WHILE THERE WAS concern over a report indicating failing finances, Empire Resorts and Concord Associates have the potential to bring two racinos to Sullivan County.
Empire, Concord reach new agreement for dual racinos
By Dan Hust
MONTICELLO Empire Resorts has gone from filing a Securities and Exchange Commission report indicating failing finances to having the potential for not one but two racinos in Sullivan County.
In a press release issued this week, the company stated that it has entered into an agreement with Concord Associates to keep its existing operations at Monticello Raceway while also working with developer Louis Cappelli to create a new racino at the Concord in Kiamesha Lake barely four miles away.
The original plan was to close the raceway location and replace it with a mall, once the Concord’s $1 billion “Entertainment City” including the new Concord Downs racetrack was up and running.
Good for 40 years, this new agreement is not official, however, until the Concord project has garnered all the financing it needs to continue. Currently, Cappelli is struggling to close a gap of several hundred million dollars, apparently due to the global economic malaise, and construction has not yet recommenced at the site.
Should the new Concord open, Empire will face a rosier future, as the agreement stipulates the company will receive a $2 million annual fee that increases by 5 percent every five years over the 40-year term; an annual percentage fee over the 40 years equal to the greater of $2 million or 2 percent of gross gaming revenues, including from future legalization or Indian gaming projects (determined after amounts payable to New York State, horsemen and breeders); and a payment of $25 million upon any sale or transfer of the Concord gaming facilities, with the buyer assuming liability to Empire for the annual fee of 2 percent of gross gaming revenues for the balance of the 40-year term.
“With no less than $2 million a year payable under the percentage fee, Concord will be providing Empire with at least $4 million a year in additional net cash flow,” states the release.
Cappelli’s Concord Associates will also become responsible for paying the horsemen and breeders at Monticello Raceway their share of video gaming machine profits after construction of the new Concord. And during construction, Concord will fund a reserve of $4 million to cover any shortfalls in Empire’s payments to the horsemen and breeders.
Cappelli himself, however, is increasing his control over Empire, in which he already is a large shareholder.
Four directors have resigned from Empire’s board, including Chairman John Sharpe, and Cappelli is one of the replacements.
In addition, Concord Empire Raceway Corporation, not Empire itself, will be the operator of Concord Downs. Reportedly, investors would not back a racino operated by Empire, but all Empire would confirm is that it will oversee management rather than day-to-day operations.
Still, Empire may now not have to worry about being able to repay a $7 million loan owed the Bank of Scotland or $65 million in notes callable this July.
“The company is not in default of any of its obligations to note holders and has made debt service payments on a timely basis,” says Empire CEO David Hanlon in the release. “... Empire’s potential as a profitable business is enhanced by the finalization of its agreement with Concord, which puts the company in a far better financial position to negotiate an amicable restructuring with its note holders.”
Hanlon’s hopeful the state will approve new electronic table games, perhaps even legalize non-Indian gaming.
As for Cappelli, “I am glad to join the company’s board of directors,” he remarks in the release. “My primary focus is job creation. New York cannot afford to lose any more jobs. The continuation of harness racing and gaming operations at Monticello Raceway will keep hundreds of jobs in place and protect the tax base of the Village of Monticello.”
instead of one?
By Dan Hust
MONTICELLO Despite the Monticello Raceway’s self-acknowledged struggle to compete with the Yonkers racino and Pennsylvania casinos, the area could see two racinos operating at the same time, thanks to this new agreement between Empire Resorts and Concord Associates.
How could that actually be financially feasible? We asked Charles Degliomini, Empire’s vice president of communications and government relations.
“When Mohegan Sun was added to Foxwoods, everyone worried it would cut Foxwoods’ market,” he said yesterday. “The opposite was true. The market doubled in size. Even in Las Vegas, each time that they added a newer and more wonderful casino, the skeptics cried out that it would destroy the others’ businesses. That was not the case. Las Vegas kept growing in tremendous proportions (until the financial meltdown that was not of its own doing).”
But now that the country is in the grips of that meltdown, how can two racinos be viable?
“As we move forward, we are looking at all this through the prism of the future, not the market condition at this very point in time,” Degliomini explained. “... The two properties can be synergistic and create JOBS, JOBS, and JOBS. The exact sizing of what Monticello will be (in relation to Concord) has yet to be determined. The same goes for targeting demographics and marketing, as Concord will be a higher level product that may appeal to a more affluent customer base better restaurants, hotel, retail, bars, nightclubs, etc.”
He added that the prospect of electronic table games and perhaps even legalized non-Indian gaming could give great significance to the current raceway operations.
“Monticello Gaming and Raceway will be appropriate to whatever improved market conditions exist at the time,” he concluded. “However, one thing is clear: having two synergistic properties can only enhance the beneficial impact on the local economy and drive visitations to Sullivan County.
“Importantly, we will be helping the Village of Monticello retain important racing and gaming jobs and a critical tax base. No one wants to see the Monticello site left empty.”