Monday, January 11, 2010

Foxwoods Philadelphia Project Looking To Replace Foxwoods Team As Developer And Operator Says Lawyer

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Yesterday´s edition of The Philadelphia Inquirer ran a story that said the investors in the Foxwoods Philadelphia casino project are looking to replace the Foxwoods team as the casino´s developers and operators. This article is a Tribes In The Media installment.

One of the disclosures in the article - The Mashantucket Pequots do not have the wherewithal to carry forward this kind of venture, according to Foxwoods attorney Stephen A. Cozen. The Mashantucket Pequots invested $30 million in exchange for the one third of the future profits.

Cozen also said the Foxwoods Philadelphia group are close to adding a new investor, which could be a major international gaming company. In addition to the Mashantucket Pequots, the other principal investors are the charitable trusts of three Philadelphia regional icons.

S. Phila. casino confronts next step
The table-games law gives Foxwoods 19 more months to open, but partners still need to find a developer.
By Jennifer Lin
The Philadelphia Inquirer
January 10, 2010

Pennsylvania's new table-games law has given investors in the Foxwoods Casino project breathing room they need - up to 19 more months - to open a 1,500-slot waterfront casino in South Philadelphia.
Now the question looms: Who will build and run it?

Since the fall, the partners have made no secret of their search for a gaming company to replace the Mashantucket Pequot tribe of Connecticut as the casino's developer and operator.

Gov. Rendell signed the bill Thursday to allow table games in casinos, and the investors can move quickly to line up a successor, said Stephen A. Cozen, a lawyer for Foxwoods.

The partners are focusing on a sole investor and could have an announcement "by the end of the month," Cozen said. He declined to identify the potential new operator, saying only that it was a gaming company "with operations internationally."

In 2006, the local Foxwoods investors chose a subsidiary of the Mashantucket Pequots to design, finance, and run the casino. The tribe put up $30 million for one-third of the profits. Since then, it has developed serious money problems stemming from a drop in revenue at its flagship casino in Ledyard, Conn.

Cozen said the local investors "hope and assume" the tribe's subsidiary will remain an investor. But, he added, the Mashantucket Pequots do "not have the wherewithal to carry forward this kind of venture."

The main local partners in Foxwoods are charitable trusts for the families of three entrepreneurs: New Jersey businessman Lewis Katz, Center City developer Ron Rubin, and Comcast-Spectacor chairman Ed Snider.

Over the summer their project was in jeopardy.

The Pennsylvania Gaming Control Board forced them to abandon the idea of putting the casino in Center City. They were ordered back to the waterfront in South Philadelphia, the original plan in 2006 when they won one of the two coveted licenses for slots in the city.

But the clock was ticking faster than the investors could line up financing to build on 16 vacant acres on Columbus Boulevard.

They warned state regulators that they were so pressed for time that they might have to hastily erect a temporary structure first. Its license required Foxwoods to have 1,500 slot machines operating by May 29, 2011.

Relief came from the General Assembly.

Under orders from Rendell to generate new revenue from gaming to fill budget holes, legislators produced a bill to add table games such as poker and blackjack at casinos.

A paragraph tucked into the 230-page bill gives operators such as Foxwoods until Dec. 31, 2012, to be up and running.

Many Philadelphia-area lawmakers objected to an extension for the long-delayed project, saying Foxwoods already had three years to produce a slots parlor.

But Cozen called passage of the table-games bill "a boon" for the project, city, and state.

"Instead of throwing up a temporary facility with very few jobs and taxes," he said, "we have the ability to do something more consistent with our original plan."

Though the casino's design has yet to take shape, Cozen predicted it would be "more grandiose and appropriate" for the site than a temporary structure.

Legislators said Foxwoods representatives had lobbied hard for the extension. Cozen would not name the lawmaker who added the language to the bill.

"I can't and won't," he said.

Cozen said the Foxwoods group must settle on a new investor-operator before determining whether to ask regulators for the additional time now available.

Gaming experts say the lending environment for casino projects, especially new construction, remains difficult. Craig Parmelee, a credit analyst for Standard & Poor's debt-rating agency, said lenders demanded "a large equity cushion" from casino developers, who have to put up more of their own money.

Five years ago, those developers might have had to raise 10 to 30 percent of the equity, he said. Today, they must produce 40 to 60 percent.

The investor group in the SugarHouse casino project in Fishtown-Northern Liberties raised 45 percent of the equity - or $160 million - and borrowed $195 million, said Leigh Whitaker, a spokeswoman for SugarHouse.

Doug Harbach, spokesman for the state Gaming Control Board, said that if Foxwoods brought a new investor-operator aboard, the replacement would be treated like a new applicant and subject to "in-depth vetting."

The project, he said, would go through the same board review it did in 2006.