From: Cincinnati Business Courier, July 1, 2011
By Dan Monk, Senior Staff Reporter
The city of Lawrenceburg and Penn National Gaming Inc. have signed a letter of intent to build a $49 million event center and hotel on a city-owned site three blocks west of the Hollywood Casino.
The city is pledging a $25 million grant and $24 million in loans to the project, which industry observers say will help the Hollywood compete with the Horseshoe Casino Cincinnati, which is now under construction.
"There's nothing else that's going to revive this downtown unless we get people here," said Lawrenceburg Mayor Bill Cunningham. "And this will get people here."
The Lawrenceburg Event Center will include a concert venue with seating for up to 1,800 people, Cunningham said, along with a 180-room hotel, parking garage and river view restaurant. Its 104,000 square feet of meeting rooms and banquet facilities will be marketed to small convention groups who need more space than Hollywood's existing facilities can accommodate. It also will serve groups that have members under 21, the age of admission for Indiana casinos.
Wyomissing, Pa.-based Penn National has told city officials that it turned away between $1 million and $3 million in convention business in the first quarter because of age restrictions and space limitations. Cunningham said Penn National will own and operate the new event center after construction is completed.
"There's no place in Southeast Indiana to hold a convention," Cunningham said. "This is going to be a nice facility. We feel it may offset some of the downside from the new casino in Cincinnati."
Lawrenceburg has been planning a convention center for several years. Last summer, it circulated a request for proposals, seeking a development partner to construct a 164,000-square-foot event center and recruit a national hotel chain to the site. Four bidders submitted proposals, including Penn National, said Tim Jensen, a project engineer for American Structurepoint, an Indianapolis-based architectural firm that is advising the city on the project.
The earlier plan featured a three-story convention facility and an eight-story hotel on the southwest corner of Walnut and High streets, tucked into the levee that protects downtown Lawrenceburg from Ohio River flooding. Jensen said last year's project proved difficult to finance, so Lawrenceburg and Penn National have been talking about a downsized project for months.
Cunningham said Lawrenceburg City Council approved the nonbinding letter of intent on June 15. A development agreement is the next step, expected within a month or so. Jensen said the project could be under construction by this fall and completed by spring 2013.
"It looks like everybody's on the same page," Jensen said. "The one thing Hollywood doesn't have is a good concert venue and a good convention venue. They needed this, and the city needed this."
Financial terms of the deal include a $25 million grant from casino tax revenue held by the city of Lawrenceburg. Cunningham said Penn National will contribute $1 million in planning fees to the project and pay back $14 million in loans from Lawrenceburg over 20 years, paying a 4.5 percent interest rate. Another $10 million in loans will be paid from tax-increment financing revenue from the city's downtown TIF district. The city is also exploring an improved connection between the new convention facility and the Hollywood Casino itself. Possibilities include an expansion of the city's existing levee walk, which ends about 300 feet short of the 150,000-square-foot casino.
Hollywood Casino's director of operations, Ahmed Ahmed, said an agreement was reached, but he described the project as being at "infant stages." He could not be reached for further comment.
The publisher of the Indiana Gaming Insight newsletter said Hollywood Casino needs more amenities to compete against the planned Horseshoe Casino Cincinnati, a $400 million facility now under construction at the Broadway Commons site downtown.
"This is the kind of thing that Indiana has to do," said Ed Feigenbaum, whose Noblesville, Ind.-based INGroup covers Indiana's gaming industry, state legislature and educational system. "Even if it doesn't make money on paper, it may still attract the people you want, people who you can bring back for repeat business."
Penn National has been warning investors in quarterly reports that the commencement of gaming in Cincinnati "would have an adverse effect on the financial results of our Lawrenceburg casino."
But the gaming company also has the potential to surround Cincinnati's new Horseshoe Casino with three rival properties in Lawrenceburg, Dayton and Columbus. It holds development rights for new casinos in Columbus and Toledo because it helped to bankroll a 2009 ballot measure that changed Ohio's constitution to authorize casino gambling.
A Dayton facility is now possible because of a deal struck this month with Ohio Gov. John Kasich. The governor secured $110 million in additional gaming taxes from Penn National and Horseshoe Casino developer Rock Gaming.
In exchange, the state provided a framework for Ohio racetracks to relocate and establish video gaming facilities, or racinos. Penn National owns Beulah Park near Columbus and Raceway Park in Toledo.
"We think the best move for the state and the best move for us is to relocate those tracks to Dayton and Youngstown," Mario Kontomerkos, Penn's vice president of finance, told investors at a June 21 investor conference in New York. The Lawrenceburg project was not mentioned in the call.