Oct. 20 (Bloomberg) -- Caesars Entertainment Corp. dropped the Gansevoort Hotel name from a project in Las Vegas after regulators raised concerns about the hotel operator, forcing Caesars to pull out of a separate partnership in Massachusetts.
Massachusetts gaming investigators recommended that Caesars not be licensed in the state, in part due to questions about an investor in Gansevoort, Chairman and Chief Executive Officer Gary Loveman said in a telephone interview yesterday.
While the hotel that was to be branded Gansevoort is in Nevada, casino regulators in other states typically conduct a broad review of business relationships before granting licenses to operators. Caesars said on Oct. 18 that it dropped out of a proposed casino resort in East Boston after the Massachusetts probe. Caesars was a partner with the Suffolk Downs horse track in a $1 billion project in the Boston neighborhood.
The investigators’ findings were “extraordinary,” Loveman said. He predicted other large casino companies will have difficulty meeting Massachusetts’ licensing standards.
“It’s going to be very hard for a multi-jurisdictional operator to pass this test,” Loveman said, citing the many business relationships large companies have, beyond gambling to include hotels and nightclubs. “It’s going to be very hard for anyone to pass.”
Caesars said in March it planned to turn its Bill’s Gamblin’ Hall and Saloon on the Las Vegas Strip into a boutique hotel using the Gansevoort name, at a cost of $185 million. Gansevoort Hotel Group, whose flagship hotel is in the Meatpacking District of New York, is led by father and son team William and Michael Achenbaum.
Arik Kislin, an investor in Gansevoort, was identified in German court filings as allegedly having ties to organized crime in Russia, according to a 2012 report in the New York Post. Kislin’s lawyer, Lisa Cohen, told the Post then that he had “no recollection” about the company with the alleged mob ties.
Gansevoort agreed to end its role in Las Vegas to minimize any controversy for Caesars, Nancy Friedman, a spokeswoman for the hotel, said in an e-mailed statement.
“We expected a serious government agency to act on the basis of substantiated fact, not rumor or innuendo previously printed in gossip columns,” Friedman said. “No new facts have arisen since we passed the internal gaming compliance process of Caesars prior to the execution of our agreements.”
Caesars did its own background checks before entering into the licensing agreement with Gansevoort, Loveman said.
“We certainly did not expect to have trouble,” Loveman said. Caesars also told Massachusetts regulators they would end the relationship, a remedy casino regulators often allow but not in this case, he said.
The report from Massachusetts Gaming Commission investigators also cited concerns about Caesars’ finances, Loveman said. The company, which was purchased in a 2008 leveraged buyout by Apollo Global Management LLC and TPG Capital, has $23 billion in debt.
The rejection of Caesars is “a bit surprising given their existing licenses,” Matthew Landry, a consultant with Strategic Market Advisors in Somersworth, New Hampshire, said in an e-mail. “Massachusetts does seem to be determined to distinguish itself in this process.”
Massachusetts legalized casino gambling two years ago with plans to have three resort-style properties in three separate parts of the state.
Suffolk Downs, whose principal owners are Richard Fields, chairman of Coastal Development LLC, and Joe O’Donnell, founder of Boston Culinary Group Inc., is competing with two other operators for the sole casino resort license in the Boston area. The other applicants are Wynn Resorts Ltd. and Crossroads Massachusetts LLC, which is affiliated with Connecticut’s Foxwoods casino.
Suffolk Downs could partner with another casino operator, according to Clyde Barrow, a professor at the University of Massachusetts Dartmouth.
The most likely candidates are Wynn, which is looking to a build a casino in Everett, or Hard Rock International, which was denied a casino bid by voters in West Springfield last month, Barrow said.
Fields has a relationship with Hard Rock that dates back to casinos he built with the company in Tampa and Hollywood, Florida, Barrow said.
The commission will hold a public hearing Oct. 29 to review facts before Suffolk Downs’ suitability is determined, Elaine Driscoll, a spokeswoman for the commission, said in an e-mail yesterday. A redacted version of the report will be released on Oct. 23, she said.
Voters in East Boston are being asked to approve a host agreement in a Nov. 5 election. The state’s five-member commission plans to pick a winner of the Boston-area license by April, according to its website.
Caesars fell 6.9 percent to $18.70 on Oct. 18 in New York. The shares have risen 170 percent this year, as the company restructured debt and offered stock in a subsidiary that has a stake in its online gambling business.
Loveman said he didn’t expect the Massachusetts recommendation to impact the company’s licensing in other jurisdictions. Caesars, which owns more than 50 properties, was licensed recently in Maryland and Ohio.
“We hold more licenses than any company in the history of gambling,” Loveman said.
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