Documents show Petersburg financial advisors wanted more vetting about Bally's future, Rivers' hotel
PETERSBURG – The investment firm that has advised Petersburg for many years informally recommended The Cordish Companies as the city’s casino sponsor in part because of wariness about the financial status of one top bidder and another top bidder’s reluctance to include a hotel in its proposal, according to a review by The Progress-Index of the questions the firm submitted to the city.
Davenport & Co. had chosen Cordish and co-developer Bruce Smith Enterprise, Bally's Corporation and Rush Street Gaming as the top three candidates for Petersburg's casino business. Davenport noted, though, that the recommendation for Cordish was "informal" based on the proposals Davenport reviewed and its previous business dealings with Cordish officials.
At the time that report was issued, Davenport wanted the city administration to vet Bally’s further about the potential for blowback on its Petersburg package from the entertainment conglomerate’s problems with financing a casino resort in Chicago. The advisors also wanted to know why Rush Street Gaming was delaying construction of a hotel with its casino and “under what terms” the developers would consider adding the hotel to the project’s initial phase.
There has been no evidence to show that Petersburg sent the questions to Cordish, even though Davenport said the questions should be sent to all five bidders. Spokespersons for The Warrenton Group and Penn Entertainment said they never received the questionnaires, and a Cordish representative said he was still trying to find out if Cordish received one.
On the other side of that coin, the $1.4 billion proposal council chose was similar to what Cordish presented last year in the second of Petersburg's three tries to become the fifth casino-host city in Virginia. Therefore, it is possible that city leaders and Davenport could have been satisfied with the info they already had.
Bally’s told The Progress-Index it planned to respond to the questions by the May 3 deadline – last Friday – Petersburg had put on receiving the answers. The questionnaires were sent April 22, but two days later, City Council voted unanimously to pick Cordish and Bruce Smith Enterprise, seemingly not enough time for everyone’s answers to be returned.
"Rush Street Gaming received the April 22nd questionnaire from the City of Petersburg and began preparing its response until published reports indicated the RFP for a Petersburg Casino had been canceled by the City Council,” RSG representative Dennis Culloton said in an email. Asked if that meant RSG was not going to send the questions anyway, Culloton replied, “Correct.”
Rush Street Gaming opened Rivers Casino in Portsmouth last year and was looking to expand its Virginia gambling footprint into Petersburg 76 miles west. Rivers Casino Petersburg was to be built on U.S. Route 460, a major traffic corridor between central and Tidewater Virginia that links to a network of highways including Interstate 264 into Portsmouth..
Mayor Sam Parham said last week that on the day council picked Cordish and BSE, councilors spoke with Davenport during a 90-minute closed session about a report the firm gave the city with pros and cons for Cordish, and Davenport essentially changed its Cordish recommendation from informal to “firm and final.”
The decision to go with Cordish drew sharp criticism from Sen. Lashrecse Aird, D-Petersburg, who sponsored legislation to permit a referendum this November that would decide the ultimate fate of a casino here. A major casino-workers union said it would sue Petersburg because the discussion and Cordish vote violated Virginia's government transparency laws.
What Davenport wanted to know
Davenport’s questions – 15 for Bally’s and 16 for Rush Street – were broken into several categories: guaranteed payments to Petersburg beyond the increase in tax revenues, their project scope and the projected financing for their operations. A final group addressed specifics about each vendor.
For guaranteed payments, Davenport asked:
What is the structure of the guaranteed payments to the city in excess of any gaming and other local tax revenues? Please specify the timing of the payments, the amounts, and any contingent events.
Under what circumstances, if any, could the amount and/or timing of the guaranteed payments to the city change from what is contemplated in your proposal?
Does your proposal contemplate any clawbacks (another term for restitution) on the guaranteed payments? If so, under what conditions would the clawback(s) be triggered?
The next five questions asked for more information about the scope of the project:
Is the footprint of your entire contemplated project within the city proper? If any portion of the land being considered for the project is within another jurisdiction, please specify which parts of the project would not be in Petersburg and any effects such layout would have on the revenues realized by the city.
Please provide as detailed a timeline as possible from the potential selection of the preferred operator in May 2024 through the completion of the project as reflected in your proposal. Include in your timeline your target date for the completion of the development agreement and commencement of construction assuming a successful Fall 2024 referendum.
How many direct jobs will you create through the construction and permanent operations of the project? Please break out between construction and permanent operations to the extent possible.
What will be included in the initial phase of development? Please specifically address the temporary/interim and permanent casino, hotel, restaurants, performance venue(s), and other related amenities.
What additional components are a part of your planned project beyond the initial phase? Please specify any contingent events or performance metrics that must be met to bring about later phases.
The final general questions pertain to financing the casino project:
For projects of a similar size and scope that you have undertaken, please provide a summary outlining the sources of funding (i.e., developer equity, short-term financing, long-term financing, other sources, etc.).
Do you plan to use a sale/lease back approach with a gaming real estate investment trust (REIT) in the funding of the project?
What is the anticipated capital stack of the proposed project? Please include in your response a breakdown of the sources of funding, the extent that the components could change, and the anticipated timing of final commitments from investors and/or lenders.
To the extent that debt financing is not available/obtainable, how would your proposed project be affected?
Does your proposal contemplate any financial support from the city for any portion of the project (e.g., infrastructure improvements funded by the city)?
Specifics, please
The final questions were more tailored to what each bidder was proposing and how would those proposals be fulfilled..
Davenport suggested Petersburg ask Bally’s about its recent credit downgrading by the rating services Moody’s and S&P, and how that would affect the Petersburg proposal.
“Please specify, if applicable, how the proposal would be affected and what components may change,” one of the questions to Bally’s was worded.
Davenport also wanted further vetting on how Bally’s would “successfully navigate the development of the Petersburg project” in addition to its other proposals for Chicago, Las Vegas and Pennsylvania. Again, the firm wanted specifics on personnel, investment of equity, major partners in those projects and any leverage.
Earlier this year, Bally's announced it was having difficulty securing financing for a multi-million dollar casino resort in Chicago. Right now, a temporary casino is located in a formerly vacant building, but Bally's said it remains committed to building the final planned product.
Bally’s recently tore down the Tropicana hotel, a longtime Las Vegas staple, to make room for a new baseball stadium for the soon-to-be-transplanted Major League Baseball team Oakland Athletics. Bally’s wants to build a new hotel-casino resort on land next to the new stadium.
According to a March 29 article in the Las Vegas Review-Journal, the head of the Las Vegas Stadium Authority said the downgrades would not affect plans for the development.
A Bally’s casino in State College, Pennsylvania, is on pause while that state’s Supreme Court mulls a lawsuit brought by Stadium Casino – a group affiliated with Cordish – who lost a 2020 bid to another developer, SC Gaming.
As for Rush Street’s Rivers Casino, Davenport wanted to know three things: how would Petersburg co-exist with the Portsmouth casino; when would Rush Street start work on an adjacent hotel; and what could be done to move that hotel construction up to the same time as the casino construction. Like with Bally’s, Davenport asked Rush Street for specifics.
Rivers Casino Portsmouth also does not have a hotel, but one is reportedly planned.
The points Davenport wanted vetted were also noted in its informal recommendation of Cordish that council members considered in the April 24 closed meeting.
Parham told The Progress-Index he did not think any of the answers, however, would change council’s mind about sticking with Cordish.
“I believe it’s going to reinforce what we know about Cordish,” the mayor said of the responses.
Bill Atkinson (he/him/his) is an award-winning journalist who covers breaking news, government and politics. Reach him at batkinson@progress-index.com or on X (formerly known as Twitter) at @BAtkinson_PI.
This article originally appeared on The Progress-Index: Report shows financial advisors wanted more vetting of casino bidders
