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  • A Primer on New York City Casinos (Part 1)

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    AlgoNYC

    There are many hot topics in New York City real estate development these days—the draw of hybrid work, the dearth of affordable housing, the redevelopment of Penn Station, etc.—but few have more intrigue than the competition to win one of the three available downstate casino licenses. Obtaining one of these licenses is essentially the New York City real estate version of finding one of Willy Wonka’s golden tickets. In this series of articles, I’ll examine the process, players, and plans, and place my bets on where New York’s new casinos will be located.

    What’s the background on these casino licenses?

    Back in 2012, then-Governor Andrew Cuomo proposed an amendment to the New York State constitution to allow casino gambling. Voters approved that amendment in November 2013.

    ABSTRACT OF PROPOSAL NUMBER ONE, AN AMENDMENT
    The purpose of the proposed amendment to section 9 of article 1 of the Constitution is to allow the Legislature to authorize and regulate up to seven casinos for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated.

    www.elections.ny.gov/NYSBOE/Elections/2013/Proposals/ProposalOneFinal.pdf

    The amendment allowed for the State Legislature to authorize up to seven casinos. The following year, Governor Cuomo signed into law the Upstate New York Gaming Economic Development Act of 2013. This law provided a process for creating four gaming resorts within three regions of upstate New York: the Catskills/Hudson Valley, the Capital Region, and the Eastern Southern Tier/Finger Lakes.

    Three licenses were awarded in December 2015:

    The fourth license was awarded in August 2016 to Tioga Downs in Nichols.

    All four casinos are currently in operation, leaving three licenses unawarded for future development. These three licenses are the downstate licenses now being vied for by real estate developers, billionaire hedge fund managers, and gaming/hospitality businesses across New York.

    How will the downstate casino licensing process work?

    In 2022, the New York State budget defined the siting process and criteria for the three licenses. That process is run by the NYS Gaming Facility Location Board (GFLB), which has a handy evaluation website outlining the various steps.

    Before the GFLB reviews an application, applicants must attain public approval through a local Community Advisory Committee (a CAC), adhere to all state/local zoning requirements, and pay a $1 million fee.

    Next, the GFLB will score the application for economic activity & business development, local impacts, workforce enhancement, and diversity according to predetermined weights:

    ObjectiveWeight
    Economic Activity & Business Development70%
    Local Impact of Siting10%
    Workforce Enhancement10%
    Diversity Framework10%
    Total100%
    Weights used by the Gaming Facility Location Board for scoring casino applications

    Pursuant to the FY2023 NYS budget casino siting language, consideration will also be given to three other factors:

    • Whether a proposal is a conversion of an existing video lottery gaming facility or a new facility construction
    • Location
    • The revenue impact of a proposal on existing facilities and potential new facilities (more about this later)

    Please also note that the FY2023 NYS budget language linked above provides very specific sub-criteria detailing the four weighted categories. I won’t rehash that here because it’s lengthy. Additionally, the GFLB is welcoming public comments. Readers can email them here if they feel so inclined.

    Once the GFLB has reviewed all of the applications and made their selections pursuant to the above process, they will review that the selected operators have met all necessary licensure criteria and completed state environmental reviews (SEQR).

    Finally, the GFLB will forward their selections to the NYS Gaming Commission, which will determine whether to award the licenses.

    Who, exactly, are the decision makers?

    The Community Advisory Committees will be formed as needed based on the specific location of each application. All CACs will include persons appointed by Governor Hochul, the applicable State Senator, and the applicable State Assemblymember. In addition:

    Within New York City, CACs will include persons appointed by Mayor Adams, the applicable Borough President, and the applicable City Councilmember. That’s six people in total.

    Outside of New York City, CACs will include persons appointed by the applicable County Executive and the applicable locality’s senior elected official (mayor, town supervisor, or both). That’s five people in total.

    Approval by a CAC must be granted by a two-thirds majority for the GFLB to consider an application.

    The GFLB is presently comprised of three members: Quenia A. Abreu, Vicki L. Been, and Stuart Rabinowitz. Their backgrounds vary across economic development, academia, not-for-profit work, public service, legal expertise, and other areas. Quenia Abreu has deep experience in the Bronx, Queens, and Upper Manhattan. Vicki Been was a deputy mayor in the de Blasio administration and teaches at New York University. Stuart Rabinowitz was the president of Hofstra for 20 years, a clear Long Island connection. Full bios are available on the GFLB website.

    The current GFLB has not yet appointed a chair, but Vicki Been took the lead in the inaugural board meeting held on January 3, 2023. Importantly, the GFLB can contain up to five members, but it only has three right now. It should be expected that two more people will join the GFLB some time in the future. Those newcomers would be appointed by the NYS Gaming Commission, which is effectively controlled by Governor Hochul, so Governor Hochul still has major sway in the overall process (in case that was somehow in doubt).

    The NYS Gaming Commission is comprised of six commissioners: John A. Crotty, Peter J. Moschetti, Jr., Brian O’Dwyer (Chair), Christopher R. Riano, Marissa Shorenstein, and Jerry Skurnik. Full bios are available on the Commission’s website. The New York Times has reported that the Commission said it would not override the GFLB’s selections absent a problem with the fitness or character of an applicant.

    Where are we now?

    On January 3, 2023, the current iteration of the GFLB held its first board meeting. They adopted and issued the formal request for applications (RFA) to solicit proposals. They also enacted two rules that are included in the RFA:

    • A minimum $500 million capital investment
    • A minimum $500 million casino license fee

    Although the RFA just went out, many proposals and rumors have already been reported in the press as developers have gotten a head start. Here’s a summary of the present contenders. (If I missed anyone, let me know!)

    NameLocationPlayers
    Resorts World New YorkQueensGenting Group
    Empire City CasinoYonkersMGM
    Coney IslandBrooklynThor Equities, Saratoga Casino Holdings, & the Chickasaw Nation
    Herald SquareManhattanL&L Holding
    Herald SquareManhattanVornado
    Hudson YardsManhattanRelated & Wynn Resorts
    Midtown EastManhattanSoloviev (Solow) Group
    Nassau ColiseumLong IslandRXR & Las Vegas Sands
    Times SquareManhattanSL Green & Caesars Entertainment
    Saks Fifth AvenueManhattanHudson’s Bay
    Willets PointQueensSteven Cohen (Point72) & Hard Rock
    The current known casino proposals. Note that Resorts World & Empire City are existing facilities. Casino licenses for them would expand their offerings.

    That’s a lot to work through, so let’s break it down into two categories.

    First, we’ll look at the existing facilities.

    As mentioned above in the process section, the GFLB is to consider whether an application is for an existing facility or new facility as well as the impacts on existing facilities and potential facilities. Because of those required considerations, and the local connections the existing facilities have made over the years, it is widely assumed that two of the three unawarded licenses will be awarded to Resorts World New York in Queens and Empire City Casino by MGM in Yonkers—the two existing casino facilities. These licenses would enable the existing facilities to provide live table games like blackjack and poker in addition to (or instead of) the electronic versions currently offered.

    A study commissioned by Spectrum Gaming Group for the NYS Gaming Commission in January 2021 notes that opening three new downstate casinos could saturate the market and even cause the existing facilities to close, leading to job loss and negative community impacts. That’s clearly unwanted. The scenario that one existing facility gets a license and the other does not was not contemplated, so that seems unlikely.

    Taken together, I’m with the crowd in assuming that the real game is about the last unawarded license. Thus, my first bet:

    Bet #1: Resorts World NY & Empire City Each Get a License

    Second, we’ll look at the proposed casinos.

    Obviously this is where things get interesting. As of right now, I’ve identified nine potential proposals for new casinos vying for the last license. Some proposals are well publicized and developed. Others are rumors at best.

    In the next installment of this series, I’ll begin to review what we know about the new proposals. Stay tuned!

  • The Sun Shines on Tribeca’s Greca & 450 Washington

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    AlgoNYC

    In other scaffolding-related news that will warm the hearts of Tribecans everywhere, the sidewalk shed that has covered Greca’s outdoor dining setup on Washington Street between Desbrosses and Watts since October 2020 has been taken down. Rejoice!

    Washington Street looking south from Watts.
    No more scaffolding on Washington Street, looking south from Watts.
    The sidewalk shed by Greca has been removed.
    A view of Greca’s new outdoor area looking north from Desbrosses.

    While Greca certainly did their best to make their sidewalk shed cozy for outdoor dining over the past two and a half years, they just couldn’t replicate the breezy vibe of their pre-covid, sun-drenched setup, which was undoubtedly one of the best outdoor cafes in Tribeca at the time. They didn’t have any tables or chairs out yet, but that’ll likely change when the weather gets better. This is a positive development for that stretch of Washington Street, which has been dotted with construction for years: the development of Hotel Barrière Fouquet’s, facade work at the Fleming Smith Warehouse, construction of the townhouse at 142 Watts, the construction of 456 Washington before that, and whatever else I’m forgetting.

    Another positive development for that block is the reported addition of Big Gay Ice Cream in the space previously occupied by Fika Coffee on the corner of Washington & Desbrosses. That’s been vacant since late 2019. The new location isn’t shown yet on Big Gay Ice Cream’s website, but it was reported by the all-knowing Tribeca Citizen, Google Maps has it, and you can see equipment being stored inside:

    Big Gay Ice Cream equipment in 450 Washington
    Equipment for Big Gay Ice Cream being stored inside the old Fika space.

    The removal of scaffolding marks significant progress on the redevelopment of 450 Washington Street into luxury condops from its previous life as a 421-a rent stabilized rental building, Truffles Tribeca. With that said, I go down a real estate rabbit hole…

    450 Washington Street as viewed from Hudson River Park

    450 Washington is being redeveloped by Related Group, who also built 456 Washington to the immediate north and 70 Vestry to the immediate south. They recently replaced the windows, refinished the facade, and are presumably wrapping up the interiors. It has the amenities you’d expect of a luxury building with Hudson River views in Tribeca: roof terrace, fitness center, golf simulator, children’s playroom, and a private dining room. Marketing materials, availabilities, floorplans, and more information are available on the 450 Washington website. There are 176 units with prices ranging from $1 million for a studio to $8.5 million for a penthouse or roughly $2,000-$3,500/sf. It’s uncertain exactly how many units are in contract because sales only recently launched. StreetEasy shows 24 currently in contract.

    If you read our previous article about 67 Vestry, you’ll notice that asking prices at 450 Washington are substantially cheaper than those at 67 Vestry even though it has comparable location and views. Compared to the $2,000-$3,500/sf being asked at 450 Washington, 67 Vestry is 100% in contract asking $2,750-$7,250/sf, an average upwards of $4,200/sf and a significant premium. The primary reason for this differential is likely 450 Washington’s complicated “condop” structure.

    A condop is essentially a coop within a condo. A review of the offering plans provides more information. 450 Washington is being divided up into four condominium units: 2 commercial (retail) condos, 1 parking condo, and 1 “other” condo. That other condo will contain a residential coop. That residential coop will govern the 176 apartments being offered. Purchasers of apartments will be buying shares of that coop, which is inside of a condo, hence “condop.”

    The 450 Washington Street Condominium contains only 4 units.
    The 450 Washington Street Owners Corporation (coop) contains 176 residential units.

    New York City real estate developers most commonly use this condop structure in order to separate non-residential uses with independent ownership like retail and parking from the residential apartments for properties where the developer does not own the land outright. That situation applies here.

    According to public ACRIS filings, in April 2002, Ponte Equities, a prominent landlord in Tribeca and Hudson Square, leased the land at 450 Washington to Truffles LLC, an entity owned by the Jack Parker Corporation, to construct the original rental building. In March 2006, that ground lease was converted to an “estate for years” agreement for $29 million. Pursuant to that agreement, the Jack Parker Corporation would own the land and building until April 30, 2105 (yes, the year 2105). After April 2105, ownership of the land and building reverts back to Ponte Equities. In February 2019, the Jack Parker Corporation sold that estate for years interest to Related for $260 million and Related began the current redevelopment. That reversion to Ponte Equities mechanism remains in place.

    Because ownership of the land and building will ultimately revert back to Ponte Equities, 450 Washington shareholders will have to deal with at least two key downsides compared to owners of standard condominiums.

    • Ownership of everything—land, residential apartments, retail condos, and parking—will revert back to Ponte Equities upon expiration of the estate for years agreement on April 30, 2105
    • Shareholders do not own fee title to their units, which can make obtaining a mortgage more challenging

    These elements add cost, complexity, and risk, substantially reducing the asking price of these units relative to neighborhood comps before taking into account typical apartment specifics—finishes, views, quality, etc.

    On the bright side, because this is an estate for years agreement whereby the sponsor owns the land for a period of time rather than a ground lease whereby the sponsor rents the land for a period of time, there does not appear to be any ground rent payable by shareholders on top of their monthly maintenance charges, so monthlies shouldn’t run above market.

    In addition, the offering plan states that Related is retaining the right to rent more than 49 percent of the apartments being offered and that there is a mechanism to sell apartments at even deeper discounts to existing tenants of the Truffles rental building. These factors could push values down further by providing a less desirable living experience for new owners and by creating challenges with building governance given the various potential different types of owners (previous tenants turned owners, sponsor rental units, bonafide new owners, etc.).

    Our grade school real estate enthusiasts should mark their calendars to keep an eye on this project at the turn of the 22nd century if Tribeca isn’t underwater by then.