NY Lottery Disqualifies 2 of 3 bidders (UPDATE: Deal finalized)
 

NY Lottery Disqualifies Two Bidders for Non-Conforming Proposals

SCHENECTADY, NY (07/06/2010) -- New York Lottery Director Gordon Medenica today announced the disqualification of two of the three proposals the Lottery received on June 29, 2010, for the development and operation of a video lottery casino at Aqueduct racetrack in New York City. The proposals did not conform with the requirements of the competition and, instead, attempted to negotiate for terms more favorable to the bidders.

The two disqualified proposals were submitted by a consortium consisting of SL Green, Hard Rock International and Clairvest Group and by Penn National Gaming. The third proposal submitted by Genting New York appears to conform with all requirements of the bid submission process and will continue to be evaluated.

The proposals were submitted in response to a Request for Proposals (RFP) the Lottery issued on May 11, 2010, which required bidders to submit with their proposals a signed Memorandum of Understanding (MOU) and other documents. Only Genting complied with those requirements.

SL Green and Penn National both failed to submit signed copies of the MOU. Instead, their proposals offered altered versions of the MOU containing numerous "material deviations." In addition, the disqualified proposals failed to satisfy other mandatory requirements of the RFP.

The Lottery found SL Green's proposal non-responsive to the RFP on a number of substantive issues, including the following:

• SL Green did not agree to provide interim funding to support New York Racing Association (NYRA) operations until the opening of the video lottery casino. NYRA, which operates thoroughbred racing and pari-mutuel wagering at Aqueduct, Belmont and Saratoga, is entitled by law to a share of the Aqueduct video lottery revenues.

• SL Green wanted the minimum $300 million licensing fee be held in escrow and released to the State only after the satisfaction of conditions defined by SL Green.

• SL Green wanted the right to terminate the MOU if all of SL Green's conditions are not satisfied by December 31, 2010.

• SL Green wanted compensation for any video lottery facility granted "more favorable tax treatment" within 50 miles of Aqueduct.

• SL Green wanted to make ownership changes without the State's consent, which violates the Lottery's video lottery regulations.

• SL Green wanted the right to sublease any portion of the Aqueduct video lottery casino to any affiliate without the State's consent, on terms defined by SL Green.

• SL Green wanted the right to award operation or management contracts to third parties without the State's approval.

• SL Green wanted the right to submit all disputes to binding arbitration, which violates the Attorney General's longstanding position that such provisions are not allowed in State contracts.

• SL Green wanted the right to enter into material debt transactions with unidentified lenders without the State's approval, a violation of the Lottery's video lottery regulations.

• SL Green wanted the State to provide the $250 million Capital Construction Grant promised in the MOU even if SL Green changes the construction budget without the State's consent.

• SL Green wanted to be able to make alterations to Aqueduct valued at less than $10 million without the Lottery's approval, which would violate a statutory requirement.

• SL Green wanted to be able to make repairs or alterations to Aqueduct without the consent of the State or NYRA and then to bill the State or NYRA for the cost of the repairs or alterations.

• SL Green wanted any increase in local property taxes to be limited to no more than three percent a year, which would deprive the City of New York of revenues attributable to the increase in the value of the Aqueduct property.

• SL Green wanted a complete exemption from State and local sales taxes in connection with the construction of the video lottery casino.

• SL Green wanted to increase the required insurance coverage to be provided by NYRA.

• SL Green wanted NYRA to indemnify SL Green for any and all claims except those caused by SL Green's gross negligence or willful misconduct.

• SL Green wanted a limitation of the State's right to litigation expenses if it is necessary for the State to sue to enforce SL Green's obligations under the Construction Grant Disbursement Agreement.

• SL Green wanted a promise that the State would never discuss the Aqueduct video lottery casino with any other party as long as SL Green continues as the Aqueduct video lottery agent.

• SL Green also modified other provisions dealing with various approvals and indemnifications.

The Lottery found the Penn National proposal non-responsive to the RFP for the following reasons:

• Penn National would not agree to advance funds to NYRA if construction of the Aqueduct casino is delayed by more than 30 days; Penn National also wanted a six-month acceleration of NYRA's loan repayment obligations by eliminating the waiting period already agreed to by the State and NYRA.

• Penn National wanted to be able to terminate the Aqueduct video lottery license at anytime Penn National decides, in its sole discretion, that the casino has not been profitable to Penn National for four consecutive calendar quarters.

• Penn National wanted to be able to change the MOU to protect Penn National's profits "in light of tax rates and other material factors."

• Penn National wanted the State to guarantee that no other gaming facility would ever be opened within 50 miles of Aqueduct unless the Aqueduct video lottery license agreement is revised to include terms more favorable to Penn National or the State refunds the minimum $300 million licensing fee to Penn National.

• Penn National wanted the minimum $300 million licensing fee to be held in escrow and released to the State only if conditions defined by Penn National are satisfied.

• Penn National wanted a refund of a portion of the minimum $300 million licensing fee if there is any "material and adverse change in New York State law."

• Penn National wanted a special tax concession to cap local property taxes payable to the City of New York at no more than one percent of "gaming revenue," which Penn National did not define.

• Penn National wanted the State to waive any right to seek consequential or punitive damages on account of Penn National's conduct and to indemnify Penn National against claims related to operation of the Aqueduct casino.

Most of SL Green's and Penn National's proposed changes were raised during the course of the Lottery's three rounds of questions and answers (published at nylottery.org) for the bidders over a period of six weeks. It was made clear to all bidders that non-conforming bids would be disqualified.

If Genting is not approved, neither SL Green nor Penn National will be eligible for reconsideration because of their failure to conform to the RFP's requirements. Reconsidering SL Green or Penn National would be unfair to other potential bidders who did not attempt to renegotiate the RFP's requirements, including Delaware North and Empire City/Yonkers Raceway, both of which paid the $1 million entry fee to participate in the competition but then declined to submit proposals because of their unwillingness to comply with the RFP requirements.

The Lottery is refunding the $1 million entry fees paid by SL Green and Penn National, in addition to the earlier refunds to Delaware North and Empire City. Genting's entry fee will be retained by the Lottery, which will continue and complete the evaluation of Genting's proposal. If the Lottery determines that the Genting proposal satisfies all of the requirements and that all of the entities and individuals associated with Genting's proposal are eligible for a New York video lottery license, the Lottery expects to make a recommendation on or before August 3, 2010, for approval of Genting's proposal by the Governor, the Temporary President of the Senate, and the Speaker of the Assembly. The Lottery is committed to completing its evaluation process as soon as possible, in order to allow the State to receive the minimum $300 million initial license fee sooner than expected.

So after all of this nonsense a MALAYSIAN company gets the bid.

What a bunch of crap.

For what it's worth- Penn National has done a spectacular job with the local casino in Cincinnati, and I was hoping they'd get the bid.

I don't know about you all but I am shocked!!!

Phil what makes you think their bid will be supported.. Perhaps you need to recognize that all passed but 3 and at LEAST 2 or 3 had major conditions to their bid. Again if VLT's will be operational before 2013 I will be SHOCKED.

What a complete joke.

Explain.. The State put the thing out to bid and the planet had a shot to gain the business. All but 3 passed(not a good sign) and now we are down to 1.. Even if the Lottery supports this single bidder, surely people will cry foul, or the bidder will realize they are being hosed and pull their offer knowning that any future bid can will be less costly.

The sad part is racing in NY, the mecca of the sport, is basically hopeless without a major shift in the economy

Looks like Genting to me . They are the only group meeting the rfp . None of the other groups trust this process at all so that leaves only one . They can all jump back in for the Belmont rfp which will just go to the Indians in the end .

Looks like no deal and another reboot of the process..Again there is zero chance of VLT's before 2013

Fair point, I jumped to the conclusion that they would be which you are right is not a guarantee.

On the flip side, who's to say Genting doesn't get the OK? May not be a guarantee, but at least they played by the rules as laid out by the state and met every requirement asked to this point of the process.

Based on those laundry lists of what amounts to demands by SL Green and Penn, they can both drop dead. The Malaysians seem to understand the process, likely have the necessary money, and appear willing to comply with how Lottery wants it to go. That's a big plus.

If I ever - at any time in my life - feel like I'm capable of crafting a decent take on a subject like what's being discussed in this thread .... I will do myself a favor and off myself.

Do you really think the commission is going to support the ONLY group which you hope is complaint?

If only one candidate that fulfills the criteria is left at the end of the process, why wouldn't, and why shouldn't, they be supported?

If you were bidding on a big tee shirt deal that had a variety of hurdles and were the last bidder standing, wouldn't you deserve and expect the contract?

True- but in the case of PNG, it seems they wrote in riders to protect themselves in case there are sweeping changes in NYS gaming law causing massive competition (unlikely, of course). I get that- they just took a $125MM writedown on their flagship property in Cincy because of Ohio passing additional gaming (obviously since they own rights to an Ohio location they will recoup that amount) and want to protect their $300MM capital investment, which given they are a public company that has to answer to shareholders makes a lot of sense.

Yes- the Malaysians have the money and appear to comply, but it's concerning that yet another big money project goes offshore. Maybe it's because it's July 4th and I'm feeling patriotic but what will end up being a top 5 grossing casino possibly in the world should be American-owned, in my opinion. Maybe the project isn't as attractive financially for an operator as it appears on the surface which would explain the lack of qualified bids (on the 4th or 5th round.)

Lack of bidder interest may have more to do with being in business with the state. I'd guess Malaysians are far more familiar and comfortable with being in bed with a government.

Keep the Faith

Not to worry this has zero chance of going forward..

I don't see what difference it makes that foreign owned Genting is the last bidder standing. The state can use the $300,000,000 Genting has guaranteed on the state's terms. Genting has met all the requirements as defined by the refp. The project, as defined by the rfp, is located in the USA . The jobs are USA jobs, etc. It looks like a "go" for Genting to me .

They can not and will not award a single bidder the project when the entire free world either choose not to bid(remember a paultry 3 bidders surfaced) or bidded with caveats in place. The state(Lottery) put forth an RFP and from such the received 1 single potentially complaint bid that may or may not be licensible. Ask yourself this, Do ya think Green and Penn believe Genting is real competition? Why on earth would they submit non complaint RFP's IF they thought Genting was likely suitable partner? You think these groups didn't do their homework?

I suggest the current process will end fairly quickly and hopefully when the new Gov, is in place can re start in jan of 2011. In the mean time NYRA had better instutute Plan B:

No racing 1/1/2011 thru 3/15...Hedge Fund can race at Philly park or Penn Nat

You may be right

Spot on!! Penn has a billion in cash on it's balance sheet. They have been bottom feeding for a Vegas casino for over a year now. Penn has done massive due dilligence and there is no way they would take the demands of that RFP to heart. They just told the state to drop dead, as did Wynn, MGM, and Harrah's.

Genting has a presence in NY allready . They own a piece of Monticello Raceway . http://www.timesunion.com/AspStories...ategory=REGION
About Kien Huat , they were major financiers of Foxwoods, MGM Mirage, etc... they have substantial interests in Genting...this group sure appears enormous and they have an established record of working closely with governments to get projects done... I also get a sense that this group is well positioned to expand their interest to Belmont , in conjunction with a tribe if it is called for , because their CEO G.Michael Brown was CEO of Foxwoods and Seneca gaming group and his law firm is expert in gaming law...
http://www.worldmarketmedia.com/2023...ty-iii-limited
Genting Group's largest hotel in the world and casino in Kuala Lumpor, Genting Highland (pictured) , among others ... and they've recently concluded phase I of Sentosa in Singapore by opening a casino and 4 of 6 planned hotels .


As they say in the pp notes "do not dismiss."

And the first article states in this thread Penn and SL Green are prohibited from any further bids if that comes to pass .
And as far as cancelling the inner track meet Mr Hayward just said that is not going to happen . That meet generates up to $10,000,000 in handle on good days , he said .

Who said anything about them being without means? BTW have you been to Monticello? It isn't exactly the Wynn.

No I have not been to Monticello . I do know every facility needs to be managed so that there is a profit . NY has long wanted an Aqueduct casino developer capable and interested in building a hotel(s) as well . The vision and business model that Genting seems to be successful at is exactly that .

Casino + hotels = resort = profitable...we can only imagine the vast potential of Aqueduct and Belmont as the center piece of great international horse racing resort venues. Let's keep our fingers crossed this deal gets done this time around for the horse industry and hospitality jobs jobs jobs ....

And then NY can focus on cleaning up the NYCOTB rip off .

Resort in Ozone Park? Huge hotels on Jamaica Bay? Atlantic City has a 3600 room hotel waiting to for someone to finance the last stages development and that currently is on hold. Unfortunately Genting will not be approved and the process will continue to fester.

Let's see if I have this right Freddy . We're down to a one horse race . And you are betting against the only horse in the race ?

“As long as Genting’s moving ahead, it’s not a setback at all,” said Bennett Liebman, head of Albany Law School’s Racing and Wagering Law Program and a NYRA board member."
http://www.thoroughbredtimes.com/nat...ming-race.aspx

Looks like a slam dunk to me . However, history has proven you right time and again Freddy ... 10 years and counting...:zz:

It maybe a 1 horse ace and the horse is fit and ready to run but the track will be closed for maintainence.

Something will happen to delay the process, either it will be Genting realizing the they dont have to accept these terms because there isnt competition or the State(most likely) rcognizing that the process only yielded one suiter and hence th eprocess was flawed.

I like you hope for NYRA (NY Racings) success.

Operator for Aqueduct casino gets state comptroller's approval
By Matt Hegarty

New York’s state’s comptroller on Monday approved a contract giving a Malaysian company a 30-year right to operate a casino at Aqueduct racetrack, paving the way for construction to begin on the casino sometime this fall.

Comptroller Thomas DiNapoli’s approval was the last required to put the contract into force, after prior approvals from state legislative leaders and the state attorney general. The Malaysian company, Genting New York, now has 10 days to forward the state a $380 million upfront payment. After the payment is made, and after a review of the environmental impact of the project – a process that is expected to take approximately 30 days – the company can break ground.

DiNapoli’s approval followed nine years of torturous maneuverings to name an operator for the casino following the legislative approval of slot machines at racetracks late in 2001. The state lottery had conducted three bidding rounds for the contract, with the first two winners eventually disqualified for financial or political reasons. In the final round, Genting was the only operator who met the lottery’s requirements.

“After nearly a decade of false starts and broken promises, the [slot-machine] contract is done,” DiNapoli said, in a statement. “This is one of the most important vendor contracts New York has ever signed.”

Stefan Friedman, a spokesperson for Genting, said that the $380 million upfront fee will be forwarded to the state within 10 business days. The company remains confident that 1,600 machines will be up and running at Aqueduct by April, and that the full project will be completed by the end of 2011, aside from some aesthetic touches.

$380,000,000 check today
http://www.cbs6albany.com/news/today...ract-year.html
http://saratogian.com/articles/2010/...0344974894.txt
http://albany.bizjournals.com/albany...27/daily5.html

Freddy was wrong? How is this possible? He was SO due to be right.

:wf

Congrats, New York.

And to think, the brainiac politicians in Maryland received $28mm for a 4800 machines slot license ........ are they smart or what???

And, the taxpayers in MD are buying the freaking machines, not the license holder.

OMFG, I can't believe this is finally happening..

State Lottery Division Director Gordon Medenica (l.) and Genting New York President Mike Speller pose with the $380 million check Genting is giving the state to complete the Aqueduct video lottery terminal deal. Photo courtesy Gov. David Paterson's office.
http://www.yournabe.com/articles/201...t_20100930.txt