SL Green, Penn National Booted from Aqueduct Contest

aquedcut SL Green, Penn National Booted from Aqueduct ContestThe Paterson administration has dropped SL Green and Penn National from contention to develop a racino at the Aqueduct racetrack, leaving just one new, un-vetted bidder: Genting New York, a Malaysian gambling firm.

The bombshell was announced late Tuesday afternoon by New York Lottery, the agency in charge of the contest, which put out a release detailing the problems with both SL Green and Penn National, each of which, Lottery said, had far too many unreasonable stipulations.

Both have long sought to control the property, as the two teams were leading contenders in the prior round led by the Paterson administration (which collapsed earlier this year).

Here’s part of the statement from Lottery director Gordon Medenica:

The proposals did not conform with the requirements of the competition and, instead, attempted to negotiate for terms more favorable to the bidders. The two disqualified proposals were submitted by a consortium consisting of SL Green, Hard Rock International and Clairvest Group and by Penn National Gaming. The third proposal submitted by Genting New York appears to conform with all requirements of the bid submission process and will continue to be evaluated.

The proposals were submitted in response to a Request for Proposals (RFP) the Lottery issued on May 11, 2010, which required bidders to submit with their proposals a signed Memorandum of Understanding (MOU) and other documents. Only Genting complied with those requirements.

SL Green and Penn National both failed to submit signed copies of the MOU. Instead, their proposals offered altered versions of the MOU containing numerous “material deviations.” In addition, the disqualified proposals failed to satisfy other mandatory requirements of the RFP.

The move is a giant blow to the project, and one wonders whether there is much chance an untested bidder such as Genting will actually be able to waltz in and firm up a contract with the state. (SL Green and Penn National went through months of rigorous vetting last round.)

From a business point of view, the state was asking for a big lift from any bidder. Given the politics and attention surrounding the process, the state essentially wanted a bidder to write a $300 million check to take control of the property, before all details were ironed out. For months, the bidders suggested they would indeed be willing to do this, although observers questioned who would actually be eager to risk so much money.

Update 7:00 p.m.

An SL Green spokesman responded by criticizing the requirements sought by the state, saying they were too onerous to make the project feasible.

From the spokesman: 

The SL Green/Hard Rock team felt that the Lottery’s MOU was completely unreasonable and wasn’t workable. The team was willing to move forward, but only under conditions that were noted right in the proposal. Obviously all but one of the other registered bidders felt the same way, since they either didn’t submit a proposal or did so with conditions.

It is somewhat surprising that one bidder is actually willing to take on the risks.

The full release from Lottery is here.

07.06.10 Announcement Re Penn National and SL Green FINAL FINAL (1)