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International Speedway Corp.  and Cordish Co. Withdraw Plans for
 Hard Rock Hotel & Casino at Kansas Speedway; Will Recover
 $25 million Application Fee 
By Rick Alm, The Kansas City Star, Mo.McClatchy-Tribune Regional News

Dec. 6, 2008 - --The odds of a Hard Rock Hotel & Casino at Kansas Speedway just got longer -- thanks to the worsening economy.

Only hours before the project was set to receive final approval Friday from the Kansas Racing and Gaming Commission, casino partners International Speedway Corp. and the Baltimore-based Cordish Co. said it had become "prudent and necessary" to withdraw their application.

The deal called for them to build and manage a state-owned casino complex that had been estimated at $705 million.

The Hard Rock partnership, Kansas Entertainment LLC, said it remained interested in building a casino at the speedway in Kansas City, Kan., but not as originally proposed. It intends to submit a new application for a phased project after the state, as expected, restarts the selection process and reopens bidding.

"It is absolutely our intention to reapply for a license in the northeast zone," said Kansas Entertainment President Joe Weinberg. "We have a lot of emotion and energy invested in this project."

Friday's action qualified the Hard Rock partnership to recover its $25 million application fee. Had the commission announced that the project's final round of background vetting had been approved Friday, the fee would have become nonrefundable.

Kansas officials, who had gotten indications that the project was struggling, vowed to continue their pursuit of a Wyandotte County casino.

"Hard Rock's withdrawal is another unfortunate result of the worldwide crisis that has plagued the financial markets and hit the gaming industry especially hard," said Kansas Lottery director Ed Van Petten.

Unified Government Mayor Joe Reardon and other civic leaders were disappointed. Reardon said Friday that local officials learned last week that the developers wanted to scale back and phase in the hotel and other amenities. He said officials worked behind the scenes to move the project forward without having to reopen the selection process.

"I want our citizens to know that we made every effort to move this project forward to reality," Reardon said.

Jilted casino suitors in September's final selection process expressed interest Friday in a new round of bidding, but none would commit to doing so.

The first time around, the approval process took more than a year. The Hard Rock partners had been on pace to open a temporary casino in the second half of 2009.

In a letter to the Kansas Lottery, Weinberg said: "Kansas Entertainment remains in a strong financial position, and is prepared immediately to commence development" of a $400 million Hard Rock casino.

However, "in the three months since the decision of the Lottery Gaming Facility Review Board, there has been an unprecedented crisis and disruption in the global financial and economic markets.

"Economic conditions necessitate that we have the flexibility potentially to phase in at a later date the construction of the non-gaming retail and hotel amenities of the project ... in the event financial markets do not recover in the near term."

The partners also said Kansas Speedway would delay the addition of a road-racing course and potential second NASCAR Sprint Cup Series race. As part of its incentive package, the partners had pledged to petition NASCAR to reassign a second Sprint Cup Series race to Kansas Speedway no later than 2011.

Weinberg said the first phase of the new development plan would include a $400 million structure with virtually the same gambling floor, including 3,000 slots and 140 table games, plus five restaurants, "a couple" of nightclub and bar venues and a handful of retail shops.

He said the rest of the 1.5 million-square-foot complex, including a 300-room hotel, and 275,000 square feet of additional dining, retail and entertainment venues, would be added as the economy recovers.

The withdrawal comes as the casino industry, long regarded as relatively recession-proof, contends with a sharp decline in revenues.

It offers breathing space to the Kansas City area's four casinos, which have seen revenues suffer in a competitive marketplace rocked by recession.

"I was shocked," said Troy Stremming, a vice president at Ameristar Casinos Inc. "But it's further evidence of how dramatic the financial crisis is that we're in and how hard it has hit our gaming industry."

Executives at Florida-based International Speedway Corp. recently had advised market analysts that financing in the current tight credit market would not be a problem.

International Speedway Corp. and Cordish, developer of the Power & Light District in Kansas City, were each to pour $40 million to $45 million into the initial phase of construction as the first installment on their combined and estimated 20 to 40 percent equity share of the project.

Cold financial winds are whipsawing Kansas' pursuit of casino gambling, which is seen as a revenue source for a state budget that faces a deficit topping $140 million next year.

Hard Rock becomes the sixth of seven projects to withdraw from the Kansas casino market after being selected by state officials this year for 15-year contracts to build and operate what technically would be "state-owned" gambling facilities.

The remaining project, the proposed Boot Hill Casino and Resort in Dodge City, by partners including Olathe-based Butler National Corp., received final approval Friday, and officials said the project was on. That $87.5 million project is to include 875 slot machines, 20 table games and a 124-room hotel. The casino could open in the latter half of 2009.

The state has estimated that Boot Hill will generate $40 million to $60 million a year in gambling revenue. Kansas' cut would be 22 percent, or $8.8 million to $13.2 million a year.

That is a small slice of the $200 million a year the state had anticipated from the original seven gambling facilities.

Other successful applicants that have withdrawn plans in Kansas include Penn National Gaming, in the state's southeast zone; a partnership that included Harrah's Entertainment Inc., in the central Kansas market; and the operators of the state's three pari-mutuel racetracks, including The Woodlands in Kansas City, Kan.

Bidding has been re-opened in the southeast and central zones. Track operators balked at their deals over tax issues and have said they plan to lobby the Kansas Legislature for a reduction in the mandatory 60 percent cut off the top of gross slot revenues earmarked for the state and others.

The state Racing and Gaming Commission on Friday granted a request by the state's three closed greyhound and horse tracks to delay revocation of their racing licenses until after the 2009 legislative session.

"The commission's priority is to get the greyhound and horse racing and breeding industries active again in Kansas," said commission director Stephen Martino. "This order allows the track owners to seek legislative changes they say are necessary to reopen their facilities."

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Inside Speedway may not get a second Sprint Cup race. -- D1

The Star's Mark Wiebe contributed to this report. To reach Rick Alm, call 816-234-4785 or send e-mail to ralm@kcstar.com.

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To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.

Copyright (c) 2008, The Kansas City Star, Mo.

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