Mass. tribe's choice for partner in casino venture a wise bet, say industry analysts

As they negotiate a new partnership with investors for a tribal casino, the Mashpee Wampanoag in Massachusetts are following the money.

The tribe announced late last month it would drop Mohegan Sun investors Len Wolman and Sol Kerzner, part of the Trading Cove at Mashpee investment group, in favor of an alliance with Arkana Limited.

It's a savvy move, gaming analysts say, because the new prospective partner - which has ties to Kien Huat Realty and the Genting Group - has a solid grasp of the worldwide hospitality and gaming market and no associations with the Mashpee Wampanoags' disgraced and imprisoned former chairman.

Kien Huat Realty, which backed the Mashantucket Pequot tribe's Foxwoods Resort Casino, maintains an interest in Genting, a wealthy multinational group involved in gaming, hospitality and other industries.

Through Trading Cove at Mashpee, Kerzner and Wolman purchased the 539 acres in Middleborough, which the Mashpee Wampanoag want to take into trust for a resort casino, in anticipation of Massachusetts deciding to allow gaming in the state.

Wolman and Kerzner experienced success early through Trading Cove Associates, an entity that invested in the Mohegan Sun in Uncasville and is still reaping 5 percent of the gross revenues from that casino by virtue of a pact that removed them from daily casino management.

But the partners, through a group known as BLB Investors, LLC, are also in bankruptcy at the Twin River racino in Rhode Island, for which they paid about $690 million to purchase and renovate.

That's nearly three times the $280 million price tag for the Trump Marina in Atlantic City, observed Clyde Barrow, a gaming analyst with the Center for Policy Analysis at the University of Massachusetts at Dartmouth.

"Kerzner and Wolman have taken on risky ventures up until this point," said Roger Gros, publisher of Global Gaming Business Magazine. "They hit a home run with Mohegan Sun, but they struck out with Twin River. It's going to make it that much more difficult for them to really come back and establish their reputation again."

Part of the problem for Wolman and Kerzner is that they had too much debt and paid too much for Twin River, Barrow said.

"A lot of the gaming expansions toward the end of this decade were financed almost exclusively through debt rather than equity, so (those investors) are facing the same problem as everybody who took out the zero-interest loans," Barrow said. "When the economy's growing, you can keep the money moving and pay that debt, but when it stops you have problems."

In contrast, Gros said, "When you're talking about companies that have money, Genting is right at the top of the list.

"They just put $4 billion into the Singapore project that will open in January. A casino investment in the Philippines opened three months ago and is doing well. This is their business. They're not shy about investing if they feel it's going to be profitable, so what they're doing with Massachusetts shows confidence in the state and the tribe."

The Genting Group has about $26 billion in combined stock market capitalization. Its Web site boasts total assets exceeding $30 billion in 2008 and profit before taxation of $1.7 billion. One division, Genting Malaysia, is involved in theme parks, gaming, hotels, seaside resorts and entertainment, the Web site notes.

According to The Cape Cod Times newspaper, Trading Cove at Mashpee negotiated a tentative deal with Glenn Marshall, the former tribal chairman who is now serving time in federal prison on embezzlement and corruption charges.

That agreement, the financial terms of which are not public, reportedly would have allowed Kerzner and Wolman to extract almost three times as much in casino revenue from the proposed venture as the tribe would have.

"I think the new tribal chairman just wants to cut off any relations the former tribal chairman had and be the architect of any new arrangement" going forward, Gros said.

Mashpee Tribal Chairman Cedric Cromwell would not discuss the tribe's reasons for seeking out new investors, citing the confidentiality of the settlement process. He noted in an interview, however, that a confidential interim agreement with Trading Cove allowed the tribe to look for alternate investors.

"We were just out there looking at prospective investors and we had a conversation," said Cromwell, referring to the talks that led to the association with Kien Huat and Genting. "We had spoken with many private investors. It's all about relationships."

The tribe said negotiations with Trading Cove, which include disposition of the 539 acres, should be resolved in a couple of weeks.

"We're pleased about how the relationship is moving forward," Cromwell said.

In response to e-mailed questions, a spokeswoman for Trading Cove at Mashpee said she could not comment because of the confidentiality clause in the contract with the tribe.