Like most things connected with the bidding process for the slots license at New York City’s Aqueduct Racetrack, the winning bid was surprising and controversial.
Aqueduct Entertainment Group, a consortium of seven companies that includes the Navegante Group of Las Vegas, led by former MGM Grand executive Larry Woolf, was the winner, but only after New York Governor David Paterson raised the stakes once again, boosting the up-front “buy in” for the license from $200 million to $300 million. That demand forced AEG to match the high offer from Penn National Gaming. Other stipulations inserted at the last minute include a vetting and licensing of all partners.
“After an extensive review of the five remaining bids to operate the video lottery terminals at Aqueduct racetrack, I have chosen and the (legislative) leaders have agreed upon the organization that best fulfills our selection criteria,” Paterson said in a statement. “AEG has both the financial viability and ability to pay the required up-front licensing fee.”
The AEG choice is purportedly the end of a nearly 10-year process that resulted in two different choices and two disappointments. MGM Mirage was originally chosen as the operator in 2001 but backed out after the company saw effective tax rates in New York rise to more than 75 percent. While the tax rate has been somewhat mitigated over the years, it remains one of the highest in the gaming industry. A second choice in 2007 of Delaware North collapsed when the economy slumped and Delaware North was not able to line up financing for the $370 million deal.
The latest round resulted in six bidders, including such gaming powerhouses as MGM Mirage, Harrah’s Entertainment, Penn National Gaming and Hard Rock International. Wynn Resorts initially bid but dropped out when the $200 million fee was demanded.
In addition to Navegante, the AEG partners include: GreenStar Services Corporation, a New York-based construction contractor; Turner Construction Company, another New York company founded in 1902; Levine Builders, a Queens-based company that provides general contracting and construction management services; the Darman Group, a minority company from New York City that provides consulting and real estate services led by Queens powerbroker Rev. Floyd H. Flake; Long Island-based Paulus, Sokolowski and Sartor, an architectural firm that will design the project; Siemens AG, an international electronics and engineering firm based in New York City; and Clairvest Group Inc., a Canadian-based merchant bank.
But it still may not be over. Penn National Gaming is apparently steamed that its higher guarantee was simply transfered to AEG without allowing Penn the option to take the deal.
“We were extremely shocked and dismayed by the governor’s announcement, given we offered over $100 million more to the state than AEG in our bid,” Penn National Gaming said in a statement. “In addition, our proposal complies with the conditions outlined by the (Assembly) Speaker for the winning bidder.
“We remain committed to this project, and will await further details about the selection process before commenting further.”