Casino deal is win for Cordish

Pending settlement between developer, Seminoles means $1.3 billion payout

March 07, 2007|By Robert Little | Robert Little,Sun Reporter

A pending settlement that would end the Indian casino partnership between the Cordish Co. and the Seminole Tribe of Florida will result in the Baltimore development firm and its partners earning roughly $1.3 billion from the deal.

Cordish built the Seminole Hard Rock Hotel and Casino complexes in Tampa, Fla., and Hollywood, Fla., but fell out of favor with the tribe soon after the casinos opened in 2004. Each side has sued the other over matters related to the deal - a development project that company President David S. Cordish once called his "proudest accomplishment" - but those lawsuits are now expected to end.

Even as it collapses, the contract has garnered Cordish subsidiary Power Plant Entertainment one of the largest development fees in the history of Indian gaming. And the two casinos, which have outperformed their pre-construction predictions, have so enriched the Seminoles that the tribe closed yesterday on a $965 million deal to buy the entire Hard Rock chain - unthinkable, analysts say, in the days before the casinos were built.

Seminole Tribe spokesman Gary Bitner would not comment on the settlement, but said it is expected to be finalized as early as this week.

David Cordish declined to comment on the settlement, which is detailed in a research paper from the bond-rating agency Standard & Poor's. But analysts consider the settlement a positive outcome for the developer, who will earn a sizable payment while largely insulating his company from the unpredictable risks of doing business with the Seminole Tribe.

"I'd say it sounds like it all turned out pretty well for him," said Donald E. McGhie, a former chief operating officer for Bally's casino in Las Vegas and now an accountant and consultant in Reno, Nev. "He'd be taking a lot of risk trying to stay in there and fight the Indians in court. They have a different set of rules."

According to Standard & Poor's, the settlement calls for the tribe to pay Power Plant $756 million over the next 22 years. Those payments are in addition to $28.7 million paid when the projects were built and about $500 million in monthly fees paid to Power Plant since the casinos opened - about $1.3 billion in all.

The Sun published a series of articles in early 2004 outlining Cordish's contract with the Seminole Tribe and estimated the developer's total payout as about $1.3 billion. At the time, David Cordish called the estimate "absurd."

But figures released by the tribe show Cordish might have earned considerably more if the deal had continued as originally written - perhaps as much as $2.2 billion, according to court documents the tribe filed last year.

The Standard & Poor's report says the settlement between Cordish and the tribe will "resolve all litigation between the parties." It is unclear from the report whether it would affect Cordish's lawsuit against the investment bank Merrill Lynch, which the developer accused of colluding with the tribe to thwart its bid for the Hard Rock franchise.

The Seminole complexes were the first casino developments built by the Cordish Co., which has since formed a gaming division and is pursuing gambling projects around the world. The Seminole casinos were complicated and sometimes controversial from their inception.

Cordish and his partners first inked the deal with former Seminole Tribe Chairman James E. Billie, an alligator-wrestling showman who was later blackballed by the tribe for alleged financial indiscretions. On the day before Wall Street bond agencies were expected to review the deal, the tribe's general counsel was shot while resting in his home. He survived.

The Internal Revenue Service investigated the casino deal's $455 million financing arrangement shortly after the casinos opened and later declared it an improper use of tax-exempt municipal bonds. The tribe was forced to issue taxable bonds.

The risks of doing business with the Seminoles were clear early on. In 2002, the tribe stopped paying the developer of a smaller casino in Coconut Creek, Fla., saying that its contract with the company violated federal Indian gaming laws. The tribe and the developer reached a settlement.

The Seminoles sued Power Plant last year claiming the company's contracted share of its casino profits - about 30 percent for 10 years - violated federal laws regulating Indian gaming. Cordish contended in court documents at the time that the tribe was simply backing out of its deal once it realized how successful the projects were.

Indeed, Standard & Poor's issued its report last week to assure investors in the tribe's bonds that the Seminoles have enough income to repay their debts despite the considerable payments they would make to Cordish and his partners under the settlement.

"The tribe's two largest casinos, located in Hollywood and Tampa, are of very good quality and are expected to continue to attract visitors," the rating agency wrote.

"The Indians probably had no idea how much money it was going to make, and who knows?" said McGhie. "Maybe it wasn't going to make anything. And you can't really blame somebody for getting a good deal."

Power Plant still faces a lawsuit from developer Donald Trump, who claims that Power Plant landed its deal with the Seminoles by posing as associates of Trump, a claim that David Cordish has called "ludicrous."

Richard T. Fields, Cordish's partner in the Power Plant subsidiary, is a former Trump partner and employee who first approached the Seminoles on behalf of Trump several years before the Cordish deal was signed.

robert.little@baltsun.com

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