Prior to the announcement that Genting Group would build the country”™s biggest convention center in Queens, Cuomo administration representatives might have violated state laws controlling competitive bidding while also giving Genting a major edge over its competitors in the region”™s gambling market.
In his Jan. 4 State of the State address, Gov. Andrew Cuomo said his administration would pursue a joint public-private venture with Malaysian entertainment giant Genting to build a $4 billion, 3.8-million-square-foot convention center at the Aqueduct Race Track venue in Jamaica, Queens.
The Aqueduct site is also home to Resorts World Casino New York City, owned by Genting, which, since opening in October 2011, has ranked among the highest-grossing of the state”™s nine racetrack casinos.
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In addition to Resorts World Casino, SEC filings and other reports show Genting and its affiliates have a 49 percent stake in the company that owns the Monticello Casino and Raceway and rights to 10 percent of all net profits generated at MGM Grand at Foxwoods through 2018.
Observers questioned the timing of the convention center announcement, which was coupled with a call by Cuomo to put into motion an amendment that would legalize Las Vegas-style casinos in New York state.
“If reports are correct, they (Genting) are looking to corner the market on this in the New York City region, which raises questions of all sorts,” said E.J. McMahon, senior fellow at the Empire Center for New York State Policy, a conservative think tank based in Albany.
One such question, McMahon said, is whether Cuomo is “trading his offer to give somebody a monopoly in order to fix our Javits problem” ”“ namely, the notion that the state”™s biggest event space, the Jacob Javits Convention Center in Manhattan, has had trouble attracting some of the country”™s premier events.
Cuomo representatives did not respond to multiple calls for comment.
Following the initial announcement, it became clear the convention center plans were announced by Cuomo without the blessing of the New York State Franchise Oversight Board, which is charged with representing “the interests of the state in all real estate development proposed for the Aqueduct racetrack,” according to legislation passed in 2010.
The law that formed the oversight board states, “Any such real estate development shall only be undertaken pursuant to a competitive process approved by the board.”
That was not the case here. Documents obtained by the Business Journal show that Genting New York L.L.C., a subsidiary of Genting Group, entered into a nonbinding agreement with Empire State Development Corp. on Jan. 3 for the “private investment of at least $4.0 billion, construction of an integrated 3.8 million-square-foot convention and exhibition center with up to 3,000 hotel rooms and expansion of the Resorts World New York casino at Aqueduct.”
Genting spokesman Stefan Freidman said that conversations between the ESDC and Genting had taken place “over the course of a number of months.”
On Jan. 10, Cuomo sent a letter to state Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver, which several state Legislators confirmed was the first formal communication between Cuomo and the Legislature relating to the proposed convention center development since his address the previous week.
Cuomo said in the letter that any transaction between the state and Genting or any modifications to Genting”™s current lease to operate a casino at the Aqueduct site would be submitted to the Legislature for full review and action prior to becoming binding; however the letter made no reference to the Franchise Oversight Board.
In September 2010, Genting won the rights to develop its casino at the Aqueduct venue, and is currently under a 30-year lease for 67 acres.
The governor went on to detail a two-phase project that would include the leasing of 22 acres of land owned by the Port Authority of New York and New Jersey that are adjacent to the Aqueduct venue to Genting as well as the possible extension of MTA service between Manhattan and the site.
The first phase would include the construction of 1,000 hotel rooms, theater and entertainment components, 3 million square feet of convention and exhibition space, a parking facility and the expansion of video lottery terminal (VLT) gaming space, all on the current 67-acre site already under lease by Genting.
The subsequent phase would involve the construction of 2,000 more hotel rooms and a half-million square feet of additional convention and meeting space on the Port Authority property. Cuomo wrote that any extension of MTA service would be financed by Genting.
“The bottom line is that this is a low-risk, high-reward business opportunity for the state,” Cuomo wrote. “The Genting organization already controls the land under phase one and already is the only legislatively approved operator for VLTs in New York City.”
The letter also projected the creation of 10,000 construction jobs and an additional 10,000 permanent jobs at little to no cost to the state.
The project “makes perfect sense” for Genting Group, McMahon said, adding that the convention center would complement the company”™s other interests in the tristate area.
According to SEC filings and reports, Kien Huat Realty has a 49 percent stake in Empire Resorts Inc., which in turn owns the Monticello Casino and Raceway.
Empire Resorts is currently engaged in separate discussions with Entertainment Properties Trust, a Kansas City realty company and owner of the 1,500-acre former Concord Hotel property in the nearby town of Thompson, over relocating the Monticello Casino and Raceway to Thompson.
Kien Huat Realty, which is among the holdings of Genting Chairman K.T. Lim, also reportedly has the rights to 10 percent of all net profits generated at MGM Grand at Foxwoods through 2018 after the company provided two loans totaling roughly $240 million that allowed the Mashantucket Pequot tribe to finance the construction of the original Foxwoods casino.
“Whoever has got the franchise has got a gold mine potentially,” McMahon said. “In terms of cart before the horse, the Queens deal would appear to be based on handing the whole New York City market to one firm. If that”™s the case, I think that right away raises questions. It raises a lot of questions about governance, about procedure, about budgeting.”
Several publications also reported last week that Genting requested the exclusive casino gambling rights for New York City in exchange for its agreeing to build and fully finance the convention center.
When asked about the reports of an exclusivity agreement between Genting and New York state, Freidman said Genting had no comment, adding, “The building of the convention center is not predicated on the passage of a constitutional amendment.”
Several experts surveyed by the Business Journal were divided as to the prospects of the New York gambling industry should full-scale casinos be legalized. An amendment to legalize gambling would require the approval of two successive New York state Legislatures, followed by the passage of a public referendum, making November 2013 the earliest possible date that an amendment could become binding.
The idea of a convention center in queens at Aqueduct Race Track is misguided. People come to trade shows to experience a city . No one wants to go to this new area. it is 30-40 minutes from Manhattan. This idea is terrible. My firm personally does over 20 trade shows a year for the last 20 years. I would certainly not go to Queens to do a trade show..it is out of way, nothing to see, and will certainly not attract the shows from other cities. Please tell Governor Cuomo that this is a bad idea.