Who Will Win Philly's Gaming License?
by robert strauss
Joe Procacci was minding his own business—literally—when businessmen came to him last year to ask whether he would lease or sell his land near Front Street and Pattison Avenue for a new casino. Procacci Brothers Sales Corp. has made Procacci, 85, a wealthy man—the food wholesaler, for instance, sells or warehouses around 20 percent of the country’s fresh tomatoes.
“But then another guy came by asking about it, and then another,” says Procacci. “All of a sudden, I am thinking, ‘Hey, if so many people want to put a casino here, maybe I should think about doing it.’” So instead of letting someone else use his property, which was too substantial for his food wholesaling business, Procacci sought and found a casino management company, Merit Management Group, out of Chicago, and put in a bid—one of six—for the second Philadelphia casino license, which the Pennsylvania Gaming Control Board aims to have decided upon by the end of the year.
The license is open because Foxwoods Development Company, the Native American casino developers, fumbled around too long on several proposed sites and partners, and eventually, in 2010, the Gaming Control Board revoked the license.
After ruminating whether there should actually be a second Philadelphia license—SugarHouse, along the Delaware River, has the other one—the Gaming Control Board let it out for bid. The winning bidder for the second Philadelphia license will have to pay just under $75 million for the right to operate up to 5,000 slot machines and 250 table games.
One of Foxwoods’s potential partners—Steve Wynn, the University of Pennsylvania English grad who ditched literature for gaming, who was not available for comment—has a bid in for the license, along with Procacci. Also in the mix are two longtime Philadelphia developers, the Goldenberg Group and Bart Blatstein, as well as Penn National. And two already successful groups, The Cordish Companies and Greenwood Gaming and Entertainment, have teamed up to make a bid.
“I think it is a good business to be in,” says Jeffrey Lolli, an assistant professor in the School of Hospitality Management at Widener University, in Chester. “What gambling in Pennsylvania has done to the market in New Jersey is beyond what anyone thought. Now to have a new license in Philadelphia—to capitalize on what everyone has already done and found out—I think it is no surprise that six groups are bidding on it.”
Not that having a casino in the city is without headaches. North Philadelphia churches are already dead set against Blatstein’s proposal to gussy up the former Philadelphia Inquirer and Daily News building on North Broad Street into a glitzy hotel, casino, and retail complex. South Philadelphia neighborhood opposition, in part, brought down the former Foxwoods plan to build along the Delaware there; then Chinatown folks put on the pressure when the plan moved to The Gallery at Market East on Ninth and Market Streets.
Then there is the somewhat onerous payback to the state. Pennsylvania licensees, for instance, have to pay 16 percent of revenues back to the state and municipality on table games for their first two years (then 14 percent after) and 55 percent of revenues from slot machines. In Atlantic City, the casinos pay roughly eight percent on gaming revenue.
“It is not as though I am unaware of the taxes, but I just think it is the right time to be in the business, especially in Philadelphia,” says Blatstein, who believes he has what could be the spiffiest site, a historic building that could be a gem. He is already developing the former State Office Building just north of the site into 204 apartments. “Yes, the Inquirer building has not been maintained all that well lately, but the tower is still iconic. Plus, it is in the most rapidly developing part of the city—there are new restaurants, more all the way up to Temple and right at the doorstep of the new Pennsylvania Convention Center addition.”
The Wynn proposal is on a 60-acre site along the Delaware in Fishtown, which would be another boon to that redeveloping area. The Goldenberg proposal is on what has long been a white elephant—the parking lot where the old Gimbel Brothers department store once stood at Eighth and Market Streets. There have been countless proposals over the years, from a Disney park to the Foxwoods casino, but it will no doubt remain a parking lot unless Goldenberg, which would not comment for this story, gets the license. The group co-owns the land with the Pennsylvania Real Estate Investment Trust and plans to call the complex Market8. Connecticut-based casino powerhouse Mohegan Sun recently signed on to partner in the project.
The other three proposals, including Procacci’s, are near the stadium-arena complex in South Philadelphia, which the city, while not quite tipping its hand, might favor. First of all, there are fewer residents in the area, and most of them have experience dealing with crowds from the sports complex and food distribution businesses anyway, so they would be less predisposed to complain about the casino project on or near the spots already developed. Second, there would be no need to build significant infrastructure—the I-76 and I-95 ramps are already there, as well as the Broad Street subway and plenty of room for parking.
“It seems obvious why half of the applicants want to be there—lots of room and easy access,” says the city’s deputy mayor for planning and economic development, Alan Greenberger. “It was important to keep the second license in Philadelphia. At a minimum, it will mean 800 to 900 permanent jobs, not to mention extra tax revenue,” he says. “Will it cannibalize what is already around—meaning the existing SugarHouse, Parx, or Harrah’s Philadelphia? Hard to say, but there is a chance that it will be a dynamic new facility that will enhance everyone.”
Bob Green, the chairman of Greenwood Gaming and Entertainment, which already runs Parx in Bensalem and is expanding there, was happy to get involved with Cordish; the company developed Xfinity Live! at the stadium complex and runs the Maryland Live! Casino near the Chesapeake Bay in northern Maryland. The group, whose casino name is Live! Hotel & Casino, plans to build a half-billion-dollar complex on the current site of the Holiday Inn Philadelphia Stadium Hotel at Tenth Street and Packer Avenue, next door to Citizens Bank Park.
‘‘Keep in mind that there are eight million [tickets sold] for events at the stadium area. That is a huge potential market for us, and a significant amount of that business is people from other states,” says Green. “We believe that by being there, we will be creating new revenue instead of divvying up what is already around. A casino there would create a different dynamic and not really affect the other casinos around that much.”
The Penn National proposal—to be built on a parcel of land at 700 Packer Avenue—is unique, according to Penn National Director of Public Affairs Karen Bailey, because of a partnership with the nonprofit Philadelphia Casino Benefit Corporation and plans to return a greater share of the revenues to the City of Philadelphia. Headed by President Tim Wilmott, Penn National—according to state law—could only have a one-third interest in a second casino if it already had a full license elsewhere, as it does in Grantville, so it came up with this other idea.
“We have already formed the Philadelphia Casino Benefit Company, which will, we believe, get as much as $15 million in profits by year five,” says Bailey. “But our big selling point is that we run 29 facilities already, all in local markets. We are not out of Las Vegas or Atlantic City, so we know what to look for in local markets.”
Bailey says that in both Bangor, Maine, and Columbus, Ohio, Penn National opened casinos in dicey parts of town—and made them into destinations. “The west side of Columbus was called the ‘loneliest neighborhood in America,’ because of its vacancy rate,” says Bailey. Penn National cleaned up a brownfield site that formerly housed an old Delphi auto parts factory, “and now there are restaurants, 1,000 employees, people there all the time,” she says.
Greenberger says the city does not officially have a favorite among the applicants and is doing its best, along with the Gaming Control Board, to vet whatever problems might arise with any of them. To be sure, says Greenberger, the city does not want any repeats of the Foxwoods multiyear fiasco, and it is also going into the process carefully.
“This is something that can surely be a good thing for economic development in the city—jobs, visitors, all kinds of pluses,” he says. “If six bidders are willing to come up with $74 million for a casino license, that is a tremendous vote of confidence for Philadelphia, and the city’s potential.”
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