PNGI Still in Hunt for Aqueduct VLT Contract?
Penn National Gaming Inc., believed to be facing an uphill battle in the bidding wars to develop a video lottery terminal casino at Aqueduct, has offered the cash-starved New York state government $250 million in a non-contingency, upfront payment for the exclusive contract and believes it's still in the hunt for the project.
The offer, compared with the other five bids, would be the largest upfront payment to the state, which is facing a budget deficit approaching $3 billion in its current fiscal year.
Government officials recently said the bidding for the long-delayed project had been tentatively narrowed to three entities—groups led by Manhattan real estate developer SL Green, Las Vegas casino executive Steve Wynn, and Buffalo, N.Y.-based Delaware North.
Officials the week of Sept. 21 said there were concerns PNGI’s bid would not bring enough money to the state. They nonetheless cited the company’s extensive background in gambling enterprises as a plus for its bid.
PNGI originally bid just $5 million in upfront payments, with another $150 million in additional payments based on certain conditions. But in August, the company, responding to a request by Gov. David Paterson for “best and final’’ offers, upped its bid to the $250-million upfront payment.
“There are no strings attached to the $250 million,’’ said Christopher McErlean, vice president of racing for PNGI, which operates six tracks, four of which have gaming with 25,000 total slot machines or VLTs.
Unless any of the other bidders’ offers have changed the past couple weeks, the upfront offer by PNGI is at least $100 million more than several of its competitors. The company is also offering to open a temporary casino within eight months of signing any deal with the state. It would feature up to the 2,000 of the 4,500 VLTs the track has been approved to operate.
PNGI, a publicly traded company, is also trying to sell the state on another attribute: It has the cash on hand to guarantee the upfront payment if it wins the 30-year contract. Earlier this year, the governor scrubbed the deal he made with Delaware North after the company, caught up in the nation’s credit crunch, was unable to secure the complete $370 million it offered as an upfront payment for the Aqueduct contract it won last year. (Delaware North has said it has since resolved any financing issues for its $300-million offer, which would be payable in installments.)
“We now have $600 million cash in the bank,’’ McErlean said. “We have no financing issues in making this project happen.’’
Unlike most of the other bidders, PNGI has not added partners for the Aqueduct project. Several of the bidders have numerous partners, including some with political connections to Democrats who control the state government.
McErlean said PNGI is concerned some officials are suggesting its offer was too low. “As far as we know, this is the highest upfront payment offer, with no strings attached, by any bidder,’’ he said.
The payment would be made in total at the time the contract is signed with the state.
The company is not proposing a major destination-like project for Aqueduct. McErlean said the plan envisions piggybacking onto plans proposed years ago by MGM Mirage in what was yet another scuttled idea to bring slots to Aqueduct.
PNGI said using the basics of the MGM plan—which does not, for instance, call for any major hotel complex—will permit the project to move forward faster because government approvals, such as environmental reviews, have already been received.
McErlean said a hotel and some other features could be added in future years, but he said noted neighborhood groups have expressed skepticism about turning the facility into a large, Las Vegas-like destination.
“They told us loud and clear what their expectations are,’’ McErlean said of the local Queens community groups. “They don’t want Las Vegas in their back yards.’’
PNGI officials believe they are still in the hunt for the Aqueduct deal.
“We have the ability to start right away with no financing, no construction issues. We can be ready to go tomorrow,’’ McErlean said.
The Pennsylvania-based company opened its first racetrack in 1972. The Aqueduct VLT casino has been delayed by numerous legal, financial and political issues since being approved by the state in 2001.
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