Tuesday, August 17, 2010

Genting Strategy To Herald New York City Casino by Scott Van Voorhis - GamblingCompliance

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Genting’s ambitious push for a full-scale casino in the heart of New York City could reshape the market for gambling across the Northeast, industry observers say.

Fresh from landing one of the most elusive deals in the US gaming industry, the Malaysian casino giant has signaled it wants to go far beyond simply installing video lottery terminals at the aging Aqueduct racetrack to build a full-scale, top shelf casino.

Genting’s strategy could reap the Asian casino behemoth some handsome rewards, putting it in position to build the first casino in the Big Apple, the largest and wealthiest city in the US.

But it’s not without risks as well. The casino giant has swiftly committed itself to a major build out in a market where a number of potential competitors are also seeking to set up shop.

Still, Genting’s planned New York gambling venue, just by virtue of its almost unmatched location, is likely to shake up the gaming market on the East Coast, biting into the profits of rival casinos from Atlantic City to Connecticut, industry observers say.

“It is definitely going to have an impact on all of the Northeast,’’ said Frank Catania, a former director of the New Jersey Division of Gaming Enforcement and now president of Catania Gaming Consultants. “It’s getting to the point where the proliferation of gaming is cannibalizing everyplace else.’’

For Genting, the timing of the Aqueduct deal could not be better, coming not long after it unveiled an aggressive US expansion plan that featured big bets on seemingly long-shot deals.

Along with the notoriously tricky Aqueduct deal, the casino giant is also backing the Mashpee Wampanoag tribe in Massachusetts and exploring plans for a tribal casino in the Catskills, a short drive from New York.

But the lightning speed with which it has nailed down a deal to redevelop the aging Queens racetrack has taken gaming industry observers by surprise, with Genting succeeding in matter of weeks where others had spent years fumbling around.

A latecomer to the Aqueduct contest, Genting threw its hat in the ring this spring after the New York Lottery took over the bidding process in the wake of the latest in a long line of development deals gone bad.

The short-lived winner, Aqueduct Entertainment Group, was stripped of the Aqueduct deal in March amid a series of state and federal corruption probes into a selection process dominated by Governor David Paterson and the state’s two top legislative leaders. The winner of a previous round of bidding, Delaware North, failed to come up with a promised, $370m up-front payment.

In fact, the hunt for an Aqueduct developer began nearly a decade ago, with New York lawmakers first authorizing video lottery terminals at the aging and financially struggling racetrack back in 2001.

For its part, Genting faced rival interest from major players who had been circling the Aqueduct deal for months or even years, including MGM, Penn National and Delaware North.

But Genting benefited when it heeded warnings by the New York Lottery not to attempt to renegotiate the terms of the Aqueduct deal set forth by the state authority.

Both Penn National and New York developer SL Green, which had teamed up with the Seminoles’ Hard Rock casino and hotel empire, were disqualified after seeking extensive revisions to the Aqueduct contract put forth by lottery executives.

Genting also submitted an extremely rich upfront payment - $380m, or more than 20 percent higher than the minimum set by the lottery.

“I think they found it very hard to believe that any group could simply live up to the conditions the state had wanted for this,’’ said Bennett Liebman, coordinator of the Racing and Gaming Law Program at Albany Law School and a board member of the New York Racing Association, of Genting’s erstwhile rivals. “They put up a lot of money.’’

Following up on its Aqueduct victory, Genting is now talking up the idea of building a full-fledged casino at Aqueduct.

While Genting, after a few final sign-offs, will have a green light to roll out more than 4,500 video slots, executives with the casino giant have told lawmakers they now want to go all the way and add table games as well.

That, however, is not likely to happen overnight, with such a move needing a series of complicated approvals by the New York Legislature.

Yet it’s a further sign that Genting plans to take full advantage of Aqueduct’s prime, New York City location, observers say. (Roughly 5.6 million people live within ten miles of the track.)

Genting plans have as many as 1,600 video lottery terminals up and running in six months at Aqueduct, with the full complement of 4,500 ready to go within a year.

Initial plans call for transforming the grandstand the old track into a ‘showcase’ that will feature a three-story atrium, restaurants and two floors of video slots. There will also be an enclosed sky-bridge linking up with a nearby subway station and shuttles to pick up gamblers arriving at the nearby John F. Kennedy Airport.

Even without table games, Genting’s giant new New York City gambling hall will cut into profits both to the south in Atlantic City and to the north in Connecticut, home to two of the world’s largest casinos, Foxwoods and Mohegan Sun, observers say.

“If you establish a class facility at Aqueduct, the real losers might be Atlantic City,” said Joe Kelly, a professor of business law at SUNY College Buffalo and a gaming industry expert.

But it is a strategy that is not without some dangers as well, with a number of competitors also eager to break into the market.

Long Island’s Shinnecock tribe is pushing ahead with plans to open a casino in the area and has looked at sites that would encroach on Aqueduct’s territory, including the nearby Belmont racetrack.

There’s also the possibility neighboring New Jersey might opt to put video slots at the Meadowlands, or that New York City’s ailing OTB parlors might be given a green light to install some machines as well, Liebman noted.

Genting’s bidding rivals Penn National and SL Green were concerned enough about potential competitors that both tried to include protective provisions in a potential Aqueduct deal. Both efforts, though, backfired, prompting lottery officials to eject the two companies from the Aqueduct competition.

Still, Genting likely has a big lead on any competitor, with a Shinnecock tribal casino likely years away.

“That is a long way off,” Catania noted.