A Slots Bid's Sudden Impact

Team Chasing License Was Quick To Lure Local Clout, Industry Savvy

August 30, 2009|By Scott Calvert and Annie Linskey | Scott Calvert and Annie Linskey,scott.calvert@baltsun.com

A soft-spoken Canadian builder without deep Baltimore ties or much gambling experience sees opportunity in a deal that the biggest local developers chose not to pursue. He came to town last week to unveil his vision for a slots palace that he believes will pull in a half-billion dollars a year - an estimate that found a skeptical reception.

Michael Moldenhauer's venture springs from an unusual land agreement that would let him build on a highly visible parcel near the Ravens football stadium that the city had promised to another developer for a different project. The deal enhances the Baltimore slots project, adding momentum that's lacking at another prominent slots site, the Arundel Mills mall venue proposed by the Baltimore-based Cordish Cos. That bid is mired in a local zoning fight.

When the city sought bids for the slots facility, it said the parlor was slated for a smaller, less attractive piece of land.

Moldenhauer, 43, said he pursued the land deal earlier this year as a "tactical move" to lock in rights to a choice Russell Street location for slots. "Anybody that was serious about Baltimore would be focusing first and foremost on the location for the property," he said in an interview.

While Moldenhauer is the sole investor in the Baltimore City Entertainment Group, which is the lone bidder for the city's slots license, he fields a team that includes two fellow Canadians with gambling expertise and a respected slate of Baltimore partners. Its local face is Michael Cryor, the man behind Baltimore's "Believe" public relations campaign who stepped down as state Democratic Party chairman to pursue the gambling project.

The group is still becoming known to city and state officials, but already it is fielding questions about how it suddenly appears so well positioned, and whether its financial estimates make sense.

At last week's rollout for the Celebration Casino, city development officials rejected complaints by Cordish and others who have said the Russell Street parcel appeared off the table. Officials stressed that all would-be bidders were told they could negotiate with Cormony Development, the firm that had dibs on the more attractive site. No one had to settle for the more remote parking Lot J, one block east of Russell, they said.

"We actually had phone calls from a couple of the developers, and we pointed that out to them as well," Kimberly Clark of the quasi-public Baltimore Development Corp. told the state commission that will issue gaming licenses for up to five state sites.

Cormony head Samuel Polakoff confirmed in an interview that he spoke with other developers about bowing out so the land could be used for slots rather than a "sportsplex" that included Ravens linebacker Ray Lewis as a partner. Just before the Feb. 2 slots bid deadline, Moldenhauer said, he signed an exclusive deal to negotiate with Cormony, and sealed the transaction in April with another agreement. Financial details have not been made public.

Questions over numbers

Yet despite its enhanced position, Moldenhauer's group faces skepticism over its rosy revenue forecasts from some members of the licensing commission, as well as from industry analysts. The group projects its 3,750 video lottery machines to gross $504 million the first year, yielding $337 million in state taxes and $20 million to the city.

"I want to believe these numbers," said commission member D. Bruce Poole, a former state delegate from Hagerstown, at Wednesday's hearing. "But I'm not so sure that I do."

Joseph Fath, a gaming analyst at T. Rowe Price Group, questioned some assumptions underlying the projections. Moldenhauer's partnership assumes it will make $368 per machine per day in the first year, but Fath said gaming sites in cities "never seem to pull those kinds of numbers."

Fath pointed to Philadelphia Park, a suburban slots facility that he called "well run" and that grossed $356 per machine a day this month, making it the most lucrative of Pennsylvania's 10 slots facilities. The daily average in Pennsylvania is $263.

Also, Fath doubts annual gross revenues in Baltimore would rise over five years, as projected, from $504 million to $651 million. "These things tend not to grow," he said. "They ramp quickly and they stabilize."

After years of rancorous debate, Maryland voters last fall approved a constitutional amendment authorizing 15,000 slot machines at five locations around the state. Officials hope the state will see $600 million a year in gaming, and Baltimore officials added an extra tax that could knock 8 cents off the city's property tax rate.

Nearly a year later, with the state and city budgets under extreme pressure, all slots proposals remain in the planning stages even as other states expand their gambling. Delaware moved recently to allow table games at casinos, a type of gambling not permitted in Maryland.

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