By Steve Kilar, The Baltimore Sun
June 3, 2012
Eleven years have passed since the Cordish Cos. broke ground on their first casino venture, a project with the Seminole tribe of Florida.
Since then, the Baltimore-based developer, which builds and runs urban retail and entertainment venues, has been involved with at least four other gaming sites across the country.
But after a handful of lawsuits, false starts and soured partnerships, only one property remains in the company's gambling portfolio: the Maryland Live casino, scheduled to open Wednesday at Arundel Mills mall.
The short life spans of Cordish's prior casino undertakings raise the question of how long the developer will maintain a stake in Maryland Live, especially if the company fails to stop a large gambling facility from being built in Prince George's County. Less than two years ago, when Cordish won the right to build Maryland Live, the company did not expect to have to compete against a comparable casino less than an hour to the south that could eat into its pool of gamblers and profits, analysts said.
"We obviously came into this based on the rules that were set down by the state in terms of the market areas that would be available, so we'd hope that those ground rules will continue to be the rules under which we all play," said Joe Weinberg, managing partner and president of gaming for Cordish.
Next month, the Maryland General Assembly is tentatively scheduled to decide whether a license should be granted for a 4,750-slot facility at National Harbor.
"If anything changes in the environment that we don't have control of, we'll have to look at it at that time," Weinberg said Thursday.
With a footprint the size of three average Walmart stores, the casino, entertainment and dining complex in Hanover is the first that Cordish will operate and own outright. Cordish did not have an ownership stake in any of its previous gambling ventures.
Maryland Live will be the state's largest casino when it opens Wednesday with 3,200 machines, including video slots and electronic table games. By October, the number of machines will grow to 4,750. The facility will have six restaurants and 1,500 employees. Cordish has invested $500 million in the project.
"Since 2009, you've seen a pretty strong commitment on the part of the Cordish Cos. upfront to build the biggest casino in the state," said James Karmel, a gambling analyst and associate professor of history at Harford Community College.
Cordish's long road to Maryland Live's launch presented plenty of opportunities for the company to lose interest — a competitor's lawsuit, a referendum battle and permit appeals —and it didn't, Karmel notes.
"We certainly have approached the project as a long-term hold for us," Weinberg said.
The Arundel Mills casino should prosper because of the affluence of the surrounding areas, said Brian T. McGill, managing director for casino gaming and lodging for the equity research arm of Janney Capital Markets, based in Philadelphia.
But Cordish, and both analysts, say that approving another license so soon after Maryland Live's opening could significantly cut profits for the Anne Arundel casino, which needs time to develop a customer base.
If Maryland Live fails to bring in the bucks — a foreseeable risk considering Maryland's 67 percent casino tax and the rapid saturation of the Mid-Atlantic gambling market — it would only make good sense for Cordish to cut its losses, said David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas.
"At the end of the day, they've got to do what makes sense for them, business-wise," Schwartz said.
In 2001, around the time Cordish cut the ribbon on Power Plant Live, its Inner Harbor entertainment complex, the company began to feel the pull of gambling industry profits.
Cordish agreed to build two casinos in Tampa and Hollywood, Fla., for the Seminole tribe. Cordish also would run all nongambling operations at both, including hotels, stores and entertainment.
"As we kind of got under the tent, seeing how some of these companies operated, we felt we had a real strategic advantage in really understanding how gaming could be maximized by making it a component of an overall entertainment experience," Weinberg said.
The $455 million Florida casinos were completed in 2004. David S. Cordish, the company's chairman, called their openings "the proudest accomplishment in the 90-year history" of Cordish Cos., according to articles at the time in The Baltimore Sun.
The casinos quickly became among the most profitable in the United States, but they also drew the attention of the Internal Revenue Service. The agency questioned how the tribe structured its payments to Cordish and said the use of tax-exempt bonds to finance construction was suspect.
When the Seminoles were forced to refinance the projects with taxable bonds in 2005, the tribe moved to end its 10-year contract with Cordish.
The next year, the Seminoles sued the company, calling the casino deal "illegal and unconscionable." Cordish was receiving 30 percent of the net gambling proceeds, which the tribe said could be as much as $2.2 billion.
The company violated federal law by acquiring a "proprietary interest" in tribal gambling operations, the tribe contended. In court documents, the Cordish Cos. argued that the tribe wanted to back out of the deal after realizing how profitable the casinos were.
In 2007, the Seminoles agreed to pay the company $756 million to end the casino partnership.
"The project did exponentially better than we had projected … and I think the tribe felt like they wanted to look at a renegotiation of our contract, and we ended up with an amicable settlement with them," Weinberg said.
In spite of the litigation, the casino was extremely profitable for Cordish, which took in about $1.3 billion on the Seminole projects.
"We saw that our formula for integrating gaming and retail and entertainment and dining had a lot of merit," Weinberg said.
The gambling bug
Bitten by the gambling bug, Cordish sent representatives to pursue deals with other tribes. According to news reports, the company came close to agreements with at least three groups, but Cordish was not selected for another Indian project after the dispute with the Seminoles.
The developer began to look elsewhere. Within months of its settlement with the Seminoles, Cordish was pursuing multiple gambling projects: talking with Donald Trump to buy one or more of the debt-ridden entrepreneur's properties; bidding to build a casino resort at Kansas Speedway in Kansas City; and contracting to develop and operate a casino at a horse track outside Indianapolis.
In late 2007, Cordish launched a venture with Dennis Gomes, a prominent gambling industry executive. Within weeks, Gomes and Cordish considered buying the Tropicana Casino and Resort in Atlantic City, N.J., where Gomes had previous casino management experience and Cordish owns The Walk, a retail center now being expanded to include entertainment venues.
But Gomes and Cordish lost the hotel to the bondholders. The company's only project was to operate the $200 million "racino" in Indianapolis.`
Gomes, who died this year, was not involved when Cordish won the contract for the Kansas Speedway casino in September 2008. The partnership dissolved amicably the next summer.
By that time, Cordish was focused on Maryland. In 2008, voters approved amending the state's constitution to allow slots gambling, and Cordish wanted a piece of the action. The company quickly pulled together a proposal for the Arundel Mills site.
"We have a real strategic advantage over the public company players," Weinberg said. "We're able to act much quicker. … We were able to analyze the Anne Arundel County market when no one else was."
In September 2009, in order to focus on Arundel Mills, Cordish sold its interest in the Kansas casino to Penn National Gaming Inc., which had competed with Cordish for the speedway's gambling license.
In mid-2010, the parent of the Indianapolis casino, the financially struggling Indianapolis Downs LLC, moved to terminate its 10-year management contract with Cordish, about three years into the deal. By year's end, Cordish no longer managed the casino, Weinberg said.
Though the Indianapolis casino was successful and its operation garnered accolades from the gambling industry, Indianapolis Downs was deeply in debt because of its other businesses.
Indianapolis Downs ended up filing for bankruptcy. Cordish is still trying through the courts to recoup money it is owed, Weinberg said.
Going its own way
The string of abbreviated partnerships soured Cordish on the pursuit of casino joint ventures.
"I would say that we would focus only on those situations where we're the owner," Weinberg said.
The company is looking at Massachusetts, which plans to request casino proposals within nine months, as a possible place to expand its gambling operations, Weinberg said. And the company hasn't given up on Atlantic City, he said.
"The Trump Plaza is a kind of strategically located property," Weinberg said. "From a long-term planning standpoint, we think that there's an opportunity to link the boardwalk with The Walk project — but it's really a matter of valuation."
None of the company's prior partners in gambling ventures wanted to discuss their relationships with Cordish. Some declined to comment; others did not respond to interview requests.
"I think [Maryland Live] is really going to be the one that shows whether they can be a successful operator or not," said Janney Capital's McGill.
Cordish's quick exits from the Seminole and Indianapolis relationships are not the best indicators of its ability to thrive as a gambling operator, McGill said, but the Florida casinos show that the company has the chops to run a successful entertainment and retail project around a casino.
If Maryland Live is a success, McGill said, Cordish "definitely can be a player."
For now, Cordish is focused on launching Maryland Live, a venue that Weinberg sees as similar to the Seminole casino in Hollywood, Fla. — the one that piqued the company's interest in gambling.
Like Arundel Mills, the Hollywood casino is halfway between two major affluent cities, the principal sources of its clientele, Weinberg said.
"The only difference … is, in Florida we had to build the retail and entertainment complex to go along with the gaming," he said. "Here, we're able to position the Maryland Live casino as part of this existing regional destination that has great shopping and entertainment already."
Timeline of Cordish Cos. gaming operations
January 2001: Cordish breaks ground on the Seminole Hard Rock Hotel & Resort in Hollywood, Fla.
March-May 2004: Seminole casinos in Tampa and Hollywood open several months apart. Within three years, the casinos generated more than $1 billion in profits.
October 2005: The Seminole tribe of Florida, instructed by the IRS, refinances its casino projects with taxable bonds and attempts to sever ties with Cordish.
May 2006: The tribe sues, alleging that the developer violated federal law by taking a "proprietary interest" in tribal gambling operations.
March 2007: The tribe settles with Cordish for $756 million, severing the partnership.
October 2007: Cordish reaches an agreement to develop and operate a casino at a horse track outside Indianapolis.
June 2008: Cordish confirms that it bid for Atlantic City's Tropicana Casino and Resort.
September 2008: Cordish wins a contract to develop a casino at Kansas Speedway in Kansas City.
September 2009: Cordish sells its interest in the Kansas casino to focus on building a casino at Arundel Mills mall.
December 2009: Cordish secures a Maryland license to build a slots casino at the mall.
July 2010: The owner of the Indianapolis "racino" notifies Cordish that it is terminating their management agreement. Cordish's first venture operating a casino is over by the end of the year.
November 2010: Anne Arundel voters approve zoning for Cordish's casino and entertainment complex at Arundel Mills.
February 2011: Cordish files a $600 million lawsuit against its former business partners in Indiana and the Maryland Jockey Club, alleging that they conspired to spread false information to sabotage development of the Maryland Live casino.
April 2011: Indianapolis Downs LLC, which owns the Indiana Live casino that was built and managed by Cordish, files for bankruptcy.
June 6: Cordish is scheduled to open Maryland Live casino at Arundel Mills.
Source: Baltimore Sun archives.
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