Monday, May 5, 2008

Mohegan Bid To Operate VLT Slot Machines At NY Racetrack In Final Decision Stage

By Ken Davison

The state of New York has a new governor and the Mohegans have submitted a new, scaled back bid to operate VLT slot machines at the Aqueduct racetrack in Queens, N.Y.

Three groups are now said to be competing for the right to operate VLT slot machines at the racetrack, down from six groups that submitted bids last Fall.

The Mohegan Tribe has partnered with Capital Play, a team of Australian racetrack executives, and two other companies: a hedge fund and a real estate development company. The Mohegan partnership is now competing against two other groups, which include the Seminole Tribe and Delaware North.

The state's plan is to have 4,500 VLT machines (similar to slot machines) installed in the Aqueduct racetrack and the state will kick in $250 million toward construction.

The winning bidder, who will be awarded a 30-year lease, is expected to be selected in a matter of weeks and a spokesperson for the governor has stated that he wants the VLT slot machine facility operting within a year from the selection. The selection will be made by Governor Paterson, Assembly Speaker Sheldon Silver and the Senate Majority Leader, Joseph Bruno.

The group that includes the Mohegan Tribe offered the state $100 million for a license fee and $150 million in the initial construction phase followed by a $700 million phase two development that would include a hotel and mall and would take place within a couple of years. In addition to the team of Australian racetrack executives, the group also includes a New York real estate developer and Plainfield Asset Management, a hedge fund. The group said it would spend up an additional $30 million per year on marketing on top of the state's requirements.

The Mohegans formed a company called Mohegan Gaming, LLC specifically for the purpose of bidding on the Aqueduct gaming franchise. Mohegan Gaming is a subsidiary of the Mohegan Tribal Gaming Authority (MTGA).

Another group comprised of Delaware North and Saratoga Harness Racing has said it would pay the state a $370 million licensing fee upfront and develop the site only using the state's $250 million development incentive. Delaware North operates a racino in Saratoga Springs

The Seminole Tribe of Florida, through its Hardrock subsidiary which it purchased in 2006, and third bidding group includes Hard Rock International, which was acquired by the Seminole Tribe of Florida in 2006, along with the real estate firm SL Green, is offering to pay the state $250 million in licensing fees, $130 million toward construction development and would spend about $29 million to finance upstate N.Y. horse farms and breeding. The group also said it would spend $30 million to $100 million on capital improvements over the term of the lease. A Hardrock cafe would be added in a second phase.

The bid process is secret thus it is not known which other firms are bidding for the franchise. It was rumored that the bid process was, however, opened back up since last Fall's deadline.

The Mashantucket Pequot, Seneca and Shinnecock tribes submitted bids last Fall as well as Empire Racing and Excelsior Racing, which includes casino magnate Steve Wynn. None of these groups were among those named as having presented recent proposals to the trio of politicians that will select who wins the franchise.

According to a spokesperson for Senator Bruno, "Working with the governor and the Assembly, we expect to be able to make a selection by Tuesday, May 6." That date, as other declared deadlines in the process, appears flexible.

One racetrack close to New York City opened its VLT slot parlor in October 2006.Yonker's Raceway in Yonkers, N.Y., now has 5,300 VLT slot machines. Empire City at Yonkers Raceway, the facility's official name, plans to increase that number to 7,500 VLT slot machines, which would make it the largest racetrack-based slots operation in the nation. Management at the two Indian casinos in Connecticut have repeatedly said the Yonker's operation has affected their slot revenues and another facility at Aqueduct would have an additional impact.

The fact that New York has a new governor is certainly to the advantage of the Mohegan group, which ran commercials last Fall criticizing the Governor Elliot Sptizer's selection of New York Racing Assocation to continute running the state's racetracks. It is not known how such a public rebuke of the governor could possibly have been advantageous to the group in its bid for the Aqueduct VLT slot franchise.

But now that Gov. Spitzer has been replaced by David Paterson, the Mohegan group now has a realistic chance in the franchise bidding process.

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