Penn National Gaming Inc. announced it will withdraw as operator of a proposed 5 million casino in Lawrence County, Pennsylvania, a troubled project backed by Philadelphia-area investors that represents the last Category 1 racino license in the state.
Penn cited a soft economy and market saturation as its reasons for withdrawing from the western Pennsylvania project, which has gone through several owners since its original plan as what was to be called Valley View Downs. The project’s original owners ran into financing difficulties even before the national recession took hold, and a succession of deals has delayed groundbreaking on the racino.
Penn is pulling out of the project amid unprecedented flat results in the state, the latest results being Isle of Capri’s efforts to sell its management interest in the Lady Luck at Nemacolin Woodlands casino and Presque Isle Downs seeking to reduce the number of slots and tables in the wake of new competition from nearby Cleveland. The new casino would compete with Lady Luck, two Pittsburgh-area casinos and 11 casino properties in Ohio.
“We are disappointed to be withdrawing from this project,” B.J. Fair, chief development officer for Penn National Gaming, said in a statement. “However, given the continued softness in the economy and the level of market saturation—not just in western Pennsylvania, but across the commonwealth—we are regrettably unable to justify this investment at the statutorily required spending levels.”
Penn National filed a complaint in the Berks County Court of Common Pleas seeking declaratory judgment that it has the right to withdraw from the Lawrence County project.
The Philadelphia investors are insurance executive Manuel Stamatakis, builder Peter DePaul, lawyer Thomas Leonard, Flyers owner Ed Snider and the Melissa Silver Trust, a charitable family trust controlled by the late Lewis Katz’s daughter. Each owns about 18 percent of Endeka Entertainment LP, the company established to apply for the casino.
“We sincerely appreciate the strong support for this proposal by the people of Lawrence County,” said Fair, “and while we will not be going forward with the project, we have offered to assist with the transition to another potential operator.”
In an interview with the Philadelphia Inquirer, Endeka attorney William Pietragallo speculated that Penn is pulling out to protect its investment in Hollywood Mahoning Valley racino in nearby Youngstown, Ohio. “We are troubled by the motivation behind this 11th-hour decision,” he said, adding in a separate interview with the Pittsburgh Tribune Review, “Endeka Entertainment has been working with Penn National Gaming in good faith for more than two years on what Penn National Gaming has stated publicly was a viable business opportunity.”
Endeka has threatened a lawsuit, but Penn has already filed suit in Berks County Court of Common Pleas to reaffirm the legality of its option to withdraw from the management agreement.
“We are disappointed that our continued open dialogue with the partners in Endeka about the deteriorating market conditions in Lawrence County, and our multiple offers to cooperate fully in transitioning the project to a new operator, have been met only with threats of legal action,” Fair told the Cincinnati Enquirer. “We’re asking the court to reaffirm our rights regarding withdrawal.”
