Suffolk OTB in deal with Delaware North for electronic slots

OTB and Delaware North are working to finalize

OTB and Delaware North are working to finalize site selection and undertake construction for what OTB officials concede now is an unlikely September casino opening. This slot machine was getting a workout on July 27, 2012, at Resort World Casino in Jamaica, Queens. Photo Credit: Nancy Borowick

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Suffolk Off-Track Betting Corp. has finalized a deal with a Buffalo-based gaming company to run a planned casino with 1,000 electronic slot machines, with the company providing up to $65 million in upfront financing and guaranteeing at least $58 million in revenue over the next decade.

Delaware North and OTB, which is in bankruptcy and owes about $16 million, signed the agreement late last week. The deal cannot take effect until OTB officials get the approval of federal bankruptcy court. OTB officials are scheduled to appear there April 9.

"It's a major step forward," said Phil Nolan, Suffolk OTB president. "It solidifies the relationship between Delaware North and ourselves and puts us on a pathway to building and operating a successful facility."

Nolan said both sides hope to finalize the casino location within a month.

A Delaware North spokesman declined to comment until the court acts.

Under the agreement, the up to $65 million in financing will pay for the purchase of a site and the building of a casino. The 80,000-square-foot complex also would have restaurants, bars, a horse-betting area and parking for 1,500 cars.

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OTB also will get a $2 million "exclusive rights" payment in $500,000 installments beginning when the deal is signed.

OTB will be required to pay back the upfront financing at an interest rate of 4.75 percent the first year and 0.75 percent more each succeeding year with a ceiling of 7 percent.

OTB officials say they hope to refinance that loan at a lower rate about six months after the new casino opens and begins generating revenue.Delaware North's proposed 10-year contract calls for Suffolk OTB to receive a guaranteed minimum of $4 million during the first 12 months of operation and $6 million each year after.

Past forecasts estimate a casino could generate $1.5 billion in wagers and a total of $120 million in new revenue for schools, the horse racing industry and the county. The 2014 Suffolk budget assumes revenue of $4 million and a fall opening.

Delaware North Companies Gaming and Entertainment Inc. in November beat out seven other companies for the right to develop and manage Suffolk OTB's casino.

The gaming arm is part of a $2.6 billion family-owned company that has 55,000 employees and runs gaming operations at casinos upstate and nationwide. The company also runs hotels and food services in national parks and at major sports venues, including MetLife Stadium in New Jersey.

As developer and manager of the casino, Delaware will assist OTB with locating the casino, determining the size, layout and design of gaming, food and parking, do marketing studies and supervise construction once underway. It will also develop an operations plan and budget and recruit and train staff. Once the casino opens, Delaware North will receive 1.75 percent of net gaming revenues from slot machines and 5 percent of earnings before interest, taxes, depreciation, amortization and mortgages, but after expenses.

Nassau OTB is negotiating on three or four locations for its 1,000 video slots, said president Joseph Cairo.

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He said he expects to determine a location within 30 to 60 days.

Cairo said the agency is planning to issue a request for proposals for a potential operator in about the next month.

The deal comes together as the Republican State Senate version of the budget has proposed another 1,000 slots machines each for Nassaau and Suffolk, on top of the 1,000 already approved for each county last year. Neither Gov. Andrew M. Cuomo's version of the proposed budget nor the Assembly include the additional slot machines.

Cairo said it may be possible to get state approval for additional machines in both counties. "I'd say it's better than a 50-50," Cairo said of the possibility of getting more machines.

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