EBCI, Caesar’s partner for a casino in Virginia

By JONAH LOSSIAH

One Feather Staff

 

DANVILLE, Va. – The Eastern Band of Cherokee Indians (EBCI) has partnered with Caesar’s Entertainment on a new $650 million casino that is being called Caesar’s Virginia.

Thursday, Aug. 11 marked the groundbreaking event for this project, bringing together representatives from the EBCI, Caesar’s, the state of Virginia, and the city of Danville, Va.

The EBCI Tribal Council passed Res. No. 510 (2021) in July of last year, giving EBCI Holdings the ability to negotiate a partnership with Caesar’s on what was dubbed ‘Project Commonwealth’. This initial resolution stated that the Tribe could be involved through an investment ‘not to exceed 110 million dollars’. At the time, the project had an estimated cost of $550 million, which has since seen a $100 million increase in the budget due to delays and a ‘changing of scope’.

The EBCI had several representatives at the groundbreaking event, including Principal Chief Richard G. Sneed and Tribal Council representatives T.W. Saunooke, Boyd Owle, and Dike Sneed.

“When Virginia passed their gaming bill, there is a provision in our management agreement, it’s a no-compete clause. The Eastern Band has right of first refusal on any project that Caesar’s is involved with inside of a 300-mile radius. Danville falls within that radius, and we had an opportunity to participate. We’re going to be an equity stakeholder in that project,” said Chief Sneed.

The negotiations for this project have been handled by EBCI Holdings. Cory Blankenship, who was also in attendance, is a member of the EBCI Holdings Board and is the Secretary of Finance and Treasury for the EBCI. He offered a walk-through of the finances of the project.

“The breakdown of the ownership is 49.5 percent Caesar’s, 49.5 percent Eastern Band of Cherokee Indians, and there’s a 1 percent local owner. In projects like this, because it was a city of Danville project, they can kind of dictate ownership minimums and maximums. They really wanted a local investor involved in this project,” said Secretary Blankenship.

The projected opening date for Caesar’s Virginia is some time in 2024. Initial estimates hoped for a groundbreaking in January of this year and a completion date in 2023, but several issues caused delays. This is also part of the reason for the increased price point.

“The projected EBITDA (earnings before interest, taxes, depreciation, and amortization) on this property is north of $100 million a year. Once we get the final layout of the project, I think you’ll see a significant amount of resources coming from this project back to the Eastern Band,” said Secretary Blankenship.

The Tribe will be 49.5 percent owners of the assets, and it will also receive the same percentage of profits once operations are going. Where exactly those profits are allocated is up to Tribal Council.

“The onus falls on Council to make a determination as to how that revenue will be allocated. Tribal Council may say we’re going to follow the same methodology as our Indian gaming revenue allocation plan where half is going to go to per capita, half will go to operations. That determination, as far as I know, is yet to be determined,” said Chief Sneed.

The next step for the partnership is to decide if a temporary structure would be beneficial at the location. Currently, that has yet to be decided.

“The idea of the temporary facility is, number one, it has an immediate economic impact. There are jobs that are immediately available. There’s cash flow that’s immediately available to the project. A temporary facility could help buy down some of the cost of escalation due to scope and material and labor costs,” said Secretary Blankenship.

Barron Fuller, regional president of operations for Caesar’s, will oversee this project on Caesar’s side of things. He says that nothing is confirmed, but there is chance that they take the temporary structure route.

“I think we’re going to explore any and all opportunities. The sooner we can get up standing and running the better,” said Fuller.

Fuller said that he’s excited to be more involved with the Tribe after developing a relationship with the Harrah’s Cherokee location over the last few years.

“We’ve had a longstanding 25-year relationship with the EBCI. My involvement has been over the past two years. There’s been nothing but good. Good candid conversations, a lot of business sense. There are also a lot of good ideas. I think it’s going to be a good relationship just like that moving forward.”

Chief Sneed is excited for the EBCI to continue developing a portfolio and reputation in the commercial gaming sector. The Tribe made its first major step into the field with the purchase of Caesar’s Southern Indiana Casino.

“It’s very different from Indiana. I think, as in all things and all projects, naysayers will make it out to be the worst thing in the world. But Indiana was a very difficult state to get into. In fact, if you talk to people in commercial gaming, they’ll tell you that Indiana is one of the most difficult states to get licensed in. We knew going in that we were really going to be having to enter that market at the discretion and mercy of the Indiana regulators. Our people are used to Indian gaming. I’m trying to explain to people to differentiate between the two: Indian gaming falls under the regulation of IGRA (Indian Gaming Regulatory Act). It’s federal regulation…commercial gaming, you’re subject to the regulations of that state,” said Chief Sneed.

“We were first-time license holders.  That’s what people need to keep in mind. While we may have been in Indian gaming for 23 years, at that point, we were first timers as a commercial gaming entity. So, Indiana structured it so they could ensure that there would be money to service the debt. They required that the lion’s share of the profits stayed with a holdings company. The Tribe owns the holdings company.”

Chief Sneed said that this type of investment is essential to maintaining the economic prosperity of the EBCI. He cited that the Catawba Two Kings Casino in Kings Mountain and Hard Rock Hotel & Casino in Bristol are expected to cause a $100 million hit to Cherokee’s Indian gaming operation.

“This Tribe, like most gaming tribes, has become accustomed to a revenue stream that nothing in the world can touch, and that’s gaming. Second to that would be cannabis. It’s imperative that we’re involved in emerging markets. It’s imperative that we’re established as a commercial gaming company. Because when other states, like Georgia, come up. Georgia is going to be the Wonka golden ticket if you can get a gaming license in the Atlanta market when it comes to fruition. It’s not an ‘if’, it will come to fruition at some point. So, we need to be established as a legitimate player in the commercial gaming market. Because we’re going to have to compete against all the big names.”

Secretary Blankenship said that Caesar’s Entertainment will be taking the lead on debt financing for this project, taking off some of the initial financial burden of the project for the EBCI. He said this opens the door for them to continue to be involved in other projects and build a base.

Secretary Blankenship said there are a few details to iron out, but most of the heavy lifting is done. The Tribe is now expected to finance approximately $125 million, leaving EBCI Holdings to find the best way to get the additional $15 million in equity.

“It’s 110 million that’s been approved by resolution of the Council. We will see how much the temporary facility can buy down that escalation. Potentially, EBCI Holdings could contribute some equity to the project as well from the funds that we have on hand. There’s a small possibility that we have to go back to Council and ask for some additional funding. There’s a much larger possibility that it gets handled through some of these other opportunities.”