One of the major investors in Suffolk Downs has pulled out of the partnership and will consolidate its efforts in its core business – that being commercial real estate in New York City and the eastern seaboard.
Vornado Realty Trust had a nearly 20 percent stake in Suffolk Downs for the last several years and has been a key investor during the track’s most recent pursuit of a resort casino license.
The news was revealed through the Mass Gaming Commission (MGC) last week that Vornado was pulling out when the matter came up during an MGC regular meeting.
In a letter to commissioners and during the March 28th meeting, MGC General Counsel Catherine Blue explained that 11 of 14 Vornado principals did not agree to participate in the Phase I MGC background check. They were advised to divest of their interest in Suffolk, which they agreed to do.
“Originally 14 individuals associated with Vornado were identified by the (Commission) as qualifiers for purposes of the applicant’s suitability investigation,” read the letter. “Of those original 14 individuals, one was allowed to withdraw as a qualifier and two individuals filed the required disclosure forms…The remaining 11 individuals refused to file required disclosure forms…The applicant’s representatives came to meet with (the Commission) to determine how they could proceed in the process and have the application deemed complete.”
In order to keep Suffolk in the process during the time it takes for Vornado to bow out, the Commission agreed to allow the track to put Vornado’s interest into a blind trust controlled by Trustee Attorney Steve Kidder of Hemenway & Barnes.
Kidder had to agree to be subjected to the MGC’s background check, and any new entity that potentially comes on board to replace Vornado in the Suffolk partnership would have to submit to the same background check.
In essence, as pointed out by Commissioners last Thursday, the move is simply a bridge to allow Suffolk’s application to continue in the process while Vornado officially folds its cards.
“Vornado has decided to focus on its core real estate development practice and has decided to divest its 19 percent interest in Suffolk Downs that it acquired in 2005,” said Suffolk COO Chip Tuttle. “The partnership has worked with the Gaming Commission to update our list of qualifiers and work towards the opportunity to earn a gaming license in Massachusetts. We are confident in our ability to design, finance, develop and operate a world-class Caesars Resort at Suffolk Downs that will be an economic engine for the creation of jobs and tourism in our Commonwealth. This change to our list of qualifiers will have no impact on our application for a gaming license.”
A spokesman for Vornado in New York told this newspaper that the company preferred not to make comment on its exit from Suffolk.
While many scrambled to understand what Vornado’s exit might mean, a little context from the company’s last few months would likely explain the sudden departure.
Just last month, Vornado’s Chairman and founder Steve Roth announced that he was selling a large stake of the company’s stock holdings in the JC Penny department store company. In fact, all told, the company lost in excess of $250 million on the sale. They had become a stockholder a few years ago and brought in a new CEO from Apple to revamp the chain store. However, the bet didn’t seem to pay off, and Vornado paid dearly for it.
Just prior to that, Vornado CEO Michael Fascitelli announced that he would be stepping down and that Roth would assume his responsibilities for the time being. Also, during that time, the company lowballed a settlement on a long-term lawsuit over disputed rent payments from a New York Stop & Shop location.
All that happened in the context of stockholders and some within the company calling for Vornado to move back to its bread and butter – that being commercial real estate in New York City.
On the surface and to a person, it appears that would seem like what Vornado is doing in its sudden and unexpected parting from the Suffolk casino project.
Sidebar – Familiars names, financial newsmakers dot casino applications
Investors and company members – known as “qualifiers” for the purpose of state gaming background checks – of the casino proposals in Everett and Revere/Eastie read like the pages of a daily financial newspaper.
There are no shortage of big names and familiar names in the list of “qualifiers” that the Mass Gaming Commission (MGC) is now examining with a fine-toothed comb.
The MGC recently provided this newspaper with the names, companies and stakeholders for each and every application. Some of the names included:
•Former Pittsburgh Steeler Hall Of Fame Wide Receiver Lynn C. Swann – who is a member of the Board of Caesar’s Entertainment and part of the Suffolk application. He also, until recently, had a major stake in the Heinz ketchup company.
•Robert J. Miller is a Board member for Wynn Entertainment and the former governor of the country’s hotbed of gaming, Nevada. Miller was governor from 1989 to 1999 and enjoyed great popularity. His son is still a state official in Nevada.
•Jeffrey Housenbold is the CEO of the popular internet photo-sharing service, Shutterfly, and is a Board member of Caesar’s – thus on the Suffolk application. Prior to Shutterfly, he was an executive at eBay.
•Matt Maddox is the Chief Financial Officer at Wynn and one of the highest paid executives under the age of 40 – he’s 37. Maddox is believed to be the next COO of the company after the retirement of long-time COO Michael Schorr last week. Ironically, Maddox was once an executive at Caesar’s, serving as executive vice president of finance.
•John Strzemp is not only an executive vice president at Wynn, but he’s also an accomplished World Series of Poker tournament player. When he’s not administrating casinos, he’s trying his hand at competitive poker.
•Dr. Ray Irani is a Board member for Wynn and was the successor to world-famous Occidental Petroleum CEO Armand Hammer. Irani is still associated with Occidental, and is currently said to be embroiled in a bid to recapture the CEO position, after having stepped down a few years ago due to compensation questions.