Lakes Entertainment Inc., a major investor in Rock Ohio Ventures, stated that its $21-million investment proved to be of little worth. The company, headquartered in Minnesota, based its argument on the relatively poor financial performance of Horseshoe Casino Cleveland and the rest of Rock Ohio’s gambling venues.
Lakes carried out an analysis of Rock Ohio’s profits and working capital and notified the U.S. Securities and Exchange Commission about the results. According to it, the Ohio-based gambling venues did not perform as predicted. This led to issues with working capital that the investor had not previously faced. Lakes concluded that some sort of a permanent “impairment” caused the reduction of “the carrying value of the investment in Rock Ohio Ventures to its estimated fair value of zero.”
Matt Cullen, chief executive of Rock Gaming, stated that his company was informed about Lakes’ filing. He explained that the significant decrease in the carrying value was mainly due to the fact that eleven new gaming venues have been launched in Ohio since 2012. Mr. Cullen also stated that he was optimistic about the company’s future.
Horseshoe Casino Cleveland has posted a major decrease in turnover since its launch in May, 2012. An additional expansion was planned to be commenced at some point in the future.
Lakes Entertainment currently manages the Rock Gap Casino Resort, situated not far from Cumberland, Maryland.
Back in 2008, the company had expressed its support for an amendment in the Ohio Constitution which would have allowed it to proceed with the construction of a $600-million gambling venue near the city of Wilmington.
In 2009, Lakes inked a deal with Rock Ohio. The Minnesota-based company also granted the amount of $2.4 million for a referendum on an amendment in the Ohio Constitution that was supposed to authorize casino gambling within the territory of the state.
It seems that Lakes contributed to Rock Ohio a total of $13.3 million up to January 1, 2012, $4.5 million by the end of that same year, and $800,000 in 2013.
Currently, Rock Ohio has an 80% stake in Cleveland and Cincinnati-based casinos, ThistleDown Racino as well as Kentucky-based Turfway Park. The other 20% is held by Caesars Entertainment.
Lakes stated in its quarterly filing, published on November 12, that the fair value of the company’s investment in Rock Ohio amounted to $0. The gaming company also shared that it might invest the sum of $4.1 million and it will continue monitoring Rock Ohio.
Back in 2012, when Horseshoe Casino Cleveland was opened, it generated monthly revenues between $20 million and $26 million. Since May, 2013, however, its revenues began to mark a substantial decrease. In 2014, monthly turnover varied between $17 million and $19 million.
As mentioned above, Rock Ohio is planning to expand its downtown gambling venue. This second phase of its development may include the establishment of more restaurants, stores, and different entertainment facilities. In other words, the company is planning to pay more attention to non-gambling activities.
