MASHPEE, Mass. – The Mashpee Wampanoag Tribe is shedding its old financial partnership with two South African casino investors and forming a new relationship with a major international developer to build a resort casino in southeastern Massachusetts.
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Originally planned as a $1 billion project, the facility has been scaled back to around $350 million and will provide the full amenities of a resort casino with a hotel, spa, table games, slots, restaurants and entertainment, and retail shops.
At a special general meeting Nov. 29, tribal council Chairman Cedric Cromwell and the council announced the tribe’s new partnership with the Malaysia-based Arkana Limited, a wholly owned affiliate of Kien Huat Realty.
Kien Huat affiliates are collectively known as the Genting Group, which is one of the world’s largest casino operators.
“We are extremely excited about this new partnership,” Cromwell said. “Kien Huat and its affiliates bring the business experience and financial strength that the tribe needs to move forward aggressively with our plans for a resort-style gaming facility. This is a very positive development for our tribe and we look forward to bringing good jobs and economic development to both the Mashpee Wampanoag Tribe and the Commonwealth of Massachusetts in the near future.”
The nation is in the process of severing ties with South African financiers Sol Kerzner and Len Wolman, who operated under the name Trading Cove at Mashpee.
TCAM signed a development agreement in 2006 with Glenn Marshall, the former Mashpee chairman, who pleaded guilty last spring to fraud and corruption charges involving around $4 million of investment funds and is serving a three-and-a-half year sentence in federal prison.
TCAM reportedly would have reaped more than twice as much as the tribe in casino revenues – an unlawful distribution under the Indian Gaming Regulatory Act, which allows an investor no more than 40 percent of the revenues.
“Our focus now is to ensure that any deal we have would work under IGRA laws and IGRA-type gaming implementation regarding the investor-tribe relationship,” Cromwell said. “Our focus is on what will be in the best interest of the tribe.”
Mashpee’s “agreement in principle” to terminate the relationship with TCAM will be finalized within a few weeks. Earlier this year, an interim settlement agreement allowed the tribe to seek out new investors.
In the midst of the worst recession in memory with tumbling gaming revenues and a tight money market, Kien Huat stood out above the others, Cromwell said.
“We did our due diligence. We looked at a lot of investors out there. Kien Huat became the last one standing in our quest for new potential investors and they met quite of few of the criteria that were very important to us as a tribe.”
A lot of the big name casino investors were interested in the proposed resort casino on approximately 535 acres in nearby Middleborough, but ultimately they were not able or willing to provide the needed funding, Cromwell said.
“When we got down into the weeds – and these were all top names in gaming – none of them could provide the cash flow, because money is so tight and many of them didn’t want to assume the risk. Certainly, now that we’ve announced we have a new relationship, the phone is ringing off the hook.”
The Genting Group’s listed companies have a combined stock market capitalization of about $26 billion. It is one of two investment grade casino companies in the world with cash reserves of more than $3 billion.
In the United States, Kien Huat affiliates financed the startups of Foxwoods Resort Casino in 1992 and the Seneca Niagara Casino in 2002; acquired Norwegian Cruise Line in 1999; supported the equity and debt raising exercise of MGM Mirage in 2009 with $200 million, and this month acquired about 50 percent of Empire Resorts, Inc., a Nasdaq listed company, which has a piece of land in its Monticello Raceway property on which a Mohawk casino may be sited.
Kien Huat will be able to fund the tribal government operations and the proposed casino with cash, so the tribe will not have to go to the bond market, Cromwell said.
The Middleborough land, which was purchased by TCAM, is expected to be conveyed to the tribe under the new arrangement with Kien Huat. Both the tribal council and Kien Huat are confident that the Interior Department will take the land into trust as the tribe’s initial reservation, along with approximately 200 acres around Mashpee on Cape Cod.
The remaining challenge will be whether the Massachusetts legislature will approve Class III as it is expected to do early next year.
But if there is no Class III gaming and the tribe has land in trust, the tribe will conduct Class II gaming – which does not require sharing the profits with the state – and lobby the state to promote Class III gaming, Cromwell said.
“The key for us with gaming is we’re focused on providing stimulus back to our people with jobs and money for housing, health services and education. About 98 percent of the tribe is happy that we’re moving forward.”
The remaining two percent were tied to Glenn Marshall and whatever interests they had, Cromwell said.
“But I can’t get into that. The sun is shining on Mashpee and today is a better day. We’re focused on the interests of the tribe and looking at ensuring that’s how we move forward with the new investor.”