential and local community character.
“Central to our strategy of attracting new and casual players to our properties are proprietary food and beverage brands.”
“We want to focus our efforts on (B.C. and Ontario) — focus our capital and focus the management team — where we can generate better returns and that’s why we have a process to divest the locations in Alberta,” said de Alba.
Capital expenditures at Gateway properties
Gateway’s recent and ongoing capital expenditures program for its existing properties includes:
* Grand Villa Casino in Burnaby ($22 million): expanded gaming space; added Atlas Steak + Fish and Chow Lucky Noodle Bar restaurants; 130 slot machines and a Pulse gaming arena with 35 units; renovated the Delta Hotels Marriott Burnaby Conference Centre; refreshed and relocated the poker room, hotel lobby and high-limit room.
* Cascades Casino in Langley, B.C. ($19 million): added approximately 12,000 square feet; increased slot machines by 75 and gaming tables by three; added patio to Match Eatery & Public House; added Atlas Steak + Fish; refreshed the Coast Hotel.
* Cascades Casino in Chatham, Ont. ($36 million): relocated from nearby Dresden and rebranded; built new 45,284-square-foot facility with a 28,642-square-foot gaming floor, including 176 slot machines and 10 gaming tables; added Match Eatery & Public House and The Buffet.
* Playtime Casino in Hanover, Ont. ($22 million): relocated existing gaming facility to an adjacent building and rebranded it; added 8,225 square feet of gaming space and 111 slot machines; added eight live gaming tables; and Match Eatery & Public House and The Buffet.
* Gateway Casinos in Innisfil, Ont. ($5 million): added 3,600 square feet of gaming space, 123 slot machines and 26 live gaming tables.
* Starlight Casino in London, Ont. ($75 million): build a new 102,967-square-foot facility with a 55,961-square-foot gaming floor, including 133 slot machines and 38 gaming tables; Atlas Steak + Fish, Match Eatery & Public House, The Buffet and CHOW Noodle Bar restaurants. Scheduled for completion in the third quarter of 2021.
* Starlight Casino in Sudbury, Ont. ($60 million): build a new 64,153-square-foot facility with a 21,598-square-foot gaming floor, including 173 slot machines and 21 gaming tables; Match Eatery & Public House and The Buffet restaurants. Scheduled for completion in the first quarter of 2022.
Gateway has projected capital expenditures of $326 million from the fourth quarter of 2019 through 2022.
“Historically, we have expanded and diversified our revenue stream through property expansions, relocations, renovations and deployment of food and beverage offerings,” said Santo. “We expect that to continue.”
Gateway’s new and relocated casinos
Gateway has plans for three new casinos in Ontario and to relocate two of its B.C. properties.
* Cascades Casino in North Bay, Ont. ($33 million). It will include: a 38,524-square-foot facility with a 27,103-square-foot gaming floor, including 300 slot machines and eight gaming tables; Match Eatery & Public House and The Buffet restaurants. It’s scheduled to be completed in the third quarter of 2020.
* Playtime Casino in Wasaga Beach, Ont. ($29 million). It will include: a 24,830-square-foot facility with a 16,303-square-foot gaming floor, including up to 250 slot machines; a Match Eatery & Public House. It’s scheduled to be completed in the third quarter of 2021.
* Playtime Casino in Kenora, Ont. ($21 million). It will include: a 23,300-square-foot facility with a 6,200-square-foot gaming floor, including 200 slot machines; Match Eatery & Public House. It’s scheduled to be completed in the first quarter of 2022.
* Relocated Cascades Casino in Delta, B.C. ($87 million). It will include: a 40,000-square-foot gaming floor with up to 600 slot machines and 30 gaming tables; Match Eatery & Public House, The Buffet and Atlas Steak + Fish restaurants. It’s scheduled to be completed in the fourth quarter of 2021. Gateway is also engaged with a third party to build and operate a hotel on the property.
* Relocation of a Playtime Casino in Mission, B.C. ($10 million). It will include: a 32,000-square-foot facility, including a 16,900-square-foot gaming floor and a planned increase of 100 slot machines; Match Eatery & Public House and The Buffet restaurants.
Future expansion for Gateway
While Gateway plans to keep to its disciplined capital allocation model, more ambitious expansion isn’t out of the question.
“Gateway is solely Canadian-focused now and we think the Canadian business model is a terrific model. We’re also quite aware that there are various assets which from time to time may become available more broadly within North America,” said Silvers.
“It would have to fit within the overall story and make sense within the context of the types of properties that we have . . . but I would say that we’re an open-minded group and, if there’s a value-creation opportunity that we believe would be well-received by the public markets, I think we’re very open to it.”