Kasowitz, Benson, Torres & Friedman Partner Wally Schwartz on NYC Gaming
Jotham Sederstrom Aug. 8, 2012, 7:30 a.m.
When Wally Schwartz accepted a position as head of real estate at Kasowitz, Benson, Torres & Friedman, a national firm with offices in New York, Houston, San Francisco and other major cities, the group had no transactional lawyers on its payroll and only supported a litigation platform. Over the past 14 months, however, Mr. Schwartz, formerly the head of real estate at Skadden, has tackled work for Starwood Capital in its acquisition of the leasehold interest at 1372 Broadway, and Boston Properties’ 500,000-square-foot deal with Citibank at 601 Lexington Avenue, while simultaneously expanding his department to nearly a dozen attorneys. Mr. Schwartz, a partner at the firm, spoke to The Commercial Observer last week about representing the gaming industry in its mission to break into New York.
Mr. Schwartz: Well, we’re currently working on a significant $500 million hotel and casino project for Penn National Gaming that will be located in the Northeast, but I can’t really be more specific than that at the moment.
Is activity in the gaming sector heating up all across the region?
As head of Kasowitz’s real estate group, are you beginning to staff up for what most people assume are going to be a lot more gaming interests across New York?
Yeah, that’s one of the things. Look, we see in the future we’ll be doing more hotels and casino work in the Northeast and around the country. You know, we do this work with Penn Gaming all around the country—we’ve done it in Texas, Maryland, Kansas—and they’re very good about going into states anticipating where laws are about to change, and they don’t hesitate to lobby to help the laws to change.
Do state gaming or racing associations make these kind of transactions difficult?
Well, I’ve been doing a lot of gaming work over the years, so, yes, it complicates the documents, in that you need to make the documents work in the context of how the gaming commission works. So the documents need to provide for gaming approvals and for the timing of those. It needs to provide for what happens when you’re doing a joint-venture agreement, what happens there if one of the partners is found not to be suitable, and so on. You need a mechanism for getting that partner out of the transaction, because the gaming commission in any jurisdiction will not approve the transaction if there’s one person involved who’s not, you know, who can’t get licensed.
So what are you doing in anticipation of the gaming laws changing in New York?
In New York it would be a matter of checking what sites and what future casinos might be available. In a state like Texas, the goal is ultimately to approve gaming, which they have not done yet. It’s a process that has to go through two sessions of the legislature. So it varies. There are some states where it’s a matter of bidding on existing sites. In some states, it’s a matter of trying to help change the law.
Are most real estate attorneys fluent in these transactions, or is it a specialty?
It’s a specialty, and it’s something that many years ago, back in 1984, I fell into by working with Ramada Inns. We did a sale leaseback transaction of the Resorts hotel in Atlantic City. And just from working on that project, I became the gaming guy in our real estate group, and since that time I’ve worked on many transactions in Atlantic City, in Las Vegas and, with Penn Gaming, all around the country.
This may be naive, but why would an outfit in Las Vegas hire you, in New York?
No, it’s not naive, it’s a great question. And many of the good Las Vegas firms have asked the same question. And the reason was very simple: on the large transactions, they ended up being institutional type transactions because they became so enormous within the recent past, and they required what was major financing through what tended to be New York institutions, so they were being financed by institutions out of New York.
For instance, I worked on the redevelopment of the Aladdin Hotel and Casino, and in that case, my client was the owner at that time of the Aladdin Hotel. But the deals really became New York-centered deals because one of the partners was from London and all the bankers were from New York. So we would use a local counsel and we’d use a local firm, but you really needed a firm that did business in the national marketplace. So all the big deals in Las Vegas were usually done through a large Los Angeles or New York firm—you know, some national firm and a local firm who would work with them.