Take My Casino – Please! | By Scott Van Voorhis
Gov. Andrew Cuomo’s campaign to revive upstate New York’s chronically depressed economy should be a boon to regional banks. The centerpiece of his plan is four large, destination resorts, targeting high-rolling gamblers and tourists, and slated for the Catskills and other struggling Upstate areas. They’ll cost up to $1 billion to build, expected to generate hundreds of millions in annual revenue.
Some upstate banks might gain some new business, said Jay Masurekar, gaming, travel and Internet investment banking chief of KeyBanc Capital Markets Inc., whose parent company has a major presence in Upstate New York. He considers casinos “a shot in the arm for the region,” bringing in tourists and in-state business.
After a two-year push by Cuomo that saw lots of legislative wheeling, dealing and politicking, Empire State voters approved a constitutional amendment last November legalizing full-scale, Las Vegas-style gambling. The freshly minted New York Gaming Commission has been charged with licensing four upstate casinos by next fall.
The casinos are the heart and soul of Cuomo’s ambitious plan to help turn around the sluggish Upstate economy.
“If you were to break off New York City and the adjacent counties, what would be left would be an extraordinarily poor and unsuccessful state,” Joshua Stein, a top New York real estate lawyer and committee chief for the New York Mortgage Bankers Association. “You have a mindset that government should do something to kick-start the economy.”
The governor’s plan attempts to lay the foundation for a long-term plan to turn the region into a tourism showcase that will draw deep-pocketed visitors.
Under the new law, the Catskills are likely to land two of the four planned casinos, with the other two slated for the Capitol Region and the state’s southern tier/Finger Lakes.
Bidders have already emerged, with Mohegan Sun and the Monticello Racino, owned by a branch of Asian casino mogul Genting Group, putting forth resort casino proposals for the Catskills.
The Saratoga Racino, which has video slot machines but no table games, has applied for the Albany area license, as well as a private developer with a competing plan for the same market.
Masurekar estimates that construction spending on all four Upstate casinos will amount to a combined $800 million, while the Cuomo administration pegs that number at $1 billion.
A Zero-Sum Game?
The question is how much of casino-driven growth is new, and how much may simply take business away from local shops and stores.
If Cuomo’s casino campaign works, the region will see a net gain in new jobs, as well as new restaurants, stores and shops, particularly in the Catskills, said Robert McLaughlin, former chief executive of the New York Lottery and now a partner in Hodgson Russ’ real estate and finance group.
Upstate banks could benefit in a couple of ways; an influx of nearly 3,000 jobs in an economically depressed region would provide opportunities to gain new customers and deposits, and spark demand for homes and condos and their attendant mortgage business, McLaughlin said. Related commercial development would lead to increased demand for commercial loans. “If you increase your wage earnings, your bank accounts and increase and so do your major purchases, such as houses and cars,” McLaughlin said.
A Piece of the Action
Developing a lending relationship directly with various casino developers and operators is likely to prove more challenging. Most major casino developers and operators have their own financial networks, and won’t go to the local market for financing to build their gambling palaces, Masurekar said. But the casino law strongly encourages gambling developers to build relationships with local “retail businesses,” a purposefully broad definition that certainly can be interpreted to include local banks, notes McLaughlin.
And there may be opportunities for local banks to carve out profitable niches, such as payroll management.“This is a great opportunity for the small banks to get a big client,” Masurekar said.■