Horse out of barn on New Castle racetrack?
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When Indianapolis gaming company Centaur LLC agreed to sell its Valley View Downs project in bankruptcy court last month for $5.6 million to a startup investor group from southwestern Pennsylvania, it passed up the opportunity to sell the project -- for more money -- to the family that had wanted to build the racetrack near New Castle in the first place.
In so doing, Centaur may also open the door for the winning bidders to move the racetrack out of Lawrence County.
The losing bidders, including the Carmen Shick family from Lawrence County, can protest the results of the auction, and must file their objections with U.S. Bankruptcy Court's Delaware District by Friday.
Centaur received four bids for the racetrack project, including one from what was eventually deemed the winning bidder, American Harness Tracks Inc., the newly formed investment group headed by real estate developers John and Bob Biros, former bar owner and stable operator Daryl W. Price, and Charles Knoll, son of the late Lt. Gov. Catherine Baker Knoll.
The other three bids came from Bedford Development Management Co., Western PA Gaming Ventures LLC, and Merit Management Group LP, a racing and casino management company, according to a transcript of the Oct. 20 U.S. Bankruptcy Court proceedings.
Bedford Development is the company that originally had hoped to build a Lawrence County racetrack and casino (then envisioned as Bedford Downs) in 2007. Later, a compromise was struck, allowing Centaur to run the casino -- but instead of building it in Beaver County, as Centaur had proposed, it would build the racetrack on land owned by the Shick family, in Lawrence County. The Shicks were the primary investors behind Bedford Development.
Neither Mr. Shick nor the principals from American Harness Tracks could be reached for comment. All parties participating in the auction consented to a confidentiality agreement with Centaur and the courts. At the outset of the auction, Centaur attorneys and executives rejected all four bids, and asked the bidders to consult with their attorneys to see if any of the four groups could improve their offers. After the consultations, "We will have individual conversations with each one of you to see if we can get at least an acceptable bid," said Gerard Uzzi, the Centaur attorney who ran the auction.
All four bidders indicated that they were willing to improve their offers. After a recess to hash out the details, Mr. Uzzi announced that American Harness had been selected as the front-running bidder, with an offer of $3.5 million. The bid included an agreement that "any language requiring that the final location of the property be in Lawrence County would also be deleted," according to the transcript.
"Once we close" on the purchase, Mr. Uzzi said, "they are free to go and do whatever they want with the property." In other words, the purchase agreement was for the license "as-is," but that after the purchase agreement was executed, American Harness could carry forward however they pleased -- or, at least, could try to.
But an attorney for the Shicks and Bedford Management, Frank Salpietro, interjected, noting that the racing license that had been conferred by the State Harness Racing Commission was "site-specific."
The other companies then had a chance to improve the offer. Bedford Development over-bid, with a $3.8 million offer, in cooperation with Merit Management. American eventually sent the bidding to $5.6 million. Bedford and Mr. Shick then bid $7 million -- $1.3 million upfront and $4.2 million at closing, plus $1.5 million paid on the one-year anniversary of the opening of the casino.
But Centaur turned down that offer, saying that "we are not going to value deferred consideration," meaning that Centaur didn't want to include the $1.5 million anniversary payment as part of the purchase offer.
When given a chance to improve its offer on the upfront end of things, Mr. Shick and Bedford Development declined.
Over the summer, winning bidder American Harness announced its intention to seek the Valley View license and then use the license to build a racetrack, and later a casino, on property near Johnstown. This particular license, in the parlance of the State Harness Racing Commission, is "site-specific" and tied to Lawrence County, but American Harness could try to have the license amended when it applies for a new license, as a condition of the bankruptcy acquisition.
Local officials hope to prevent that scenario, if it comes to pass.
"The authority on this rests, in large part, with the two members if the harness commission," said Lawrence County Commissioner Dan Vogler. "We are hopeful they will maintain their position that this is a good location for the track."
State Rep. Chris Sainato, D-New Castle, said he'd "fight any attempt to move it out of the county, but if they are the successful bidder, we welcome them with open arms." Keeping the track at its original site, near the Ohio border along Route 422, is "the quickest way to get money to the state for property tax reduction."
Both Valley View Downs and the local Centaur division that owns it, Centaur PA, filed for bankruptcy reorganization in October of 2009. The parent company, Centaur LLC, has also filed for bankruptcy.
Unless the purchase is delayed or amended, the deadline to complete the deal is March 1, 2011.
First Published December 1, 2010 12:00 am