Casinos and gambling clubs
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section covers casinos and gambling clubs.
Casino gambling is considered a minority pastime, with less than 5% of the population participating with any degree of regularity. This level of participation has remained much the same for a considerable number of years. The type of premises used and those patronising them vary considerably from place to place. Most cater for local people who play for comparatively modest stakes in modest surroundings. Gambling for high stakes in lavish premises is mainly restricted to a few London clubs whose turnover accounts for around two thirds of casino business; this is substantially dependent on high spending overseas visitors.
Casino proprietors vary in character just as much as casinos themselves. Over 75% of casinos are occupied by large companies with substantial interest in the leisure industry.
| Primary Description Code: | LX |
| List Description: Casino and Premises | Scat Code 049: Suffix S |
This is a specialist class of property, to be valued by Valuers in each Business Unit.
The Class Co-ordination Team has overall responsibility for the co-ordination of this class. Contact details are in VP and CCT Members . The team is responsible for approach, accuracy and consistency of valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers and referencers have a responsibility to:
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follow the advice given at all times
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not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
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seek advice from the co-ordination team before starting any new work
The 2005 Gambling Act gave effect to Government proposals for reform of the law on gambling, providing new powers and protections for both new and old forms of gambling. It created a powerful new regulator, The Gambling Commission, with enhanced powers to regulate and maintain the highest standards of probity and social responsibility in those who provide commercial gambling.
The Act has made some significant changes to the regime for casinos. It removed certain existing regulatory controls such as “permitted areas” and introduced three new categories of casino: regional, large and small. These are defined according to a casino’s size and affect what forms of gambling can be provided at the casino.
It imposed an initial limit of 17 new casinos: one regional, eight large and eight small. An independent Casino Advisory Panel has been appointed to recommend the locations for the new casinos based on the need to obtain a proper assessment of their social impact, and on the likely regeneration benefits.
Under Section 175(4) of the Act, 16 local council (licensing authority) areas were determined as potential locations for casinos: The following licensing authorities may issue a large casino licence:
Great Yarmouth B.C., Kingston upon Hull C.C., Leeds C.C., Middlesbrough B.C., Milton Keynes B.C., Newham L.B.C., Solihull M.B.C., and Southampton C.C.
The following licensing authorities may issue a small casino licence:
Bath and North East Somerset D.C., East Lindsey D.C. (Skegness), Luton B.C., Scarborough B.C., Swansea City and County Council, Torbay B.C and Wolverhampton C.C.
Industry reaction to the initial proposals in the Gambling Act were positive, however, before the Act was due to be passed many last minute changes were made as the Government of the time came under pressure from lobby groups to adopt a harder line amidst fears of gambling addictions spiralling out of control due to the relaxing of certain aspects such as the number of gaming machines. The large majority of UK casinos remain restricted by law to a maximum of 20 gaming machines (with the exception of those holding the new ‘large’ and ‘small’ casino licences, which permit 150 and 80 respectively). The late changes to the Act were not expected and in certain circumstances the industry had already moved to adapt premises or take on increased space in anticipation of the new changes.
From the 1st November 2014 a key amendment to the Gambling Act 2005 was made under the 2014 Gambling Licensing and Advertising Act (GLA).
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The revision requires all remote gambling operators and those providing online gambling facilities to the UK to register with the Gambling Commission and in turn they will be provided with a licence.
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These operators are also subject to 15% Gross Profit Tax. This tax is now at the point of consumption, not a the point of supply meaning that online casinos that operate from outside of the UK offering services to UK residents will be subject to this tax.
5.1 Certificates and Licences
The Gambling Act 2005 replaced “operating certificates” with “operating licences” and “gaming licences” with “premises licences”. Under the act responsibility for all matters previously regulated by licensing justices was devolved to the Gambling Commission and the newly appointed licensing authorities. All decisions taken by these bodies must be made in accordance with the three licensing objectives of the Act:
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Preventing gambling being a source of crime and disorder.
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Ensuring that gambling is conducted in a fair and open way.
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Protecting children and vulnerable adults from being harmed or exploited by gambling.
The Gambling Commission issues personal and operating licences and ensures compliance with these and associated codes of practice. They are required to promote socially responsible gambling through licence conditions and codes of practice directed at those providing facilities for gambling.
Licensing authorities receive guidance from the Gambling Commission on how they should exercise their functions under the Act and must produce a Statement of Licensing Policy, to be reviewed every three years, setting out how they intend to exercise their functions. Licensing authorities have responsibility for issuing premises licences for casinos to holders of an operating licence.
5.2 Membership
The Gambling Act 2005 removed the requirement for membership, making access to casinos available to the general public. Registration as a “member” is still encouraged, particularly at the high-end of the casino scene.
5.3 Entertainment
Casinos are now able to offer a more rounded experience, if they so wish, with entertainment such as cabaret, live bands and streaming of live sporting events in addition to the dining and gambling currently provided. Restrictions on alcohol on the gaming floor have also been lifted. Decisions on the provision of alcohol on such areas are now a matter for the discretion of the licensing authorities. However, the Gambling Commission’s Code of Practice includes a specific prohibition on the use of alcohol as an inducement to encourage people to gamble.
5.4 Advertising
The Act permitted the advertising of gambling in all media, but reserves powers to the Secretary of State to make regulations controlling the content of the advertisements, so that they adhere to the Act’s licensing objectives to remain socially responsible and avoid harming or exploiting children or vulnerable groups.
5.5 Opening Hours
Licensing authorities have responsibility for determining a casino’s opening hours as one of the conditions attached to the premises licence. There are a number of casinos which are now open 24 hours per day.
Central London casinos and gaming clubs should be measured to NIA according to the categories of floor space usage detailed in Appendix 1. Soft gaming/card rooms are for members’ games (e.g. Backgammon) and are not attended by a croupier (although the casino may organise such games or contests). Salle Privé are gaming rooms with gaming tables for private or party gambling, attended by a croupier.
Areas will need to be shown separately for the following:
gaming areas, restaurants and bars which overlook gaming areas, restaurant and bars which are physically separated from gaming areas, members’ lounges, card rooms, reception areas, cashier, staff rooms, offices, kitchens, stores, customer toilets, staff toilets, plant rooms.
It is also important to note the number of gaming tables (both licensed number and actual), types of games offered, number of gaming machines and other facilities offered, such as food menu/prices, etc.
Provincial casinos do not present such a variation in format as those found in central London and accordingly should be measured to GIA, noting if car parking is available as well as the internal specification such as air conditioning, etc.
Rating surveys should be captured on the Rating Support Application (RSA) and in all cases plans and surveys should be stored in the property folder of the Electronic Document Records Management (EDRM) system.
8.1 Method of Valuation
The rentals method of valuation is the only method appropriate to casinos and gambling clubs. This valuation approach was accepted by the Lands Tribunal in the case of Clockfair Ltd v Harrington (VO) [2006] RA 286, on a hereditament which, following conversion from earlier uses, now fell within the mode or category of occupation as a casino. In dismissing the appeal, the member rejected all other methods of valuation propounded by the Appellant.
Rents passing on properties that are used as a casino will provide the best evidence to arrive at the correct level of value.
Such rents though, both for purpose built casinos and those adapted from a previous use, are typically for a shell unit. Substantial additional sums will have been incurred fitting out the premises and full details of these costs should be sought where possible and a breakdown between rateable and non-rateable works should be ascertained in order to assist in adjusting the shell rent.
In some instances fitting out works will also include the provision of additional floor space. The details and cost of these works should also be ascertained.
In the absence of direct evidence for this class, rents paid for other leisure purposes although of less weight, could be helpful. Where this evidence relates to a fully fitted-out property the “rebus sic stantibus” principles outlined in the Court of Appeal decision of Williams (VO) v Scottish and Newcastle Retail Limited and Another (RA/41/2001) need to be considered.
Comparison may be made once levels of value have become established, but strictly on the basis of one casino with another.
8.2 Valuation Considerations
The actual gaming areas of existing casinos have not greatly altered in size or character, but the ancillary facilities have become more important with the provision of more attractive dining facilities and bars. The aim is to create a club that is a place to go for a meal and a drink, with gambling available if required.
Not all casinos will want to introduce entertainment, choosing to cater for those customers who prefer to gamble in quiet surroundings, and smaller venues may not have the required floor space to provide live entertainment. Consideration will therefore need to be given as to whether these casinos are able to compete in the same market as the larger operators.
As a whole the casino market is undergoing continuous change. It is therefore important to have an up-to-date knowledge of these changes when dealing with valuations on casinos, and the Internet site for the Gambling Commission at www.gamblingcommission.gov.uk is a useful source of information.
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Rating Support Application (RSA)
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Survaid
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Class Co-ordination Team
1. Market appraisal
Licensed casinos first appeared in the UK in 1970 following the enactment of the 1968 Gaming Act. The 1968 Act ensured that Britain had one of the cleanest and most heavily regulated casino industries globally. The UK casino sector currently continues to operate in a highly regulated environment. This high level of regulation is in line with other international casino markets.
The 1968 Gaming Act permitted casinos only in towns and cities of more than 125,000 persons and thus casinos were only allowed in 53 areas historically. Given that Great Britain’s demography was therefore effectively frozen in 1969 the industry has been unable to respond to changes in population following The Act. A total of 186 casino licences were granted under the 1968 legislation with there being no further applications allowed after 28 April 2006, of these circa 156 were operational as of 31 March 2020.
The 1968 Act casino premises licences cannot be moved out of any of the aforementioned 53 permitted areas in which they were originally granted. The 2005 Gambling Act introduced the possibility of there being a further 16 casinos introduced to the UK. There are no new licences available in any of the central London boroughs originally permitted to grant casino premises licences (Camden, The Royal Borough of Kensington and Chelsea and Westminster); with the result that the supply of licences in the three central London permitted areas is therefore fixed. In order for a casino to trade it must have both physical premises and a casino premises licence.
The casino sector continues to be dominated by two main operators which collectively account for 72% of casino premises. Independent casinos remain profitable when located in the right locations with the correct demographic.
The demand for Casinos in London is largely driven by the numbers of domestic and international tourists. Hence turnover and rents are heavily influenced by factors which impact on decisions to travel to and within the United Kingdom (UK).
The 12 months leading up to Antecedent Valuation Date (AVD), 1 April 2021, was dominated by the COVID19 pandemic. However, this market appraisal reflects the whole period since April 2015.
In the years 2015 to 2019, overall growth in household disposable income had supported the casino industry. During this period casinos had been influenced by the trend towards gambling machines with the majority of the share of this revenue being derived from high volume low stake players.
Younger consumers had been increasingly likely to adopt new technologies, and this is driving an increasing demand for remote gambling. However, the main target custom for casinos is the 35 to 54 age sector which has higher levels of disposable income.
The majority of visitors to casinos are from the local communities but these are in the main low stake gamblers. It remains key to provide facilities for high stake gambling especially for the international sector. Although relatively small, the high-stake sector can be a significant contributor to a casinos revenue.
London remained the most popular tourist location in the UK and the casino industry benefitted greatly from international custom with associated high-stake gaming.
Details of the various restrictions implemented by statute in response to the pandemic and of the vaccination rollout can be found online. In February 2021 the UK Government published its Roadmap out of lockdown for England which set out four steps to relax restrictions, Step 1 of which had already taken place by the AVD.
The later three stages of the Roadmap for England included
- the opening of outdoor hospitality, and non-essential retail (Step 2, no earlier than 12 April);
- most legal restrictions on meeting others outdoors to be lifted, opening of indoor entertainment venues such as cinemas and casinos (Step 3, no earlier than 17 May); and
- the removal of remaining restrictions on social contact (Step 4, no earlier than 21 June)
Subsequent to 1 April 2021 Steps 2 and 3 took place as planned, but Step 4 was delayed four weeks to 19 July.
International travel was prohibited at the AVD, except for a small number of permitted reasons. As part of the February Roadmap announcement the government referred to a review of global travel, to report on 12 April, possibly for inclusion at Step 3. At AVD the outcome of this review was unknown. At the AVD international arrivals from certain countries had to quarantine in hotels near airports at their own cost.
The situation in Wales, both leading up to and after the AVD, was similar although not identical.
Prior to the AVD, following initial lockdowns, casinos were prohibited to open until 15 August 2020 and were subject to restricted trading conditions such as 10pm curfew from late September 2020. As a result, spending on gaming in casinos is estimated to have fallen by around 80% year on year.
Experiences following the reopening in August 2020 indicate that a venues profitability could return within three months even with social distancing in place.
It was also reported that any negative impact of a sustained drop in inbound tourism (more relevant to the London market) is expected to be offset by a reduction in outbound travel.
2. Changes from the last practice note
There are no significant changes to the last practice note which applied to the 2017 rating list.
3. Ratepayer discussions
Initial discussions have taken place with representatives of the industry and are ongoing.
4. Valuation scheme
4.1 Provincial casinos
4.1.1 Basis of valuation
The rentals method of valuation is the only method appropriate to casinos and gambling clubs. Provincial casinos should be valued on an overall basis using shell rent plus the appropriate addition for fit out. The valuation assumes the suitability of the property to be occupied as a casino or gambling club and to obtain a licence to operate as such.
4.1.2 Rents
As with the 2017 Revaluation examination of the limited number of known rents does not show any discernible pattern, with shell rental levels varying widely. This is not surprising given the wide variations in the character and locations of these properties, which range from the best new purpose-built clubs to the poorest conversions of former residential and commercial buildings.
Leases invariably require close examination, particularly for converted properties, which often have terms that relate to both existing and alternative uses, which may be inconsistent with valuation as a casino, under the rating hypothesis.
4.1.3 Fit-out
An addition to shell rents is to be made for fitting out, and similar percentages to those adopted for 2017 Rating Lists should be applied for R2023. The maximum addition for fit–out should be 25%, which should be used for the most recent developments/re-developments from the mid-1990s onward (third generation casinos).
Second generation covers a wide variety of properties, most likely to have been conversions from the mid-1970s where the original shell would usually have an open floor plate to give some flexibility to the layout. The addition should fall in the range of 15 to 25%, the latter only being appropriate to the best re-fits to a standard comparable with third generation casinos.
First generation will include those properties that are compromised in their location, layout and flexibility. The nature of their layout, often with structural walls, which provide little flexibility, is an aspect often found in many of the former old houses that were first converted to casino use. The addition for this class should be 10% – 15% dependent upon quality, the extent to which adaptation has taken place and the date of the last major re-fit. Many of these casinos have closed and been relocated to more modern and better-situated premises in the last ten years. Where a casino is in a good location and fitted out to a very high standard a higher addition for fit-out may be adopted.
When considering if any adjustment for fit-out made for the 2017 Rating Lists needs amending for the R2023 assessment the rise in costs of such fit-outs between the AVDs should be borne in mind.
4.2 London casinos
4.2.1 Basis of Valuation
As for previous Rating Lists, London Casino and Gaming Clubs are to be valued based on rents within groups according to location and status.
The groups of value reflect adaptation, fit-out and conversion. No additional value should be imported.
It is assumed that casinos do not benefit from car parking facilities. Where car parking exists, it should be valued at local office levels.
4.2.2 Rents and the market
The London casino market can be broken down into distinct sectors with each sector being characterised by the level of stakes played in each casino, high staking, mid staking and low staking. The staking policy is generally governed by the location of the casino itself and the nature of the casino premises. The casino industry in London is identified by location (and rental value) with Mayfair and St James’s attracting the richest customers and high spending overseas visitors. These casinos have lavish surroundings and high minimum stakes.
5. Material change of circumstances
The accepted approach to the valuation of casinos where an MCC occurs is as follows:
- new openings - evidence of a fall in the “drop” against a trend of rising receipts. Where the “drop” is falling, or static, prior to the MCC the cause is likely to be from economic conditions. Actual “drop” evidence is required.
- identifying other MCC events - experience in settlement of previous rating lists has shown that global, national or local events or changes have had no significant impact on the London casino market. Accordingly, appeals on grounds other than new competition should be treated with caution and would need to be supported with data from the relevant Annual Report of the Gambling Commission.
1. Market Appraisal
The latest Gambling Commission figures show that as at 31 March 2015 there were 148 licensed casinos trading in the United Kingdom. Annual attendance has risen steeply over the period since the last Revaluation (16.6m to 20.8m - a 25% increase), the ‘drop’ (total amount of wager) has increased from £4,426m in 2008 to £7,423m in 2015 - with total house win at 13.4%.
Although casino development remains restricted to the near-50-year-old ‘permitted areas’ list, the approval and opening of more of the venues licensed under the updated terms of the 2005 Gambling Act are having a positive impact on the sector’s present and future. The contribution of the new 2005 Act casinos has been a major engine of growth, with Aspers at Stratford City, Westfield averaging more than 4,000 admissions a day (up 10% on 2012/13), and The Casino MK in Milton Keynes attracting over 500,000 visitors in its first year of operation – 10% up on its original target. The other high-profile addition to the market of recent years – the Hippodrome in London’s Leicester Square – is also reported to average around 32,000 admissions a week. (Source of data: Mintel Report March 2015).
A small number of high-end London casinos have a disproportionate influence on trends, but the opening of new 2005 Act venues has been a strong positive for volume growth. Not only are the new venues performing better than established ones in admission and spending terms, but their success and popularity is likely to help strengthen the case for extending 2005 Act provisions to all casinos.
A further Gambling Act ‘large’ casino is due to open in 2015 as part of the Genting Resorts World development at Birmingham’s NEC and yet another licence is expected to be awarded in Southampton during the autumn, with Grosvenor, Kymeira Casino, Genting Casinos UK, Global Gaming Ventures and Aspers the shortlisted bidders.
Grosvenor opened a new casino in Southend in September 2014, a month after being awarded the ‘small’ casino licence for Luton. Work on a similar venue in Bath, run by Groupe Partouche SA and Global Gaming Ventures Limited, is progressing currently, while a licence for Wolverhampton has been awarded to Casino 36. This evidence shows that after a very slow start there is now an increasing number of new openings taking place under the new regulations.
Gaming and machine revenues grew faster than food and beverage income in UK casinos during 2013/14. They are expected to do so again in the current financial year as the slow and patchy nature of economic recovery sees consumers focus their spending on core activities during casino visits.
Price promotions remain the principal means of marketing casinos’ food and drink offers, while some operators have reported rising take-up of packages offering a value-led mix of fixed-price food and beverages, game tuition and free bets.
Alongside that, more venues are starting to look at non-gaming entertainments such as concerts and comedy performances that may be a better fit with dining. This diversification has been pushed by the Hippodrome in London and by the G Casino format being rolled out nationally by Grosvenor Casinos. The concept of the G Casino and other 2005 Act casinos is to provide multiple channels of entertainment, for example, the showing of live sports as well as providing an outlet for family entertainment and not just gambling.
There has also been a move by casino operators to counteract the smoking ban by building smoking shelters. An example of this is Napoleon’s Casino in Sheffield which was subject to a substantial refurbishment in 2014. Part of the works involved the creation of the first outdoor gaming terrace outside London. The terrace enables customers to smoke and drink while playing gaming machines outdoors but sheltered from the elements, and is something that is expected to become more common.
With less than 5% of the population visiting a casino in the past year another area in which casinos have been focussing on is their target age demographic - in 2013, it was 45-54-year-olds who were most likely to have experience of visiting; in 2014 it was 35-44s, this move is also key to casinos tapping into the ‘tech savvy’ generation in order to promote online gambling. The revenue derived from remote gambling has led to increased competition in the marketplace and although casino duty rates remained unchanged in 2014, land-based venues should see some of the competitive advantage of online rivals eroded by the introduction of 15% gross profit tax on remote gambling operators’ UK-facing businesses from December 2014. That said, as online gambling is now firmly established and the income stream generated is substantial with no need for physical presence, there is the potential for this to negatively impact the demand for land-based casinos in the future.
2. Changes From Last Practice Note
There are no significant changes to the last Practice Note which applied to the 2010 Rating Lists.
3. Ratepayer Discussions
To date (September 2015) initial discussions have taken place with representatives of the industry and are ongoing.
It is still expected that detailed rental schedules are going to be provided by the main operators (or their agents).
4. Valuation Scheme
4.1 Provincial Casinos
4.1.1 Basis of Valuation
The rentals method of valuation is the only method appropriate to casinos and gambling clubs. Provincial casinos should be valued on an overall basis using shell rent plus the appropriate addition for fit out. The valuation assumes the suitability of the property to be occupied as a casino or gambling club and to obtain a licence to operate as such.
4.1.2 Rents
Examination of the limited number of known rents does not show any discernible pattern, with shell rental levels varying widely from £50 per m2 to £180 per m2 (GIA). This is not surprising given the wide variations in the character and locations of these properties, which range from the best new purpose built clubs to the poorest conversions of former residential and commercial buildings.
Leases invariably require close examination, particularly for converted properties, which often have terms that relate to both existing and alternative uses, which may be inconsistent with valuation as a casino, under the rating hypothesis.
Many rents agreed immediately prior to the Gambling Act coming into force in 2007 had the potential to be artificially high due to the Act not fulfilling its initial promise of a deregulated market. A great deal of rents agreed in this period and earlier were either index linked or subject to fixed uplifts, and as such there may well be a disparity between the market and rents achieved at review.
Leading up to 2015 there have been a small number of new openings and rent reviews, however due to the nature of the leases agreed in 2007, (index linked etc.) caution will be needed when analysing these.
4.1.3 Fit-out
An addition to shell rents is to be made for fitting out, and similar percentages to those adopted for 2010 Rating Lists should be applied for R2017. The maximum addition for fit–out should be 25%, which should be used for the most recent developments/re-developments from the mid-1990s onward (third generation casinos).
Second generation covers a wide variety of properties, most likely to have been conversions from the mid-1970s where the original shell would usually have an open floor plate to give some flexibility to the layout. The addition should fall in the range of 15–25%, the latter only being appropriate to the best re-fits to a standard comparable with third generation casinos.
First generation will include those properties that are compromised in their location, layout and flexibility. The nature of their layout, often with structural walls, which provide little flexibility, is an aspect often found in many of the former old houses that were first converted to casino use. The addition for this class should be 5 – 15% dependent upon quality, the extent to which adaptation has taken place and the date of the last major re-fit. Many of these casinos have closed and been relocated to more modern and better-situated premises in the last ten years. Where a casino is in a good location and fitted out to a very high standard a higher addition for fit-out may be adopted.
When considering if any adjustment for fit-out made for the 2010 Rating Lists needs amending for the R2017 assessment the large rise in costs of such fit-outs between the AVDs should be borne in mind.
4.2 London Casinos
4.2.1 Basis of Valuation
As for previous Rating Lists, London Casino and Gaming Clubs are to be valued based on rents within groups according to location and status (as explained at 4.2.2 below). Some changes were made to the groupings for 2010 Rating List assessments in order to reflect changes in market conditions and further changes may be made for R2017.
The groups of value reflect adaptation, fit-out and conversion. No additional value should be imported.
It is assumed that casinos do not benefit from car parking facilities. Where car parking exists, it should be valued at local office levels.
4.2.2 Rents and The Market
The casino industry in London is identified by location (and rental value) with Mayfair and St James’s attracting the richest customers and high spending overseas visitors. These casinos have lavish surroundings and high minimum stakes.
Areas like Piccadilly and Knightsbridge form the second rank with South Kensington and Russell Square as the third/fourth rank. Leicester Square and surrounds, which includes the Hippodrome and Empire Casinos, offer lower minimum stakes and appeal to a wider range of customer, these are found in the fourth/fifth rank.
4.3 Material Change of Circumstances
During the 2010 Rating Lists there were two significant openings in London - The Hippodrome in Leicester Square and Aspers at Westfield, Stratford. The assessments of existing casinos in the Central London area were affected to differing extents by these new openings. The accepted approach to the valuation of casinos in such circumstances is as follows
a.new openings - evidence of a fall in the “drop” against a trend of rising receipts. Where the “drop” is falling, or static, prior to the MCC the cause is likely to be from economic conditions. Actual “drop” evidence is required.
b.identifying other MCC events - experience in settlement of previous rating lists has shown that global, national or local events or changes have had no significant impact on the London casino market. Accordingly, appeals on grounds other than new competition should be treated with caution and would need to be supported with data from the relevant Annual Report of the Gambling Commission.
| Use | Relativity to gaming space |
| Gaming Area | 100% |
| Salle Privé | 100% |
| Restaurant/ Bar (on Gaming Floor) | 80% |
| Restaurant/Bar | 60% |
| Stage | 60% |
| Soft Gaming/Card Rooms | 50% |
| Reception | 50% |
| Cashier (include Strong room) | 50% |
| Members’ Lounge | 50% |
| Offices (include security) | 50% |
| Staff Room | 50% |
| Kitchen | 20% |
| Cloakrooms | 20% |
| Stores | 20% |
| Smoking Balconies | 10% |
| Plant Rooms | Nil |
| Customer/Staff Toilets | Nil |
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Assumed no car parking
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No discount for upper or subterranean floors
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No quantum allowances
1. Co-ordination Arrangements
This is a Specialist Rating Unit (SRU) Class. Responsibility for valuation and co-ordination lies with the SRUs.
Special Category Code 049 should be used; as an SRU class the appropriate suffix letter is S.
2. Central Discussions
A number of useful meetings have taken place with Agents representing the major casino operators, Stanley (46 clubs), Grosvenor (32 clubs), Gala (28 clubs) and London Clubs International (10 clubs). The 2005 List valuation approach, the Gaming Act 2003, the effects of the smoking ban and an appreciation of the market at April 2008 were amongst the main topics discussed.
3. Background
The Gambling Commission Report for 2007-08 shows that at 31 March 2008 there were 144 licensed casinos trading in the United Kingdom. In addition a small number of licences have been granted for new casinos under the Gaming Act, 1968 where the casinos are not yet operational. This situation contrasts with 135 licensed clubs (126 trading) at 31 March 2003, with 6 further licences granted for new properties. Annual attendance has risen steeply over the period (11.8m – 16.2m), and the number of clubs trading was only 10% higher, the ‘drop’ rose by 16.7% to £4,432m, with retention (House Win) dropping by 1.8% to £657m (in 2007/8 house win dropped below 14.8%, below the usual range of 16 – 18%; this was due to a drop in house win to 14.4% in London which accounts for over half the national drop).
Out of the total number of casinos, 26 are within Greater London, most of which are located in the central area; a further 13 are situated in Scotland.
The five years to 1 April 2008 have been a challenging time for the casino industry with the coming into force of the Gambling Act 2005 (GA) on 1 September 2007 with a reduction in the number of jackpot machines allowed for pre-2005 Act casinos (under current regulations a maximum of 20 B to D or C or D machines instead) the smoking ban implementation in Wales on 2 April 2007 and in England on 1 July 2007. The new openings that occurred during the currency of the 2005 Rating List were all under licences granted under the Gaming Act, 1968 before it was repealed. The application procedures for the eight small casinos, and eight large casinos to be permitted under the GA have started. It is also unclear what will happen with regard to the proposed regional (super) casino following the cancellation of the Manchester scheme. The full impact of the change in legislation cannot yet be assessed.
The following licensing authorities may issue a large casino licence:
Great Yarmouth B.C., Kingston upon Hull C.C., Leeds C.C., Middlesbrough B.C., Milton Keynes B.C., Newham L.B.C., Solihull M.B.C., and Southampton C.C.
The following licensing authorities may issue a small casino licence:
Bath and North East Somerset D.C., East Lindsey D.C. (Skegness), Luton B.C., Scarborough B.C., Swansea City and County Council, Torbay B.C., Wigtown Divisional Licensing Board in the area of Dumfries and Galloway Council (Stranraer) and Wolverhampton C.C.
The two largest casinos Star City in Birmingham (6439 sq m) and Isle Casino in Coventry (10,480 sq m) were built in anticipation of a greater relaxation in control as indicated in the Budd report. Both are far larger than any operator would require under the current legal framework for casino gambling. The initial interest of overseas casino operators in entering the British casino market when the Budd report was published has receded.
The 17 new clubs proposed under the GA are far fewer than at one time was indicated (up to 450 indicated by Sir Alan Budd). To avoid a proliferation of new casinos, the Budd Report recommended a minimum gaming floor size of 2000 ft² (185.8 m²) for new schemes. However, the GA provides that a small casino will have a minimum total customer area of 750 m2 and will be able to offer casino games, betting and up to 80 gaming machines in any combination of categories B1 to D (except B3A lottery machines). A large casino will have a minimum total customer area of 1500m2. They will be able to offer casino games, bingo and/or betting and up to 150 gaming machines in any combination of categories B1 to D (except B3A lottery machines).
The relaxation of demand criteria by the former Gaming Board for Great Britain in recent years has allowed the new generation of larger casinos, these developments have/will all be re-locations or new builds within the existing permitted areas under the Gaming Act 1968. Nonetheless, their viability has been helped by the evolution of a number of changes since 2002, instigated by the Budd Report:
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alcohol on the gaming floor
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electronic (roulette) games in the bar area
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live entertainment (as first seen at the Hard Rock casino in Manchester) and dance floors
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new casino games
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linked jackpot games (between tables and/or casinos)
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use of credit and charge cards within the casino (but not at the tables) to obtain money for gaming
4. Valuation guidance for 2010
4.1 Provincial Casinos
Basis of Valuation
The rentals method of valuation is the only method appropriate to casinos and gaming clubs. This valuation approach was accepted by the Lands Tribunal in the case of Clockfair Ltd v Harrington (VO) [2006] RA 286, on a hereditament which, following conversion from earlier uses, now fell within the mode or category of occupation as a casino. In dismissing the appeal, the member rejected all other methods of valuation propounded by the Appellant. The valuation assumes the suitability of the property to be occupied as a casino or gaming club and to obtain a licence to operate as such.
Rents
Examination of the limited number of known rents does not show any discernible pattern, with shell rental levels varying widely from £70 m2 to £150 m2 (GIA). This is not surprising given the wide variations in the character and locations of these properties, which range from the best new purpose-built clubs to the poorest conversions of former residential and commercial buildings.
Leases invariably require close examination, particularly for converted properties, which often have terms that relate to both existing and alternative uses, which may be inconsistent with valuation as a casino, under the rating hypothesis.
Developments in recent years have been confined to re-locations and a handful of new clubs within existing permitted areas. Whilst the best new purpose built casinos may have seen rental growth since 2003, particularly in the first half of the period between revaluations, many of the older converted clubs in poorer locations may show little or no rental growth. However, there is no evidence of a drop in rental values. Many rent reviews from 2006 onwards are yet to be resolved. The foregoing comments are made without taking into account any effect the Smoking Ban may have had on rental values. At present there is no evidence of rents agreed following its implementation. Values adopted for R2010 should reflect any allowances made to 2005 List rating assessments for the Smoking Ban.
Survey Requirements
All surveys of provincial casinos should be to Gross Internal Area (GIA) basis, which enables a consistent valuation approach. This approach has been adopted in previous lists and should be continued.
**Fit-out **
An addition to shell rents is to be made for fitting-out, and similar percentages to those adopted for 2005 should be applied for 2010. The maximum addition for fit –out should be 25%, which should be used for the most recent developments/re-developments from the mid 1990’s onward (third generation casinos).
Second generation covers a wide variety of properties, most likely to have been conversions from the mid 1970’s where the original shell would usually have an open floor plate to give some flexibility to the layout. The addition should fall in the range of 15–25%, the latter only being appropriate to the best re-fits to a standard comparable with third generation casinos.
First generation will include those properties that are compromised in their location, layout and flexibility. The nature of their layout, often with structural walls, which provide little flexibility, is an aspect often found in many of the former old houses that were first converted to casino use. The addition for this class should be 5 – 15% dependant upon quality, the extent to which adaptation has taken place and the date of the last major re-fit. Many of these casinos have closed and been relocated to more modern and better-situated premises in the last ten years. Where a casino is in a good location and fitted out to a very high standard a higher addition for fit-out may be adopted.
When considering if any adjustment for fit-out made for the 2005 Rating Lists needs amending for the R2010 assessment the large rise in costs of such fit-outs between the AVDs should be borne in mind. Smoking Ban
Valuations for R2010 should reflect any adjustment made in the 2005 Rating Lists for the effects of the smoking ban.
4.2 London Casinos
Basis of Valuation
The rentals method of valuation is the only method appropriate to casinos and gaming clubs. The valuation assumes the suitability of the property to be occupied as a casino or gaming club and to obtain a licence to operate as such. No discount should be made for upper or subterranean floors.
As for previous Rating Lists, London Casino and Gaming Clubs are to be valued in groups according to location and status (as explained below). Some changes have been made to the groupings for R2010 in order to reflect changes in market conditions.
The groups of value reflect adaptation, fit-out and conversion. No additional value should be imported.
It is assumed that casinos do not benefit from car parking facilities. Where car parking exists, it should be valued at local office levels.
Rents and The Market
The casino industry in London is identified by location (and rental value) with Mayfair and St James’s attracting the richest customers and high spending overseas visitors. These casinos have lavish surroundings and high minimum stakes.
Areas like Piccadilly and Knightsbridge form the second rank with South Kensington and Russell Square as the third rank. Some of these may offer lower minimum stakes and appeal to a wider range of customers.
The total ‘drop’ for 2007-8 in London was £2,498m, which represents some 56% of total national figure. The ‘house win’ in 2007-8 for London amounted to 14.4% of the ‘drop’ in each casino, the lowest level for many years.
Survey Requirements
London casinos and gaming clubs should be measured to NIA according to the categories of floor space usage detailed in Appendix 1. Soft gaming/card rooms are for members’ games (e.g. Backgammon) and are not attended by a croupier (although the casino may organise such games or contests). Salle Privé are gaming rooms with gaming tables for private or party gambling, attended by a croupier.
Regulation Changes and MCCs
With the proposed legislation, it is anticipated that the number of casinos in London will increase during the life of R2010 rating lists. Market intelligence suggests that new casinos will be located outside of the existing areas and that they will have large gaming floors with low minimum stakes. These casinos may offer live entertainment, bingo and betting.
It is not, therefore, to be assumed that there will be an impact on Rating Assessments of the existing casinos resulting from new casino openings. The accepted approach to valuation of casinos following material change in circumstances, established for previous rating lists, should be maintained:
a. new openings - evidence of a fall in the “drop” against a trend of rising receipts. Where the “drop” is falling, or static, prior to the MCC the cause is likely to be from economic conditions. Actual “drop” evidence is required.
b. events - experience in settlement of previous Rating Lists has shown that global, national or local events or changes have had no significant impact on London casino trade. Further appeals should be treated with caution and would need to be supported with data from the relevant Annual Report of the Gaming Board.
|
Use |
Relativity to Gaming Space |
|
Gaming Area |
100% |
|
Salle Privé |
100% |
|
Restaurant/ Bar (on Gaming Floor) |
80% |
|
Restaurant/Bar |
60% |
|
Stage |
60% |
|
Soft Gaming/Card Rooms |
50% |
|
Reception |
50% |
|
Cashier (include Strong room) |
50% |
|
Members’ Lounge |
50% |
|
Offices (include security) |
50% |
|
Staff Room |
50% |
|
Kitchen |
20% |
|
Cloakrooms |
20% |
|
Stores |
20% |
|
Smoking Balconies |
10% |
|
Plant Rooms |
Nil |
|
Customer/Staff Toilets |
Nil |
-
Assumed no car parking
-
No discount for upper or subterranean floors
-
No quantum allowances