A spokesman for Bluhm's group tells GlobeSt.com that construction on the casino, which began last December, halted July 1 after developer PITG Gaming LLC defaulted on a $200-million bridge loan. The default capped a series of financial setbacks on the project that began with rising construction costs and difficulty in obtaining refinancing, according to a news release from PGCB.
PITG, led by Don Barden, signed an agreement two weeks later giving 75% control of the project to the newly formed Pittsburgh Gaming Investors, a group led by Walton Street, Bluhm and entities controlled by Greg Carlin, CEO of Philadelphia-based SugarHouse Gaming, and Ira Lubert, co-founder of Independence Capital Partners. Barden's investor group retains 20% ownership, while a pair of Detroit pension funds owns 5%. Carlin will now serve as CEO of Pittsburgh Gaming Holdings, and will serve on the management committee of Holdings Acquisition Co. with Bluhm and Barden, CEO of Detroit-based Majestic Star Casino LLC.
Under the restructuring, a Walton Street investment fund will provide $205 million of equity, up from the $120-million infusion originally announced, the spokesman says. According to a presentation made before the PGCB on Thursday, the new cash consists of $120 million of junior preferred equity and $85 million of senior preferred equity.
In a news release, PGCB notes that the approved deal maintains the original commitments that the board had required of PITG and Barden, who was awarded the slots license in December 2006. These include: a cash contribution of at least $7.5 million annually for a period of 30 years in support of the development and construction of a multi-purpose arena in Pittsburgh; a $1-million annual grant for three consecutive years to Pittsburgh's Northside Leadership Conference; and a $1-million annual grant for three consecutive years toward the development of Pittsburgh's Hill District.
With the PGCB's approval in place, "we expect to move quickly to close the financing, pay contractors who are due $50 million and re-start construction as soon as possible, putting more than two thousand workers to work," says Carlin in a prepared statement. "We look forward to working with the gaming board staff, the City of Pittsburgh and Allegheny County as we build and open a world class entertainment facility in August 2009."
In its presentation before the PGCB, Holdings Acquisition projected total revenues of nearly $2.4 billion for the first five years from the facility. At its opening, it will encompass 119,000 sf of gaming space and include 3,000 slot machines, with capacity to expand to 5,000 slots if market conditions warrant. Currently the casino has no name; it had been known as Majestic Star prior to the July 15 recapitalization agreement.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
