Making the News

New York Times

Originally Published:Tuesday, June 29, 2010
http://www.nytimes.com/2010/06/30/nyregion/30aqueduct.html?_r=1

3 Submit Bids on Franchise for Gambling at Aqueduct

By CHARLES V. BAGLI
New York Times

New York State's fourth attempt in nearly a decade to sell a gambling franchise at the faded Aqueduct racetrack in Queens drew three groups, who submitted bids on Tuesday to operate 4,500 electronic slot machines there.

Aqueduct is widely viewed as a potentially lucrative market with two million people only a short subway ride from the track. But the uncertainty surrounding a possible Las Vegas-style Indian casino nearby, a $300 million upfront payment and other costs and deadlines imposed by the state prompted two other prospective bidders to abandon the competition at the last minute.

The three bidders who remain are: Genting New York, a subsidiary ofSoutheast Asia's largest gambling company; a partnership of SL Green, New York's biggest commercial landlord, and Hard Rock International; and Penn National Gaming, which operates 15 casinos in Florida, Maine, New Jersey and other states. Another bidder,Clairvest Group, a publicly traded merchant bank, joined the SL Green-Hard Rock team.

"The prospect of operating that facility will keep a lot of people in the game," said Michael J. Pollock, managing director of Spectrum Gaming Group, a consultant. "It's one of the few major opportunities left in the eastern U.S."

One executive involved in the bidding suggested that Aqueduct could generate as much as $800 million in annual revenues, about 50 percent more than the Empire City Casino in Yonkers, currently the best performing electronic slot machine parlor in the state. Empire does as much business as the seven other racetrack casinos in New York combined, principally because it sits in a far more populated area than the others.

Most analysts say that Aqueduct would also generate more than $1 million a day in tax revenue for the state.

Whatever happens, the bidders are also betting that gambling will become legal in New York, allowing them to add poker, blackjack and other table games. There are full-blown casinos in Atlantic City and Connecticut; Pennsylvania's slot parlors are adding table games.

The bidders submitted offers Tuesday to the New York Lottery, which is assessing the bids. The agency hopes to make a recommendation to Gov. David A. Paterson and legislative leaders by Aug. 3. The state comptroller and the attorney general will also review the winner's bid.

Prospective bidders got a jolt this month when the federal government formally recognized the Shinnecock Indians of Southampton, N.Y., opening the door for the tribe's often stated desire to build a full casino.

The bidders at Aqueduct worried about making a $300 million down payment on a franchise that may have to confront a new competitor offering not only real slot machines, instead of electronic ones, but also roulette, black jack, poker and other table games, as well as shows and concerts.

Mr. Paterson tried to reassure the bidders by saying that he did not expect a Shinnecockcasino outside the reservation to have "a major impact" on the Aqueduct casino. "The state intends to protect its financial interest in existing and planned facilities."

This is the fourth attempt to install electronic slot machines, or video lottery terminals, at Aqueduct since 2001. Eight other tracks quickly installed the machines. But Aqueduct, the only track in New York City and the one with the greatest potential, turned into a long-running drama.

After two failed attempts to sell the franchise, Gov. Eliot Spitzer decided to start over in 2008. Mr. Paterson, his successor, ultimately picked Delaware North, a Buffalo company, to run the gambling operation. But the deal collapsed in March 2009, after Delaware North failed to raise a $370 million payment it promised.

Last June, six bidders, including the gambling impresario Steve Wynn and Delaware North, submitted bids. The process dragged on through the fall and winter. The governor's office favored a bid from SL Green and Hard Rock. But Governor Paterson announced in January that he had selected Aqueduct Entertainment Group to break a deadlock in the State Legislature. That deal collapsed amid charges of favoritism and an investigation by the state inspector general.

 

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