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,” 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.”

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 entrée 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,” 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,” 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,” 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 didn’t just dream up minority participation. It is the way we conduct ourselves,” said Bissett of the Buffalo-based 95-year-old hospitality business. “After meeting with Cheryl McKissack and Don Peebles, I felt like the chemistry worked and they would be tremendous assets to the team.”

McKissack is the nation’s oldest African American, woman-owned professional design and construction firm, and Peebles Corp. (No. 18 on the B.E. Industrial/Service 100 list with $245 million in revenues) is the nation’s largest African American-owned real estate development company.

“We are delighted to be a part of this venture,” says Cheryl McKissack, president and CEO of the 103-year-old construction company that was founded by her grandfather, the first black licensed architect in the country. As a prime construction manager on the project, McKissack and Peebles can make certain that other minority- and women-owned contractors are included on the project.

McKissack will perform construction management services based on schedules and budgets, including cost estimating and check the collaboration between the various disciplines (electrical, mechanical, architectural, structural, plumbing, civil, and landscaping.)

Of the 2,000 new jobs that will be created during the first phase, 1,000 jobs will go toward construction and the remaining toward running the business. They hope to complete that phase of the project within 18 months of breaking ground, which is expected to take place early in 2009. Delaware North will set up an employment office and a business center during and after construction to provide jobs for the surrounding community and place local businesses into vending and contracting opportunities.

The second phase will incorporate a conference center, an entertainment/concert venue, hotel, nightclub, and more large-scale retail outlets. The construction costs for the second phase are estimated to cost between $200 and $250 million.

“I always wanted to have the opportunity to build a project in New York,” Peebles says. “The nice thing about Aqueduct [is that] it is a signature project that will have a tremendous economic impact.”