Detroit businesswoman eyes Indian casino in Barstow

Jul 8, 2003 7:33 AM

Marian Ilitch, whose family fortune in Little Caesars pizza chain has provided the wherewithal for her husband’s ownership of the Detroit Red Wings and the Detroit Tigers, seems to have found a new calling in the gaming industry.

The Detroit businesswoman was helpful to Mandalay Resort Group (MBG) in the development of the MotorCity Casino, a property in which she retains a 25% share. She also has been identified with efforts to bring casino gambling to Hawaii and in helping an Upper Peninsula, Mich., Indian tribe to develop a casino operation in Port Huron.

But her most active recent moves have been in California where in the past four years more than 50 Indian tribes have opened casinos, some of which are expected to rival their Eastern counterparts in their levels of success.

Mrs. Ilitch’s focus has been on Barstow, Calf., considered by I-15 travelers as an oasis on their journey to and from southern California. What started as a refueling point soon grew, especially with the establishment of a major high-end discount mall, into a major retailing location. And that’s what attracted Mrs. Ilitch.

She has formed BarWest Gaming LLC and attracted Detroit real estate developer and former MotorCity investor Michael Malik as an investor in the California project.

Mrs. Ilitch has formed an arrangement with the Los Coyotes Band of Cahuilla and Cupeno Indians whereby her group would provide the development funds to the Indians and would receive in return a long-term operating contract.

Also, BarWest has been granted a nine-month development agreement with the Barstow City Council to put the project together.

Since the tribe doesn’t own land to be used for such a project, it must petition the federal government for permission to take some land in trust. In addition, the tribe must negotiate a casino compact with Gov. Gray Davis, who has been meeting with tribal casino operators looking to re-write the compacts granted some four years ago.

Having the backing of the community should ease Mrs. Ilitch’s plans. This contrasts completely with the plans of Station Casinos Inc. (STN) whose executives have an agreement with the Federated Indians of Graton Rancheria to build a casino on some 200 acres of a hay field owned by the tribe in the wine country of Sonoma County.

The plans don’t sit well with the vineyard operators who have rejected a pledge of $164 million gaming revenues to help local governments deal with any problems the casino might generate.

The tribe’s leaders insist the land on which the grapes are grown originally belonged to their members and that tribal members have struggled with low-income jobs while grape growers have prospered.

Joining the fight last week was Sen. Dianne Feinstein and other politically savvy people who are working to give local officials a voice in the matter should the federal government get involved.

Sale supported

The intention of Alliance Gaming Inc. (ALLY) to sell off some non-core assets has received the blessing of at least one Wall Street analyst. Bill Schmitt, chief gaming analyst for CIBC World Markets, supported the moves in an equity research paper.

"We like the price," said Schmitt in reviewing Alliance Gaming’s sale of slot route operations in Nevada and Louisiana and its German wall machine division, Bally Wulff.

For its Nevada slot route, the company expects to receive total compensation of $127 million, including cash and stock, and expects to close the sale to privately-held Century Gaming Inc. in early calendar 2004.

In Louisiana, Alliance Gaming is selling Video Services Inc., a company in which it holds a 49% interest. No price was given for the transaction. Which is not expected to close until June, 2004.

As for Bally Wulff, the gaming machine manufacturer is being sold to a private equity investment group for $16.5 million.

Sports bets next?

Not only are the Delaware state officials worried about racetrack slots competition from their neighbors in Pennsylvania and Maryland but they are also unhappy that for the first time since 1995 they experienced a decline in slot revenue at their three sanctioned racetracks.

For the period ending on June 30, the state found itself down about $12.5 million from last year, representing a drop of 6.5%. And that was without competition.

The revenue decline motivated Delaware Finance Secretary David Singleton to schedule meetings with representatives of Dover Downs (DVD), Delaware Park and Harrington Raceway to discuss means to increase attendance at the tracks and their casinos.

Track and casino operators blame the state’s ban on smoking within their facilities as providing a direct negative impact on their businesses. An attempt to allow smoking in designated areas of the casinos was defeated in the most recent session of the legislature. Also causing problems, they said, was the sluggish economy.

Among the gimmicks being eyed by legislators as a means of improving gaming revenues is to permit the tracks to start taking sports bets. Delaware was one of five states given the opportunity to take bets on sports when Congress banned the activity in the early 90’s. So far, the state has left the door open for sports betting but has not passed legislation that would put Delaware in a position of being the only state on the East Coast with sports betting.

Gaming protocol

The Gaming Standards Association (GSA) has released its latest version of the gaming communications protocol that allows for communication between gaming machines and slot accounting and monitoring systems.

The new version, said the GSA, an international trade organization dedicated to ensuring open standards and communication in the gaming industry, offers enhancements to address new industry and regulatory requirements relating to the recently adopted Nevada regulations.

International Game Technology (IGT) provided the original SAS protocol to the organization in 2001 in support of the industry’s goal of providing open standards for the facilitation of interoperability between gaming machines and gaming systems.

Fortune recognition

MGM MIRAGE Inc. (MGG) has been selected by Fortune magazine as one of America’s 50 best companies for minorities. The company was listed at No. 31 on the list.

Fortune noted that MGM MIRAGE ranked ninth on the list for minorities within its total workforce and eleventh for minority new hires. Minorities make up 51.7% of the company’s total workforce and 28% in management.

The recognition compliments a program begun by MGM MIRAGE Chairman and CEO Terry Lanni three years ago.

"While we are honored by this recognition," said Lanni, "we are not satisfied that the job is done. Diversity has been a long journey we have taken, though we formally established programs in May 2000 and we were the first within our respective industry to do so."

Churchill record

Prior to the 2003 spring race meet, Churchill Downs Inc. (CHDN) completed a $121 million renovation of the 129-year-old racetrack. Principal expense involved the construction of dozens of luxury suites.

When the meeting ended on Sunday, the track announced that a rebound in on-track support, as well as other improvements, resulted in a wagering record of nearly $650 million for the 52-day meeting. This was an increase of 17% from the previous record set last year.

Adding to the meet record was record betting on this year’s Kentucky Derby and its surrounding card that attracted more than $140 million through the betting machines.

Now that the meeting has been completed, officials have begun on the second phase of improvements, expected to cost in the order of $95 million. The renovations will include more luxury suites, an expanded Turf Club and a new Skye Terrace that includes what has been termed as Millionaire’s Row where the wealthy and famous will mingle on Derby Day.

Cashing in

With the spring rise in equity prices for the major gaming companies, executives, considered insiders by the Securities and Exchange Commission, have been active in selling shares in their companies.

On June 23, the two top executives at Mandalay Resort Group (MBG) indicated that they plan to sell 2.5 million shares each. They are Mike Ensign, company chairman, and Bill Richardson, vice chairman. Also from that company, Arthur Bliger, a director, registered to sell 35,000 shares.

From Harrah’s Entertainment Inc. (HET), four executives were active in selling their shares. Chairman Phil Satre sold 45,000 shares to generate proceeds of $2 million; Tim Wilmott, sold 83,843 for $3 million; Joe Henson sold 105,000 for $4 million and another lot of 3,100 shares for $134,000, and Marilynn Winn sold 27,378 shares for $1 million in proceeds.

No kids allowed

Some parents were upset with the Borgata Hotel, Casino and Spa in Atlantic City over the weekend when they were barred from entering the new $1.1 billion mega resort with their children.

No children allowed in unless the parents can produce a room key, said security officials, much to the dismay of visiting families.

Apparently the regulation was not imposed until Saturday, although the property had opened two days earlier. An official explained that the no-children policy was scheduled for opening day but because of "all the hoopla" it really wasn’t imposed until Saturday.

Although some families left in a huff, other casino patrons praised the move, noting that they had seen many children in some of the Boardwalk casinos and they preferred not having them around in the gambling atmosphere.

On the move

Not only does the Mashantucket Pequot Tribal Nation run what many believe is the most successful casino ”” Foxwoods Resort ”” in the world, but now the leaders are looking to nearby Pennsylvania as a way of branching out.

This time the tribe would like to run a slots operation at a new racetrack. Last week, Resort President and CEO Bill Sherlock announced that the tribe was partnering with the Northampton County Industrial Development Authority to bid for one of two thoroughbred racing licenses still available in Pennsylvania.

"We’d like to be in the gaming picture in different parts of the country," said Sherlock, adding that his partners "know the track side and we certainly know how to run slot machines. We think it’s a great marriage."

But Sherlock admitted that the bid for the license wouldn’t make economic sense unless the Pennsylvania lawmakers approve having slot machines at its racetracks. The bill authorizing track slots has passed the state Senate and will be heard in the House this week.

The Insider

Business has been booming for England’s two biggest bookmaking operations, according to insiders, who recently announced that shares of William Hill PLC and Hilton Group PLC (owners of Ladbroke) have risen dramatically since the beginning of the year.

Now that Harrah’s Entertainment Inc. (HET) has taken sole ownership of Bally’s Casino riverboat in New Orleans, the company has asked the owner of its dockside berth for a cut in its rent. The riverboat had losses of between 2000 and 2002 of $11.5 million.

Morgan Stanley gaming analysts have assigned "overweight" or "buy" ratings on Argosy Gaming Inc. (AGY), Aztar Corp. (AZR), and Boyd Gaming Corp. (BYD).

Station Casinos Inc. (STN) will release its second quarter earnings in a conference call at 8 a.m. (PT) on Wednesday, July 23.

IGames Entertainment Inc. (IGMS), a developer of gaming devices, has relocated its corporate headquarters to a facility in Las Vegas.