Florida regulators took a big step in finalizing the transfer of Magic City Casino from West Flagler Associates to the Poarch Band of Creek Indians.
At last week’s Florida Gaming Control Commission meeting, the panel approved a unique lease agreement between the two parties. Thus, the tribe will own the Florida casino once the commission approves the purchase.
At the start of March, the Alabama-based tribe purchased Magic City’s underlying 30-acre plot for $96 million. The total value of the deal is reported to be $660 million. That includes the value of the business, its assets and the attached Florida gaming license.
However, West Flagler wants to run its jai-alai matches and Battle Court league at its Miami-area fronton. As a result, West Flagler needed to work out a lease agreement with the building’s new owners.
Seminole Tribe opposed lease’s structuring
Its desire to continue its jai-alai operations in Miami meant West Flagler needed to renew its Florida jai-alai license. But when the Seminole Tribe saw how the lease was structured, they protested the license renewal.
The Seminoles had no problem with the lease when the Poarch Band of Creek Indians, under its corporate entity Gretna Racing, leased the building directly to West Flagler. But West Flagler restructured the deal to avoid any regulatory concerns potentially.
Instead of leasing directly to West Flagler, Gretna is leasing to a third party Hecht Investments. Then, Hecht Investments will lease the building to West Flagler.
At the commission hearing, Marc Dunbar, the Seminole Tribe’s attorney, protested the agreement. Dunbar claimed the lease violated Florida Statute 550.475.
“Last night, the underlying documents changed,” said Dunbar. “The greyhound permit holder is essentially leasing to a strawman, a non-pari-mutuel permit holder. And the strawman is leasing to a jai-alai fronton. There is no authorization in the statue whatsoever for the pari-mutuel to lease to a non-pari-mutuel. Period.”
Dunbar said West Flagler must lease from another fronton permit holder. Not Hecht Investments.
West Flagler fights back
John Lockwood, representing West Flagler at the meeting, pushed back. According to Lockwood, the lease is valid because it’s being used for the license’s original use. In this case, that is jai-alai.
“If you look at the applications before us, you have no leases, you have no deeds,” said Lockwood. “None of this is ever required when you are actually operating a facility for which you are originally permitted.”
Ross Marshman, general counsel for the Division of Gaming Enforcement, helped the commissioners understand the statute in question.
“The restriction has always been on the landlord,” said Marshman. “The lessor. Who is the permit holder that is going to be leasing their facilities. That’s what 550.475 was concerned about. That is still true today. [The statue] is a restriction on who the permit holder landlord can lease its facilities to. I see that being consistent from 1971 to 2023.”
Marshman recommended that the committee approve the license renewal after saying he believed the lease was in accordance with Florida law.
Dunbar protested one final time.
“That is a pretty significant departure… from gaming regulations 101. The idea is for these properties to be strictly regulated. That you’re doing to be able to keep an eye on all those involved. If, in fact, there are landlords that are unlicensed that are leasing to pari-mutuel facilities, I would say that is a significant problem.”
Commission approves lease, decision on sale to come next
The commissioners took a 15-minute break to review the lease paperwork more carefully. They agreed to approve the lease and renew the license when they returned.
They also said they were reviewing the paperwork for Magic City’s sale to Gretna Racing. The commission will make a final decision at April’s meeting.