Market saturation, city desires cited as reasons
Penn National Gaming has withdrawn its bid for the second license in the city of Philadelphia, where it had proposed a $480 million Hollywood-branded facility in partnership with the city.
The company cited the desire of city officials for a casino project in the Center City district of Philadelphia, and overall saturation of the Northeast gaming market, as reasons for withdrawing the bid. The company’s project, located in South Philadelphia near the city’s professional sports complex, would have divided its revenue three ways with the city’s education department and pension fund.
“A contributing factor in our decision to withdraw our proposal was the city of Philadelphia’s vocal support for a Center City casino location, despite the fact that two-thirds of the profits from our proposed casino were dedicated to the city’s education and pension fund liabilities,” said Timothy J. Wilmott, president and CEO of Penn National Gaming, in a press release.
“The market potential in Philadelphia is less today then when we first applied, as a result of the ongoing gaming saturation in the mid-Atlantic region, as well as continued softness in the economy.
After the announcement, U.S. Rep. Bob Brady, whose district includes the casino site and who was one of the key figures putting the deal together between Penn and the city, complained of the lack of support for the project from Philadelphia Mayor Michael Nutter and Deputy Mayor Alan Greenberger, who has openly supported the Market 8 project in the Center City retail district.
“Why isn’t (Penn National’s project) a slam-dunk?” Brady said in an interview with the Philadelphia Daily News. “We shouldn’t be pushing as hard as we can for that? Tell me what the bad side of this was. I don’t understand it. I just don’t understand it.”
The deal for a partnership with the city owning two-thirds of the casino property was necessary because of Pennsylvania’s law that forbids any one company from owning more than a one-third interest in a second casino in the state. Penn National’s flagship property is Hollywood Casino at Penn National Race Course near Harrisburg.
The withdrawal of Penn’s application leaves four proposals for the second casino license in Philadelphia:
• Developer Bart Blatstein’s Provence, a gaming and entertainment complex covering several blocks centered by a casino in the historic Philadelphia Inquirer clock tower building in north Center City;
• Market 8, an “urban entertainment center” at the site of a current parking lot that was once home to Gimbels, in the heart of what was once the Center City department store district;
• Casino Revolution, a huge casino and 250-room hotel near the South Philadelphia stadium complex, proposed by local “Tomato King” Joseph Procacci; and,
• Live! Hotel and Casino, a hotel casino at the site of an existing Holiday Inn adjacent to the stadium complex, a joint venture of Cordish Companies and Greenwood Racing, owner of the Parx Casino at Philadelphia Park.
Penn National is the second project to drop out of the competition for Philadelphia’s second casino license—a competition that the Pennsylvania Gaming Control Board is in no hurry to bring to a conclusion. Original projections were for the board to have made its decision in April. The extended consideration is due not only to the flux in applicants, but to the board’s examination of complaints from several fronts—including current Philadelphia casino SugarHouse—that a second city casino will hurt existing casinos in a Philadelphia market that is oversaturated.
For Penn National, dropping the Philadelphia project means executives can refocus on the several other irons the operator has in its expansion fire, from Plainridge Park racino in Massachusetts, slated to open in June 2015 to the Jamul Indian casino it is building near San Diego, two new racinos in Ohio, and a proposed $750 million gaming and entertainment project in the Catskills, a joint venture with Cordish.
“While we’re disappointed to be withdrawing from Philadelphia, we’re fortunate to still have one of the deepest development pipelines in the gaming industry,” said Wilmott. “Our withdrawal from Philadelphia today will allow us to focus our resources on these higher-return projects for our shareholders.”
