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Mashantuckets put $34M into failed Philly project

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Friday, 14 January 2011

Mashantuckets put $34M into failed Philly project By Brian Hallenbeck Publication: The Day Published 01/14/2011 Investors ask Pennsylvania gaming board to reconsider license revocation The Mashantucket Pequot Tribe invested more than $34 million in the failed Philadelphia casino project that was to bear the Foxwoods name, a newly released document shows. According to a petition filed last Friday and made available in redacted form this week by the Pennsylvania Gaming Control Board, the tribe's Foxwoods Development Co. has agreed to relinquish its right to manage the project - if, indeed, it is revived - and will reduce its financial interest in exchange for $6 million in charitable contributions to the Mashantucket Pequot Museum & Research Center. In the petition, Philadelphia Entertainment and Development Partners, or PEDP, an investors group that includes Foxwoods Development, has asked the gaming board to reconsider its Dec. 16 vote to revoke the gaming license it issued in 2006 for Foxwoods Casino Philadelphia. The board has 30 days to respond to the request and could agree to it, deny it or ignore it, Richard McGarvey, a board spokesman, said Thursday. PEDP could also decide to appeal the board's action in court, he said. PEDP says it has addressed the concerns the board cited in revoking the license, namely questions about the financing being provided by Caesars Entertainment (formerly Harrah's) and changes in the project's design and construction timetable and in some investors' commitment to sharing the proposed casino's gaming revenues with local charities and nonprofit groups. Some gaming board members had specifically questioned PEDP's plan to make contributions to the Mashantucket museum. "PEDP acknowledges that contributions to the Museum were not contemplated … in 2006," the petition says. "However, such an undertaking was negotiated in good faith as part of the Harrah's Transaction." The investment group agreed to make contributions to the museum in exchange for Foxwoods Development's agreeing to reduce its stake in the project from 30 percent to 1.25 percent, according to PEDP's petition. The document says Foxwoods Development "and its affiliates" have invested more than $34 million in the project. The figure includes Foxwoods Development's share of a $50 million licensing fee, Gary Armentrout, president of Foxwoods Development, said in an e-mail message. Whether the licensing fee is refundable is expected to be a point of contention between the board and PEDP if the license revocation stands. PEDP, which refers to the museum as "a legitimate and important charitable institution," contends in the petition that its commitment to the museum does not constitute a "material diversion" of contributions away from the charities originally proposed as beneficiaries. Under the Harrah's transaction, PEDP would distribute $5 million in charitable contributions "at or about the time of the opening of the proposed casino." Half of the sum, or $2.5 million, would go to the museum and half would go to other charities. In addition, the museum would receive $500,000 in annual charitable distributions in each of the first seven years of the casino's operation. Total distributions to the museum would be capped at $6 million, according to the agreement. The Philadelphia casino project's history has been rocky from the start. Plagued by local opposition and years of regulatory delays, the investors sought last year to find a new partner to replace the financially troubled tribe. In 2009, the gaming board granted a two-year extension of the investors' original license and imposed a series of new deadlines. It also assessed a $2,000-a-day fine from Dec. 1, 2009, for PEDP's failure to meet the deadlines. As of Dec. 16, 2010, the date of the license revocation, the fines totaled $762,000, according to McGarvey, the board spokesman. In November, PEDP submitted drawings that depicted a $275 million Horseshoe casino, one of the brands owned by Caesars Entertainment. http://www.theday.com/article/20110114/BIZ02/301149886/1018

 

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