Betting the House
Ameristar Makes a Bold Statement in Springfield
Editor’s Note: This is the latest in a series of stories detailing the players and issues involved in the competition to place a resort casino in Western Mass.
Gordon Kanofsky understands that this is the number that most people in the Greater Springfield area remain fixated on when it comes to Ameristar Casinos’ plans to build a resort casino on the former Westinghouse Electric site off Page Boulevard.
That’s the amount the Las Vegas-based company paid for the 40-acre parcel roughly a year ago in a move that surprised many observers because it represented an outright purchase (at $400,000 per acre, no less), rather than the acquisition of an option. Now, as then, Kanofsky, Ameristar’s CEO, describes the company’s gambit as both a sound business decision — this is easily the largest open site in Springfield, and one with great accessibility — and a strong commitment to Springfield on the part of Ameristar.
“That’s the only 40-acre site available for development in Springfield — if it’s not used for a casino, it has value for something else,” he explained. “It’s an attractive site, we wanted to make sure it was ours, and we thought it made sense to buy it. It’s a bold statement, but it’s one we wanted to make.”
What Kanofsky would like now is for people to focus on some other numbers, starting with $910 million — that’s the price tag on the plan formally known as Ameristar Casino Resort Spa Springfield, which represents the largest plan to date — as well as 150,000, the number of square feet of casino space, and 500, the number of planned hotel rooms.
Meanwhile, he wants observers to understand that, when all is said and done, the two other casino developers who are advancing plans for Springfield — MGM Resorts International and Penn National — will have to invest several times the Ameristar commitment in the Page Boulevard site to acquire and then prepare their sites for construction.
“We’re going to wind up with three or four times as much land,” he said, “and we’re not going to have the cost of demolishing and relocating businesses and residents, we’re not going to vacate streets, and we’re not going to relocate underground utilities; $16 million is a lot of money, it’s not chump change, but we think it’s a good investment.”
This was one of many observations and opinions offered by Kanofsky in a wide-ranging interview with BusinessWest that followed the company’s rollout of its plans at an elaborate event staged late last month at the Westinghouse site. Among some of the others:
Kanofsky believes Ameristar has what he called a “huge” advantage over the other proposals because the Westinghouse site is completely under its control and essentially shovel-ready. He believes those aforementioned challenges facing his competitors will give Ameristar at least a year’s head start in terms of both the start of construction and the opening of the casino, an important consideration when the state and the region are thirsty for jobs and tax revenue (much more on that later).
Ameristar’s CEO also maintains that the track record for downtown casinos is not particularly good, and in the end, city officials and the state’s Gaming Commission will conclude that a site outside the central business district makes more sense for the city.
“Urban downtown casinos don’t work as well as ones that are outside the city center,” he said, basing his opinion on experience and what’s he’s seen in other markets. “The traffic in city centers is already bad; it’s really congested, and there’s not a lot you can do about it.”
As for the process that the city has put in place for this competition, Kanofsky believes Springfield would be much better off sending all three casino proposals currently on the drawing board to the Gaming Commission for consideration, but he is ready and willing to compete in a scenario in which only one or two finalists are submitted to that panel.
“I think it would be to the city’s advantage to put as many shots on goal as possible,” he said, summoning a hockey term. “To select a single applicant, especially before that applicant has been through regulatory scrutiny by the Gaming Commission, is not necessarily in the city’s best interests, but I’m not a resident of Springfield, and I’ll leave it up to the city fathers to make those determinations.”
Placing the Bet
Konofsky told BusinessWest that Ameristar, which operates eight casinos in seven markets, with another under construction in Lousiana, first started looking hard at the Bay State several years ago as a way to bring desired geographic diversification to the company, which has most of its properties in the Midwest.
The company’s interest in Massachusetts intensified as the prospects for casino legislation steadily improved through the spring and summer of 2011, he continued, and it considered locations across the Commonwealth.
“Massachusetts has been talking about gaming for quite a while, and we’ve been watching from afar,” he said, adding that the legislation eventually signed by Gov. Deval Patrick last fall provides plenty of incentive for casino operators.
“The license conditions in Massachusetts are pretty favorable, even though you have to pay a significant license fee,” he noted. “The ongoing gaming-tax rate (25%) is a reasonable rate that allows us to build a quality facility instead of just a slot barn. If you look at some states where they have a 55% or 57% tax rate, casino operators don’t put that much into bricks and mortar, and they don’t have a lot of money to market the facilities; they’re kind of low-rent.
“With a 25% tax rate, and a limitation on only one license in the western region,” he continued, “Massachusetts has set itself up to attract quality operators like Ameristar to come in with the willingness to pay the license fee, but also the willingness to invest in the facility and make it a quality regional asset that can effectively compete. I think that was brilliant on the part of the Massachusetts Legislature, because they’re going to create more jobs and create more capital investment, and also extend the marketing reach of their casinos. They did it just right.”
Like many other casino operators, Ameristar eventually concluded that the western region of the state (the territory between Worcester and the New York border) offered the best opportunity. And within that large district, Springfield became the community that made the most sense, said Kanofsky, citing everything from location to the likelihood of a referendum supporting a casino as reasons for this.
“We looked at opportunities in all the regions, and after a matter of about a month, we concluded that the Western Mass. region was going to be the most promising one for us,” he explained. “In Boston, we assumed it would be much more competitive than it appears to be at this time, and that the Caesar’s opportunity had been long entrenched at Suffolk Downs, and it looked like it might be difficult to go up against, although not impossible — we’re not afraid of Caesar’s.
“And in the Southeast, it looked a little crowded, with the noise from the Native Americans [the Wampanoag tribe],” he continued. “And that area gets cut off rather quickly, with casinos in Eastern Connecticut and Rhode Island, with Boston coming, and nothing but water to the east. You have an $85 million license fee no matter where you go, and that’s a large amount to recoup.”
There are other challenges in large, urban areas, including costs associated with assembling and readying a site for a casino, as well as infrastructure issues, he went on, adding that these considerations and others prompted the company, again, like others, to look west — and to Springfield.
“It has a terrific location — it’s right on the Turnpike and Interstate 91,” he explained. “You have 2.5 million adults within a 50-mile radius of Springfield; there’s only going to be one casino in Western Mass., and that’s a huge draw for us. It’s a closer drive and an easier drive to our site from most of Hartford than Foxwoods or Mohegan Sun.”
After focusing on Springfield, Ameristar commenced a search for a site that would allow for a facility that was “more horizontal than vertical,” said Kanofsky, adding that there are many advantages to those dimensional qualities.
“The hotel can certainly be vertical,” he explained, “but having a two-floor or three-floor casino is not nearly as attractive to guests, and not nearly as efficient to operate, as a one-floor casino.
“And, believe it or not, the Westinghouse property is the only site — no one’s found anything else — with sufficent size to really to be the kind of facility that will serve not only the city of Springfield but the entire region of Western Mass., Eastern New York, and Connecticut, and be a regional casino.”
The proposal that Ameristar outlined at the Oct. 23 press event calls for 150,000 square feet of casino space, 3,300 slot machines and 110 table games, a 500-room hotel, a diverse roster of restaurants, indoor and outdoor swimming pools, a spa and fitness center, and parking for more than 4,000 vehicles.
The list of restaurants already lined up include some local establishments such as Frigo’s Market and Deli and Schermerhorn’s Seafood, as well as regional and national chains such as Dunkin Donuts. Facilities to be operated by celebrity chefs Wolfgang Puck and Martin Yan were also announced, as well as the latest Jerry Remy’s Sports Bar & Grill.
The planned facility will make the most effective use of the available 40 acres with room set aside for additional expansion, said Kanofsky, adding that the complex will be more horizontal than vertical, as he described, and has been designed to put a good face to both Route 291 and Page Boulevard, with the tallest building, the hotel, built close to the highway.
This architect’s rendering shows how the 40-acre site will be transformed by Ameristar. It also shows the planned new overpass from Route 291.
“We’re going to have two front doors,” he told those assembled for the press event, noting that the main entrance would be on the south (Route 291) side of the property, but there would also be entrances on Page Boulevard and Stevens Street.
The Page Boulevard entrance will feature what he called an “urban courtyard” with restaurants, fountains, and benches, that will create a solid connection to the neighborhood and “lead to economic rejuvenation of commercial life along this main thoroughfare.”
To address traffic concerns, the company has developed a $58 million plan that it will fund, calling for a new overpass along the south side of the property to create primary access to the site from 291.
To link the casino to the rest of the city and neighboring communities, an intermodal facility will be built on Page Boulevard, said Kanofsky. “We’ve heard very clearly that Springfield isn’t interested in a casino island unto itself or an inward-facing box,” he said at the project launch. “And we agree; we’ve been very conscious in our planning of the need to revitalize Springfield as a whole, including downtown, and not just East Springfield. We’ll link our project to the rest of the community in as many ways as possible.
These linkage efforts will include an on-site ‘Springfield box office’ and kiosks, he said, that will sell tickets to events at other venues, such as the MassMutual Center, Symphony Hall, CityStage, and the Basketball Hall of Fame, and also provide transportation to and from those facilities. A similar box office will be placed downtown, he continued, probably at Union Station.
Ameristar also plans to create partnerships with area restaurants that would enable guests of the casino to redeem players’ club points at those facilities.
A Roll of the Dice
When asked how his proposal will stand up in the intense competition for the Western Mass. casino license, Kanofsky said it has a number of advantages over the other Springfield proposals.
They include, he believes, everything from location to the size of the site; from the plans for handling traffic to the ability to get started before the others.
Overall, the site, with its clean state and manageable (in his view) traffic problems, will allow Ameristar to put more into resources into the revenue-generating aspects of a casino operation, rather than demolition and site-preparation work or infrastructure, said Kanofsky.
At the press event, he told the more than 200 people assembled that he believed that Ameristar’s clean, shovel-ready site would give the company a 12- to 18-month advantage over the rival Springfield proposals because those competing plans involve assembling sites, demolishing buildings, relocating existing tenants, and undertaking extensive infrastructure work.
“Someone came up to me afterward and said he thought we were softpedaling that estimate,” said the CEO. “He said we could have a two- or three-year head-start advantage, and I think he might be right.”
How important is that consideration in the larger scheme of things? “Huge” was Kanofsky’s one-word reply, on which he would quickly elaborate.
“When you think about putting 2,000 construction workers to work two to three years earlier, that’s a big consideration,” he said, adding that, while there would be some job opportunities in demolition, there wouldn’t be nearly as many as with the start of construction on a new casino. “And when you talk about having 2,300 permanent team members working two or three years earlier, and flowing in tax revenue of tens if not hundreds of millions of dollars, as well as providing catalyst funds to the city of Springfield for whatever they want to use it for … this has got to be huge.”
The location outside of the central business district is also a plus, especially when it comes to traffic, he said, while acknowledging that his site is a few miles away from the cultural and hospitality-related businesses and institutions that the competing proposals intend to partner with.
“When you put that many people into a casino, and you have a major event at the MassMutual Center, people that would ordinarily go to the casino are going to say, ‘no, I’m not going to do that; there will be too much traffic from the MassMutual Center,’” he said. “And people who want to go the MassMutual Center are going to be reluctant to do that because of concern about traffic from the casino.
“And from what I understand, the MGM proposal has as much meeting and entertainment space as there already is in the MassMutual Center,” he continued. “And they’re already having a hard time renting out that space at the MassMutual Center. It sounds to me like they’re duplicating things rather than adding and complementing things.”
Meanwhile, he said the rival Springfield plans haven’t offered any details on traffic-mitigation plans, and he believes there’s a reason — because there are no simple answers to the challenge of getting people in and out of a casino in the downtown area.
“I know from talking to some traffic engineers that there are big questions about whether there is even a viable plan for either of those [downtown] sites,” he told BusinessWest. “And if there is one, it has to cost a lot more than $58 million. And even if the other proponents are willing to pay that amount, it’s just that much less money that they’ll be able to throw into features that generate profits.
“We’ve got more hotel rooms,” he continued, “and a big factor behind that is that we have lower overall costs of development on infrastructure, and, therefore, we can put it into revenue-generating assets.”
When asked what happens next for Ameristar in this elaborate process, Kanofsky said there will be more of what the company has been doing to date: listening to residents and officials in Springfield and working to address their needs and concerns.
“We were the first applicant to identify a site, and we were also the last to announce project details,” he said. “We used that time to really listen to people in the community to make sure we understand what their hot buttons are and what would excite them, and we tried to deliver on that.
“But we’ve also been in Springfield a relatively short time,” he continued. “We’re newbies, and we’re not done listening.”
What’s in the Cards?
Returning to his thoughts on Springfield’s two-stage RFP process for determining one or more finalists, Kanofsky said this would not be his preference, and he has concerns about the city making its choice or choices before applicants pass muster with the Gaming Commission in terms of regulatory and financial suitability. “But those are the rules of the game, and those are the rules we’ll have to play by.
“If it we were me, and I had three quality applicants with three quality proposals that check enough of the boxes to satisfy Springfield’s goals, I’d want all three of those to go up to the Gaming Commission,” he went on. “I don’t know that it’s clear yet that we have three proposals that check enough of those boxes; we’ll have to wait and see.”
There will be a considerable amount of waiting and seeing over the next several months, Kanofsky acknowledged, while adding quickly that he’ll be doing so from a position of relative confidence.
That’s what comes from having what he believes is a winning hand.
George O’Brien can be reached at email@example.com