A Casino in Manhattan? Strapped Developers Hope So
Thursday 21st January 2021
With commercial real estate slumping, casino interests are lobbying the state to grant early approval for city-based casinos.
With New York State desperately looking for new sources of revenue, real estate developers and gambling interests are trying to revive interest in a long-shelved proposal: a casino in New York City.
The concept is hardly new. Casino operators have been seeking to capitalize on the New York City market for decades, focusing on the dense, typically tourist-rich sections of Manhattan, which they consider the holy grail of gambling in the United States.
State lawmakers and Gov. Andrew M. Cuomo have traditionally opposed efforts by gambling companies to bring a casino to New York City.
But this latest push could carry more weight because of its timing -- Mr. Cuomo says the state is facing a $15 billion shortfall -- and its supporters, which include real estate giants that have a track record of influence in Albany.
Vornado Realty Trust has pitched the idea of a casino on its expansive holdings near Herald Square, according to two people briefed on the discussions. Vornado's neighbor, Morris Bailey, the owner of Resorts Casino Hotel in Atlantic City, has talked with colleagues about building a casino on the site of his own Herald Square property, the former McAlpin Hotel, one of those people said.
L&L Holding Company has proposed making a casino the centerpiece of a $2.5 billion tower it is building at the intersection of 47th Street and Broadway, a 46-story development that encompasses a landmark theater and includes a 669-room hotel.
The casino proposals highlight the tribulations within the commercial real estate market, where there is significant concern about the future of office buildings now that employees have acclimated to working from home.
Tenants leased just 20.5 million square feet of Manhattan office space in 2020, a 64 percent decline over the prior year and "the lowest level experienced in at least two decades," according to a recent report by the real estate services firm Savills.
The state is authorized to issue three new casino licenses beginning in 2023, but even before the pandemic hit last year, pressure was building to accelerate the timetable, particularly in the New York City area.
If a plan for the legalization of full-scale casinos in the city emerges, developers say they are ready with their pitches.
"Times Square market is ripe for a high-end casino," reads a slide in a Nov. 10 promotional deck for the L&L project in Times Square, which features renderings of attractive young people playing table games like roulette and blackjack, and an image of Celine Dion, a Las Vegas mainstay, singing to a packed crowd.
"Be the future," it says.
The state's upcoming budget negotiations, scheduled to begin in earnest later this month, could well be when new or expanded gaming comes into focus.
Mr. Cuomo's budget proposal, released on Tuesday, would allow the state to put out a formal request for information from developers and gaming companies to gauge market interest in the three remaining licenses. The state intends to ask potential bidders about the appropriate size and scope of development, and the value of the license.
With the state's fiscal problems, leaders in New York have been casting about for new revenue streams, recognizing that any aid from Washington -- even with President Biden now in office -- may not be enough to fill the state's fiscal hole.
Lawmakers and casino executives say that each new license would be a windfall for the state, with a likely asking price of at least $500 million apiece.
"That's real money, in light of a $15 billion deficit we're looking at," said Assemblyman Gary Pretlow, a Democrat from Westchester County and the chair of the chamber's committee of racing and wagering. He added: "If I can raise a billion dollars without raising a penny in taxes, I think that's a good deal."
Mr. Pretlow's counterpart in the State Senate, Joseph Addabbo, the chairman of the Racing, Gaming and Wagering Committee, also supports the plan to expand, saying such revenue could be used stave off a variety of painful cuts to education and health care. He said that new casinos can create much needed jobs in construction and in the gaming facilities.
In an interview last week, Mr. Addabbo added that such a license would be "gold" to casino developers, who view the New York City area as one of the last unsaturated gaming markets in the Northeast and have floated the ideas of casinos in Coney Island, Queens and Manhattan. "Who wouldn't want a gaming license in downstate New York?" he said. "The bottom line is it's about location."
The reception in Albany, however, has traditionally been unenthusiastic.
"I'm not a big fan of casinos, period," said Liz Krueger, a state senator from Manhattan and the powerful chairwoman of the Senate Finance Committee. And Brad Hoylman, the state senator whose district includes Times Square, said it "would be a fight to get me and a lot of other people to support a casino."
Even Mr. Pretlow believes there is not enough political support for a Midtown casino, saying, "Manhattan is off the map."
Still, some lawmakers and gambling interests hope that the state's fiscal situation might make Albany more receptive. Indeed, Mr. Cuomo said recently that he now supports legalizing mobile sports wagering in the state, a move that he hoped could bring the state an extra $500 million a year when fully in place.
Representatives for Vornado, L&L and Mr. Bailey declined to comment. The Real Estate Board of New York, which represents nearly every major developer in New York City, has expressed support for the acceleration of the downstate licenses -- for the sake of its membership and the state's fiscal health.
Any change to the licensing timetable would require approval of the Democrat-controlled Legislature and Mr. Cuomo, a third-term Democrat.
Both Mr. Pretlow and Mr. Addabbo say that the most probable option for new gaming would be to allow the two existing "racinos" downstate -- Genting's Resorts World Casino at Aqueduct Racetrack in Queens and MGM Resorts' Empire City Casino in Yonkers, just north of the city -- to simply upgrade to full casino licenses.
The two establishments have electronic slots and electronic games like craps and roulette, but no table games or poker rooms with human dealers.
The advantages of such a conversion include both a quick infusion of licensing fees, as well as new revenue from the actual gaming: The state already earns 10 percent from table games and on-site sports wagering at the four upstate casinos, as well as anywhere from 37 to 45 percent from slot machines. That money is then channeled to education funds and property tax relief as well as local governments in the vicinity of the casino.
"For me, in my district, the opportunity to have full gaming would be an economic boon, not only for Yonkers, but for all of Westchester," said State Senator Shelley Mayer, who represents the county. "I'm fully on board for that."
Such conversions don't need to go through lengthy environmental review or periods of public comment.
Despite long-held resistance to a Manhattan casino, developers continue to put forth proposals to transform parts of Midtown into a mini-Macau.
L&L Holding Company began exploring the idea of a casino after the pandemic began and the economy tanked, according to someone briefed on its proposal. The company has since spoken to a number of operators, that person said. Las Vegas Sands is one of those operators, said another person briefed on the discussions. Both people requested anonymity so they could speak freely.
Las Vegas Sands has also floated the possibility of a property near the Resorts World casino at Aqueduct. Mr. Pretlow said he had also heard of interest in a parking lot site adjacent to Citi Field.
The two existing racinos -- Empire City Casino and Resorts World -- seem to have an inside track on getting approved for a license, including already having collective bargaining agreements with the Hotel Trades Council, whose former president now consults for Genting. In December, the union's new president, Richard Maroko, ran an op-ed in Gotham Gazette making the racinos' case.
Genting, which also operates Resorts World Catskills in Monticello, N.Y., the closest of the state's four casinos to New York City, would presumably fight any proposal that would allow a competitor to open up shop in the city.
Some legislators argue that a proper open bidding process is in order, particularly given the history of the original competition to install electronic games at Aqueduct, which a state inspector general found was awash in impropriety.
"We could speed up the process," Ms. Kruger said. "But the Legislature should have absolutely zero to do with the decision to decide who's getting those awards."