Two casino proposals head in vastly different directions

Joseph Procacci presented the Casino Revolution plan for South Philadelphia.
Joseph Procacci presented the Casino Revolution plan for South Philadelphia. (DAVID MAIALETTI / Staff Photographer)
Posted: January 31, 2014

The casino projects with the least amount of land and the most presented vastly different plans to the Pennsylvania gaming board during the second day of hearings Wednesday for Philadelphia's second casino license.

In each case, the size of the sites defined the shape and focus of the projects.

Market8 would be a tall, compact project on two acres in Center City that catered as much to patrons arriving by foot or public transit as car.

Casino Revolution would sprawl over 24 acres in the warehouse district of South Philadelphia and be driver-friendly.

While both projects present divergent approaches to gaming, commissioners continued to drill down on a fundamental question: Can the region support another casino - big or small, horizontal or vertical - without doing too much harm to the bottom lines of existing casinos?

The seven-member state board is in the final phase of deciding which project, if any, should get the second license reserved for Philadelphia under the state's gaming law. The process began a year ago with hearings.

Five groups are competing for the license. Two other projects are proposed for South Philadelphia - Live! Hotel & Casino, and Hollywood Casino Philadelphia - and another for Center City, the Provence on North Broad Street.

An industry analyst hired by Casino Revolution, Eugene Christiansen, argued Wednesday that Philadelphia has "substantial unsatisfied demand."

The decline in gaming revenue last year, Christiansen testified, "only means that the Pennsylvania's market is finally maturing."

"The solution is not to circle the wagons," he told the board. "The solution is more capital investment."

Commercial corridor

Developer Ken Goldenberg, a lead partner in Market8, told commissioners that the design of his project "was perfectly suited for a dense commercial corridor" in Center City.

The project, proposed for what is now a parking lot at Eighth and Market Streets, would be a "vertical" entertainment complex, Goldenberg testified. (A minority investor in the land is a trust for the grandchildren of Lewis Katz, one of the owners of the company that publishes The Inquirer.)

Restaurants would be located at street level of Market8, with gaming space on the second and third floors. The fourth floor would have a 1,400-seat theater, managed by AEG Live, which operates the Mann Music Center, the Trocadero, and the Keswick theater.

The hotel, which would be developed, financed, and owned by Hersha Hospitality Trust, would be part of the Marriott Autograph Collection.

A financial consultant for Market8, Peter Tyson, calculated that the casino would generate $518 million a year in gaming revenue, compared with his estimate of $458 million for the Provence and $393 million for a location near the South Philadelphia stadiums.

'Healthy skepticism'

In questioning, Greg Fajt, a gaming commissioner since 2009, said he had "healthy skepticism" about that forecast.

He noted that the average daily win for slot machines in the state is $265. Market8, meanwhile, predicts it will generate $382 per day per slot machine.

Tyson acknowledged that the number was high, but argued that because of its location - a few blocks from the Liberty Bell and the Convention Center - Market8 could do better than other applicants at drawing tourists, convention visitors, and downtown residents. He also said Mohegan Sun, the Connecticut-based gaming operator that would run the casino, has "rightsized the project." It would have 2,400 slot machines vs. 3,300 for the Provence.

Bobby Soper, a top executive for Mohegan Sun, said 17,000 people a day walk past the site at Eighth and Market.

"That's very powerful," Soper testified. "As an operator, we know what drives business and that excites us."

The project could be done in two years, backers said. It would be financed with $125 million in equity from its partners - including a $20 million commitment from Mohegan Sun - and $375 million in debt from Deutsche Bank.

In contrast to Market8's backers, produce wholesaler Joseph Procacci, who launched the Casino Revolution project, would use 24 acres that he owns in the warehouse district in South Philadelphia to build a sprawling one-story casino.

The partners in that venture - called PHL Local Gaming - also envision a family entertainment park on more than 30 adjoining acres, with an indoor pool, golf driving range, outdoor music venue, zip line and restaurants.

Highway access

The site, at Front Street and Packer Avenue, is located near where the Schuylkill Expressway meets I-95. Backers of the project tout that as its chief selling point.

"I stood on Joe's property staring at the two interstate highways and gasped at the number of cars driving by," Joe Canfora, president of PHL Local Gaming, testified.

The partners are putting up $130 million in equity and would borrow the rest of the money for the $428 million project from Jefferies & Co. and Wells Fargo Securities. The casino would open with 2,400 slot machines, but has room to expand in phases to 5,000.

In an obvious dig at Market8's smaller acreage, John F. O'Riordan, a Casino Revolution executive, testified, "Some have no choice but to go up."


WHAT'S NEXT

The Philadelphia and Baltimore companies behind the Live! Hotel & Casino project proposed for South Philadelphia will present their plans Thursday. Jennifer Lin and Harold Brubaker will have updated coverage on Inquirer.com with blog posts and tweets. The Pennsylvania gaming board does not have a deadline for making a decision on the second casino license.


jlin@phillynews.com

215-854-5659 @j_linq

www.inquirer.com/double

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