Navegante lands N.Y. slot concession at Aqueduct

Feb 2, 2010 5:04 PM

Gaming Insider by Phil Hevener |

This Woolf has no sheep’s clothing!

So how did the little Las Vegas-based Navegante Group muscle its way through a group of giants that includes the biggest gaming companies in the business to win the right to operate 4,500 VLTs at New York City’s Aqueduct racetrack?

It’s a question Navegante CEO Larry Woolf fields with a moment of thoughtful silence before offering a good-natured chuckle and saying, "That’s a trade secret."

 

But he does not quarrel with the notion that it is helpful, being in the right place at the right time to benefit from knowing all the right people. Also, it is not as though Navegante lacks experience at this business of putting together a good offer when the pressure is on in a big way.

The company had previously outbid about 27 competitors for the license at the Casino Niagara on the New York-Canadian border.

The outcome of the surprisingly long bidding process probably speaks volumes about the importance of well-connected local partners. The half-dozen or so principals in what is known as Aqueduct Entertainment Group includes names with years of experience at navigating the currents shaping business and governmental realities in the New York City area.

The list includes Levine Builders and Turner Construction which have been building in the New York area for years. Turner pioneered the use of reinforced concrete design concepts and demonstrated them with the building of the station stairs for the New York subway system in 1904.

Queens-based Levine and its affiliates have built or renovated thousands of residential units and millions of square feet of commercial space, including the largest development built in Harlem in the last 20 years.

This core of principals was reportedly pointed toward Navegante by mutual acquaintances in the banking industry.

The considerable interest in the Aqueduct bidding came from the fact that Aqueduct with its roughly 200 acres of real estate in the borough of Queens is a subway ride away from millions of potential gamblers.

The announcement of the winning bidder had been expected late last summer but whatever was going on with the negotiation process produced a considerable delay that ended last Friday with the announcement by Gov. David Paterson.

Besides the Casino Niagara, Navegante operates Nevada casinos that include the Sahara in Las Vegas and properties in Elko and Reno.

Companies that bid unsuccessfully included the Florida-based Hard Rock casinos owned by the Seminoles, Penn National, Harrah’s and MGM MIRAGE. Steve Wynn dropped out of the bidding late last year despite the early prediction of insiders familiar with the politics of New York racing that Wynn would emerge as the winner.

Woolf who formerly headed the Las Vegas MGM resort, said the goal of the AEG bid was to create the feel of a New York City neighborhood with hotdog vendors and Corona Italian ice.

The 60-70 percent tax rate in New York would seem to limit early development but Aqueduct’s appeal has a lot to do with possible changes down the road, a situation similar to the scenarios taking shape in Pennsylvania and Delaware where tracks with only slots are evolving into full casinos with the addition of table games and efforts to acquire sports betting.

How did AEG beat out much larger companies operating and marketing many of the world’s best- known casino resorts?

There was not a lot of clarity in Paterson’s explanation that referred to the AEG offer as a "comprehensive bid" that benefits from "community support" while offering "strong marketing appeal …"

Whatever that means.

Penn National, which had submitted a bid with the promise of $300 million in upfront money, used words like "shocked" and "dismayed" to describe the Paterson decision.

A senior gaming industry official cited a reality that runs through many different business sectors: "Sometimes it is who you know, not what you know."

Woolf concedes, without giving away any details, "It was a real slugfest for awhile," as the agents of the various bidders waded into the brawl.

Neither MGM nor Harrah’s were given serious attention because of the different question marks hanging over each. MGM is dealing with the uncertainty created by the unresolved argument in neighboring New Jersey over whether the company should be doing business in Macau with Pansy Ho.

The giant-sized financial issues pressuring Harrah’s may have been sufficient to have New York analysts wondering where Aqueduct would be on the company’s priority list.

As for Penn’s "shock" and "dismay," well, sometimes it helps to be in the company of the right people.

If the Aqueduct casino becomes a reality it will be the ninth New York track with slots or VLTs.

Woolf guesses that it may take about 60 days to finalize agreements with the state before work starts on a first phase of about 2,500 games that could be available in about 10 months.

Question? Comment? E-mail me at: Phil Hevener