Once Low Bidder, AEG Upped Its Ante

By DOMENICK RAFTER

Documents released by Aqueduct Entertainment Group and Gov. David Paterson on Tuesday show that AEG, the winning bidder to develop the racino at Aqueduct Racetrack, dramatically increased promised upfront payments to the state, almost doubling in a few months time as the bidding process moved along.

The documents also show that AEG increased it's "win per day" estimates - the estimated money per VLT that the house will win from a customer per day — in the final days before the selection.

Gov. Paterson chose AEG last month after the group promised to pay the state a total of $351 million up front by March 31. AEG had initially agreed to pay $151 million up front, but then offered another $200 million at the governor's request. That total surpassed the $310 million offered up front by Penn National.

According to the evaluation of win-per-day estimates dated Sept. 18, 2009, in the first year, the win per day from AEG would be estimated at $381, while that number would drop to $350 in the second year as construction of the permanent facility at Aqueduct is at its earnest, and then rise in the years after to $387 in year five.

However the document also notes that the net machine income in the first year is lower than all the four later years, even with the higher WPD because of fewer VLT machines. In the first year, AEG will install 3,321 of the 4.500 machines. AEG's initial bid projected a first-year WPD of $381 with a net income is projected to be $461,886,300. In the second year, the lower WPD, $350, will still yield a higher net machine income than the first year because all 4,500 would be operating. The second year machine income is projected to be $574,875,000. The net machine income increases to a project income of $635,647,500 in year five.

AEG's expected generated income changed from its initial projections, which put the generated income below all other bids. When Gov. Paterson opened the bids for revisions last summer, AEG's generated income projection was the only one that changed, from a total of $2.9 billion by 2022-2023 to $3.6 billion.

In documents dated Sept. 23, 2009, five days after the release of the Evaluation of WPD Revenues, AEG upped its projected WPD revenue from $381 in the first year to $450. AEG said part of the overall increase in revenue came from changing the number of VLT's it is planning on installing in the first year from 3,321 to the full 4,500, which is also the reason for the larger number in first-year income than other bidders and an increase in WPD in the first year. In the revisions, no other bidder changed their projected overall income.

The four other bidders all came in at between $3.1 billion and $3.3 billion by 2022-2023. AEG points to its first-year income as the reason for the growth.

Concerns over AEG's lack of a notable brand name also were expressed. Unlike Wynn, MGM or Hard Rock, there was no well-known brand name attached to AEG. In documents dated Aug. 6 and Aug. 7, 2009, the concerns were noted and AEG officials attempted to argue that a new brand name launched would work and had worked before.

Larry J. Woolfe, Chairman and CEO of Navagante, the brand name AEG proposed, used the example of The Borgata in Atlantic City, which was a brand name invented at the time the resort was established and is now a well known name. Concerns about the brand name were expressed in the Sept. 18 evaluation of potential win per day revenues.

Reach Reporter Domenick Rafter at drafter@queenstribune.com or (718) 357-7400, Ext. 125.