 |
| The Live! Philadelphia proposal in South Philadelphia would cost $425 million but require no debt. |
The five companies vying to build a second casino in
Philadelphia are competing against each other, but also against the ghost of
Foxwoods, which in 2006 won a license for a casino along the Delaware in South
Philadelphia but failed to secure the money to build it.
Current bidders - scheduled to make final arguments
to the Pennsylvania Gaming Control Board on Wednesday - have used a variety of
tactics to convince commissioners that they are not another Foxwoods, which
lost its license in December 2010.
Applicants have highlighted national track records,
sworn they do not need to borrow a dime to build, lined up two major banks,
promised cushions of extra cash, and even touted debt packages twice the amount
needed to realize a dream.
An industry expert doesn't expect financing to be a
problem this time.
"I don't think any of these guys are going to
have any issues getting approvals for these loans, getting these loans, and
getting them at pretty good rates," said Saverio R. Scheri III, president
and chief executive of WhiteSand Gaming L.L.C., a consulting firm with offices
in Atlantic City, Las Vegas, and overseas.
After Wednesday's meeting, the gaming board will
begin final deliberations, but it is uncertain when or if it will award the
second Philadelphia license.
To demonstrate the ability to pay for their
proposals, with price tags ranging from $425 million to $700 million, most
applicants have lined up a combination of debt and equity, which is usually a
cash contribution, like a down payment on a house.
Finance experts said it would be unusual for a
casino developer to borrow more than 75 percent of the total amount needed.
Only the partnership between Cordish Cos. and
Greenwood Gaming Inc., which has proposed the $425 million Live! Philadelphia
casino in South Philadelphia, said it did not need debt to build. "We're
not dependent on anyone else's money. We're not dependent upon Wall
Street," Joe Weinberg, managing partner for Cordish, said last month at
board hearings in Philadelphia.
By contrast, Bart Blatstein plans to borrow all of
the $600 million he needs for the Provence, counting the value of the property
he owns at the proposed site along Callowhill Street west of North Broad Street
as his equity.
Blatstein bought that property, including the former
Inquirer Building, for $22.65 million in 2011. His financing proposal now
values the property at $100 million, more than four times what he paid.
That seems jaw-dropping at first, but experts said
that the value of a piece of land with a casino is much different from what it
is without a casino.
"If it's for gaming, you can increase the value
by two, three, four, five times," said Dan Davila, a partner in Poydras
Capital, a New Orleans gaming finance firm.
That ratio is borne out - and then some - in the
prices other applicants have agreed to pay for the properties where they would
build their casinos.
For example, Penn National Gaming Inc. said the
property at 700 Packer Ave., where it has proposed building a $480 million
casino, should be worth $60 million, according to a gaming board document.
The city values the same parcel at just $6.5
million, which means the land would be worth 9.2 times more with a casino on
it.
The bigger issue in Blatstein's financing proposal
is that his $100 million in equity amounts to just 14 percent of the project's
total value of $700 million, significantly less than the typical 25 percent to
30 percent in equity.
Blatstein emphasized that he had lined up financing
totaling $1.23 billion - twice what he needs - plus what he called his
"own significant financial resources."
But potentially complicating the picture for
Blatstein is the possibility of "some additional licensing
ramifications" with two of Blatstein's funding sources, according to Cyrus
Pitre, director of the state gaming board's office of enforcement counsel.
Blatstein is not the only applicant to include land
as part of the equity.
Joseph G. Procacci, the main backer of the proposed
$428 million Casino Revolution, included $50 million of land he already owns in
the $130 million of equity to be invested by the partnership he leads.
Procacci's group said it has arrangements with two
investment banks, Jefferies & Co. and Wells Fargo Securities, to provide
debt totaling $298 million.
The $500 million Market8 proposal, planned for the
corner of Eighth and Market Streets, is relatively straightforward. It calls
for $125 million in equity and $375 million in debt. Market8 partners have said
they also have $50 million in "contingent equity" - a just-in-case
fund.
Penn National said money from operations and
revolving credit would pay for its Hollywood Casino on Packer Avenue.
Tim Wilmott, Penn National's chief executive, said
at the January meeting there was no doubt his firm could build, alluding to the
fact that Foxwoods "couldn't get it started because of financing."
"We have our operating cash flows and our
balance sheet that can deliver this $480 million proposal as it stands
today," Wilmott said.
Source: Philly.com
No comments:
Post a Comment