Consultant skeptical of Castle Rock Casino proposal

TOPEKA – A consultant hired by the state said Wednesday that a destination casino proposal backed by a consortium of Wichita businessmen is not feasible – an opinion that drew a heated rejection from its backers.

The Kansas Lottery Gaming Review Board is charged with recommending one of three proposals for a state-owned casino in southeast Kansas. It met to hear its consultants’ reports at the Ramada Inn in Topeka.

On June 23, it will hear challenges to its consultants’ recommendations and decide which of the three proposals to send to the Kansas Racing and Gaming Commission. The commission will make a final decision soon after.

The three proposals:

▪ Castle Rock Casino, a regional destination casino and hotel valued at $144.5 million that would be built within a few feet of the Kansas-Oklahoma-Missouri state line. Wichita businessmen Brandon and Rodney Steven lead a team of largely Wichita investors. They have $50 million in cash and plan to borrow $95 million.

▪ Camptown Casino, a smaller, more locally focused $84 million casino in Frontenac, just north of Pittsburg. It is backed by sometime Wichita resident and casino magnate Phil Ruffin, who said he would pay for it in cash.

▪ Kansas Crossing, also a smaller, locally focused casino valued at $70 million. It is backed by the group that won the bids for the Dodge City and Mulvane casinos. The investors have $26 million in cash and will borrow $44 million. It would be built on U.S. 400 and U.S. 69 just south of Pittsburg.

The board’s main consultant, Michael Greene of Union Gaming Analytics, estimated Castle Rock would see fewer gamblers and generate far less revenue than projected in its business plan. Greene estimated $47.8 million in gross revenue.

A second consultant, Will Cummings of Cummings & Assoc., also working for the board, estimated Castle Rock would bring in $59.8 million.

Greene also said that he did not receive proof from the Castle Rock team that it had a firm commitment from a bank for the loan. He said that based on his estimate of the cash flow through the casino, they couldn’t afford to make the payments on such a loan.

He told the board – with the Steven brothers and their team looking on – that “the project is not feasible.”

Brandon Steven said in an interview afterward that his group has four studies that confirm their visitor and revenue estimates. Castle Rock, he said, would have revenue of $76 million on gaming alone and more than $91 million when related activities, such as hotels rooms, restaurant food and meeting rentals, are included.

The group gathered around a table at the Ramada Inn in Topeka to pick apart Greene’s report.

“You can see how many pages of notes I took of the flaws,” said Greg Ferris, who showed a legal notepad with seven or eight pages of scribbled notes.

Brandon Steven said they didn’t have a firm loan offer from a bank at the time of the application months ago because of the cost of holding that commitment. And, he said, it wasn’t actually a requirement of the application. They could have had one at any time and will have one when they go back before the board, he said.

Aside from Greene, Steven said, the consultants tended to support Castle Rock’s estimates and business model. There’s no question, he said, that Castle Rock delivers the biggest economic benefit to the area and the state.

“I see today as a positive,” he said. “All of them (consultants) but one said the same thing.”

He said they are assembling a point-by-point response to Greene’s report.

Greene and Cummings, the second consultant, also evaluated the other two proposals.

Kansas Crossing estimated that it would generate $47.2 million. Greene estimated it would generate $39 million and Cummings $36.6 million. Greene said Kansas Crossing would barely generate enough cash flow to pay its debt but that its investors hold multiple positions within the financing structure and that would help support it.

Jonathan Swain, one of the investors and a manager of Kansas Crossing, said his group chose to build closer to Pittsburg because it did not make sense to locate near the state line, near the giant Downstream Casino & Resort in Oklahoma.

Camptown estimated it would generate $48.8 million, while Greene estimated $43.9 million and Cummings $34.6 million. Because it will be built with cash, it has no debt payment to cover.

This story was originally published June 10, 2015 at 11:26 AM with the headline "Consultant skeptical of Castle Rock Casino proposal."