November 18, 2008
Delaware North Recruits Minority Firms
Hospitality company Delaware North will create 2,000 jobs when it builds a video lottery terminal at the Aqueduct Racetrack in New York, but its equity partnership with two of the nation’s most successful minority firms is proof that minority venders will get a seat at the table.
Delaware North identified the Peebles Corp. and McKissack & McKissack as prime contractors on the project, and together the three firms promised an upfront investment for the state gaming licensing fee that was significantly more than other bidders.
“Delaware North by far had the strongest upfront financial commitment of $370 million to the state,â€ says a spokesman in Gov. David A Paterson’s office. “In addition, the company has a proven track record in operating video lottery terminals in New York State.â€
The New York State Legislature and Paterson awarded Delaware North the contract based on that investment and their previous success with Saratoga Gaming and Raceway, which was New York State’s first entrÃ©e into video lottery gaming. Saratoga generated more than $200 million in aid to education since it opened in 2004.
Delaware North and its partners hope to produce similar revenues by renovating the 192-acre dilapidated Aqueduct Racetrack. From the Aqueduct Video Lottery Terminal, $1 million per day will be distributed to the state to provide resources for elementary and secondary education. It will amount to an estimated $8.2 billion for New York State education over the next 30 years, according to the state.
“We hope the revenues would be sufficient to pay back the investment in the first 10 years,â€ says Don Peebles, owner and CEO of Peebles Corp., who says the racetrack and casino will be a world-class destination that will also include an upgraded grandstand clubhouse, restaurant, parking lot facility, and retail stores.
New York State will provide Delaware North with $250 million to build and operate the video lottery facility and renovate the Aqueduct Racetrack in Queens, New York. Once built, Delaware North estimates that they will invest an additional $170 million in capital to maintain the VLT facility over the life of the 30-year contract. All companies would not state their specific investment, but said that the ultimate cost of construction may have increased beyond $250 million as a result of increased cost of materials.
“We have a significant interest in the gaming side and an equal interest in the overall development of the project,â€ Peebles says. “Because of the close proximity to New York City, we hope to attract conferences and leisure customers interested in gaming, entertainment and shopping,â€ says Peebles, who hopes to reach 10,000 visitors per day immediately upon completion. He hopes that number will double over time.
Delaware North’s commitment to including minority firms also played a role in the state choosing them for the project, but William Bissett, president of gaming and entertainment at Delaware North Co., says they chose McKissack and Peebles based on the quality of their work.
“We’ve had scores of relationships with minority partners over those years. It is something that we do quite naturally. We