Place Your Bets: Real Estate and Gaming Companies Jockey for Position
Daniel Edward Rosen June 26, 2012, 1 p.m.
One would assume that owning two racinos would result in handsome profits for Jeffrey Gural.
Yet despite reports that the racino at the Aqueduct Racetrack in Queens made $57.5 million in May, outpacing Mohegan Sun as the country’s top slot-machine moneymaker, the Newmark Grubb Knight Frank chairman’s investment in Tioga Downs and Vernon Downs has not been so lucrative, in part because of unfavorable locations and a high tax rate.
“One problem I have is one racino is five miles away from an Indian casino that has table games—that was a terrible decision,” Mr. Gural said late last week. “My other racino is in Tioga County in a town of 1,000 people. Obviously, if you have a great location like Aqueduct and Yonkers, you’d make a lot of money. But the bulk of the money is going into state taxes.”
And, in fact, for would-be gaming operators in this town, it’s all about location, location, location. While some have speculated that New York City—specifically, Queens—will be one of up to seven sites chosen by legislators across the state two years from now, others have predicted that most, if not all, the sites will likely be upstate and in the Catskills.
For the time being, however, none of that matters. Now that Gov. Andrew Cuomo has whetted the appetites of in-state racino operators and big-time out-of-state casino operators, both groups are quietly lobbying local politicians and developers for a piece of the action should Governor Cuomo continue to support legalized table gambling in the Empire State.
The prospect alone has drawn several big-name suitors: MGM, Wynn Resorts, Caesars, Boyd Gaming Company and Sands have all kicked the tires, some of them going so far as to hire notable lobbying firms like Kasirer Consulting, LJM Rad and Bolton-St. Johns.
But many obstacles stand in the way of New York becoming Sin City East. Earlier this year, legislators approved a bipartisan constitutional amendment allowing up to seven privately owned casinos to have table gaming, including roulette and poker. But before gambling can be legalized, elected officials in the Senate and Assembly must also authorize a second legislative vote before the measure can be brought before voters on a statewide ballot in November 2013.
In the meantime, the governor has made this—and horse racing—his game to run. Last week he introduced plans to set up an independent gaming commission that will take over the New York Racing Association on Feb. 1, 2013. This overall gaming commission will regulate horse racing, lottery, charitable gaming and Indian casinos.
The governor brought forth new legislation that would give the state control of NYRA’s board for up to three years, after which the government would return the franchise in the form of a not-for-profit corporation. Cuomo will reduce the existing board from 25 members to 17, with Cuomo having eight of those picks (including the new board chairman).
He is doing so as controversy surrounds the Committee To Save New York, the lobbying group composed of several key members of the real estate industry, such as CBRE’s Mary Ann Tighe and REBNY’s Steven Spinola, that, with Mr. Cuomo’s apparent endorsement, has been supporting the governor’s agenda through a high-profile media campaign.
Just as news of the collapse of the Genting talks was spreading, reports also hit that the Committee To Save New York had received a $2.4 million donation from Genting and the New York Gaming Association. This was perceived as a hypocritical slight on Gov. Cuomo’s part, whose gubernatorial campaign was based on fighting pay-to-play schemes and Albany corruption.
A person close to the committee, who did not wish to be named, said that the $2.4 million contribution from Genting and the Gaming Association was done in support of a new convention center, not for casino gaming.
“We don’t discuss our donors. If you want to ask them what was behind their support, they can speak for themselves,” said Mike McKeon, a group spokesman.
Despite the controversies and the premature state of table gaming in New York, this has not prevented casino groups from jockeying for position.
Those casinos are getting “a lay of the land,” figuring out which neighborhoods could possibly be in play, while also learning precisely what politics are involved.
“There’s Marty Markowitz lobbying for Coney Island,” said one insider, who acts as a lobbyist. “But everybody wants to know is Manhattan on the table? Is Yonkers a site? What role are the racinos going to play? Who can be the right partners?”
The consensus among those who spoke anonymously with The Commercial Observer is that it’s too early to know what’s going to happen. Too many questions abound: will Governor’s Island be a destination? Will there be access to public transportation?
“If I had my druthers, I would say that it’s likely some place in Queens, because, candidly, this is [the governor’s] home turf,” said one government insider.
While answering off-topic questions at a June 4 press conference, Governor Cuomo told reporters that having a casino close to New York City is “important.” But he was also against the idea of awarding racino owners with one of the casino licenses.
“I 100 percent oppose that,” the governor added. “I believe it should be an open competition, where we bring in the best companies and we get the best deal for the taxpayer that we can get. I don’t believe the racinos have any claim for primacy.”
That does not bode well for Mr. Gural. In the meantime, locations in Queens appear to have the best chances of landing a casino license. While Willets Point remains a possibility—Queens Borough President Helen Marshall has been advocating for a convention center to open at the Sterling Equities and Related Companies joint development—complications arise because of both developers’ ties to major sports teams. Sterling Equities head Fred Wilpon owns the New York Mets, while the Related Companies’ Steven Ross owns the Miami Dolphins. Such an issue will not be easily overlooked by either teams’ leagues, observers predict.
Then there is the Genting collapse. The Malaysian-based gaming group was in discussions with the state to build a 3.8 million-square-foot, $4 billion convention center at the Aqueduct Racetrack in Queens. It was there that Genting had successfully built its Resorts World Casino New York City in 2011 and was eager to expand on its success by adding a casino to the convention center and racino.
Genting chairman K.T. Lim and Genting New York Chief financial officer Christian Goode cornered Governor Cuomo at a fundraiser held in October 2011 at the Westchester home of Barry Gosin, CEO of Newmark Grubb Knight Frank, according to The Wall Street Journal. The two presented the governor with a 20-minute slideshow of the gambling company’s plans for its casino.
But by June, talks between Genting and the governor collapsed. Governor Cuomo went on David Paterson’s WOR radio show—on a not-so-press-friendly Friday evening, no less—and informed Mr. Paterson and the public that talks between Genting and New York State “haven’t really worked out.”
“Frankly, I think Genting wasn’t prepared to put the money in without the guarantee of exclusivity,” said one insider. Without the assurance that Genting would be rewarded one of the seven casino licenses, talks dissolved.
The announcement left some scratching their heads, while others working behind the scenes were only emboldened by Genting’s setback.
Las Vegas-based Caesars Entertainment Operating Company hired lobbying group Bolton-St. John in May to target NYC council members, according to city records. Phone calls and emails to Bill McCarthy, the lobbyist officer of record for Caesars, were not returned.
Last week, Wynn Resorts signed a six-month contract worth $60,000 with lobbying firm LJM Rad, according to reports.
MGM Resorts hired Kasirer Consulting to lobby the city for a potential casino. Lobbyist Suri Kasirer told The Commercial Observer last month that the gaming group may be interested in using its Aria concept as the model for a New York casino. Aria is a mix of hotel, retail, restaurant and nightlife under one environmentally friendly, LEED-Gold certified roof at the CityCenter in Las Vegas.
“I think the model that MGM has will work much better closer to Manhattan,” Ms. Kasirer said at the time. She declined to be interviewed for this piece.
In a statement, MGM Resorts International senior vice president of public affairs Alan Feldman said the company is meeting “with many stakeholders” as it continues to explore opportunities to open a casino in New York.
“We are more convinced than ever that our integrated resorts model, including convention facilities, will result in thousands of jobs for New Yorkers and tremendous economic opportunities for local businesses,” Mr. Feldman said.
Officials with the Las Vegas Sands Organization and its politically conservative chief executive and chairman Sheldon Adelson have also been meeting with local lobbyists, including Kasirer Consulting and Brown and Weinraub, about the possibility of opening a casino in New York State. Sands and Brown and Weinraub did not return requests for comment.
When asked if Sands, MGM, Wynn Resorts, Boyd Gaming, have met with the Committee to Save New York, Mr. McKeon said “I am not aware of any [discussions].”
Despite failing to seal the deal in highly public fashion, Genting still remains a competitor.
“I think there is obviously the amount of resources Genting has versus these other companies,” said a high-ranking trade group official. “They just can’t be shooed away.”
How does the real estate world steel itself for the impending arrival of casino gambling in the state? Of those major commercial real estate brokerage firms approached for the story, only officials with Cushman & Wakefield said the firm increased its number of brokers in its hospitality division, by three brokers. And even that increase was not a direct response to the growing casino debate.
“I would say the eventuality of gaming in New York State hasn’t really caused us to ramp up, per se. But we certainly have been paying attention,” said Tom McConnell, an executive managing director of C&W’s Hotel Transactions Group.
“We’ve hired people, but it’s more for a generalist mode,” Mr. McConnell said.
Organizations in this story
People in this story
- Andrew Cuomo
- Willets Point
- Wynn Resorts
- New York Racing Association
- Marty Markowitz
- Newmark Grubb Knight Frank
- Helen Marshall
- LJM Rad
- Committee to Save New York
- Jeffrey Gural
- Sterling Equities
- Bolton-St. Johns
- New York Mets
- Cushman & Wakefield
- Related Companies
- Boyd Gaming Company
- Governor Andrew Cuomo
- Kasirer Consulting