Casino Company Bets It Can Make a Pretty Penny in the U.S. Heartland

PLYMOUTH, Minn. — A New York stockbroker once told Lyle Berman that he had done for gambling casinos what Henry Ford had done for cars: Made them easily available to middle-class Midwesterners.

Berman, chairman and chief executive officer of Grand Casino Inc., believes the Ford comparison is stretching things a bit.

But he does agree the two casinos his company developed and operates on the Mille Lacs Indian Reservation, located about 70 miles north of Minneapolis, have made blackjack and slot machines more accessible to millions of people living between Las Vegas and Atlantic City.

“It’s another way for the Middle American public to have a good time for an evening,” said Berman, himself a championship-caliber Las Vegas poker player. “It’s a major extension of the entertainment market.”

Now, he says, he’s ready to extend Grand Casino’s operations beyond its two central Minnesota operations.

Grand Casino plans to build and manage two Indian-owned casinos in central Louisiana and a third near Hayward, Wis. It also intends to develop a dockside casino on barges in Mississippi, which would be its first non-Indian venture.

“We recognized that this was a business that clearly could be exported, that could be specialized in,” Berman said in a recent interview.

The company’s goal for the next three years is to manage six to eight casino-resorts, which would include retail shops, convention facilities and live entertainment, he said.

Grand Casino was one of the first companies in the nation to develop and manage Indian casinos, which are flourishing as an economic development tool under the 1988 National Indian Gaming Regulatory Act.

Indians now operate about 150 gambling halls, which produced $1.3 billion in revenue and $400 million in net profit last year alone, according to the National Indian Gaming Association.

The most recent sprung up earlier this year in Ledyard, Conn., and is run by the Mashantucker Pequot tribe.

Berman and his partners, who were involved with Indian bingo in the mid-1980s, opened Grand Casino Mille Lacs in April 1991. It generated $37.4 million in revenue and $12.4 million in profits through its first 10 months of operation.

In May, Grand Casino opened its second Minnesota gaming operations in nearby Hinckley.

Grand Casino keeps 40% of the profits as its management fee, while the rest goes to the tribe, which is planning to use the money to upgrade utilities and build new houses, a school and a medical clinic.

Because Grand Casino is working with tribes that start out with little money, their agreements call for the company to pay for the construction of the casinos and for the tribes to pay the money back with their gaming profits.

To help finance the Minnesota projects Grand Casino went public in October, raising $12.5 million with its initial stock offering. It made its second offering in May and raised more than $35 million.

Grand Casino’s stock has since more than doubled in price, trading recently at around $14.50 a share over the counter.

And the company has remained in the black since going public, earning $305,028, or 3 cents a share, on revenue of $1.4 million for the third fiscal quarter ended April 26. Its nine-month profit totaled $2.1 million, or 15 cents a share, on revenue of $3.9 million.

Mike Moe, an industry analyst for Dain Bosworth Inc. in Minneapolis, projected earnings growth of more than 50% over the next three to five years.

“Being first has a huge advantage here. They are really positioned to be a big-time gaming company,” Moe said.

Moe credits the 50-year-old Berman, whose business acumen has extended beyond the gaming industry.

Berman, among other things, helped to build Berman Buckskin Co. from one leather fashions store to 200 before selling it in 1988 to Melville Corp. for $165 million.

“He’s a visionary, he’s smart, and he’s a risk taker. More often than not he’s going to win,” Moe said. “He’s always thinking about the next step. Maybe not the next step, but three steps beyond.”