10.19.2010
by Bill Shea
The Ilitches' high-profile pursuit of the Detroit Pistons and plan to build a downtown arena could be dwarfed financially by the family's quiet effort that could top $1 billion to construct casinos for an American Indian tribe on New York's Long Island.
Marian Ilitch, sole owner of MotorCity Casino and matriarch of the family whose fortune is built from the Little Caesar Enterprises Inc. pizza chain she co-founded in 1959, has a casino development deal with the Southampton, N.Y.-based Shinnecock Indian Nation, which recently said it may build up to three casinos now that it has official federal recognition.
Even if the tribe builds just one hotel-casino, because it will serve New York it's expected to be significantly larger than MotorCity, for which Ilitch financed the purchase and expansion for $600 million. A trio of casinos could each still be as large as or even larger than the Detroit property.
MotorCity reported $446 million in 2009 revenue and had 2010 revenue of $333.5 million through September.
"The location will dictate the size of the casino, but it certainly will be larger than the operation at MotorCity," said Tom Shields, owner and president of Lansing-based Marketing Resource Group Inc. and spokesman for Ilitch and her partner in the casino effort, Birmingham developer Mike Malik.
The U.S. Bureau of Indian Affairs this month rejected final objections to its acknowledgment of the Shinnecock
as a federally recognized American Indian tribe -- one seeking to build a casino, with Ilitch financial backing, to improve the lives of its roughly 1,200 members. They live on about 800 acres, mainly in mobile homes.
as a federally recognized American Indian tribe -- one seeking to build a casino, with Ilitch financial backing, to improve the lives of its roughly 1,200 members. They live on about 800 acres, mainly in mobile homes.
Such formal recognition, which the Shinnecock tribe first sought in 1978, is needed to open an Indian-run casino under federal law. It also makes the tribe eligible for federal housing, health and education funding.
Ilitch and Malik have been working with the tribe since 2003 on plans to build and operate a casino in Long Island's upscale Suffolk County -- an area better known as the Hamptons.
Casinos could be built elsewhere on the island to serve a wider population.
Ilitch and Malik are partners in Gateway Casino Resorts LLC and Gateway Funding Associates LLC, the businesses working with the tribe. They are headquartered in Detroit's Fox Theatre, whose offices are home to Ilitch Holdings Inc. and other Ilitch-owned ventures.
Additional state and federal legal, environmental and regulatory approvals are needed before a casino project can start -- something industry insiders have said is a long process with no guarantees and in which longer-recognized New York tribes have been mired for years.
The tribe prefers to negotiate with authorities to build a more lucrative Class III casino, which allows table games in addition to video slot machines under federal law. A Class III casino must share revenue with the state.
Ilitch and Malik will give the tribe financing and guidance on development and operations, Shields said. How much they'll be paid, and how much of a cut of the casino revenue they'll get, isn't yet known.
There is no timeline for the development, Shields added, noting that it's expected to take several years to get approvals and finish construction.
Beverly Jensen, communications officer for the tribe, declined to comment.
Casino spending
Malik and Ilitch have worked on casino efforts in Port Huron and Manistee and in Hawaii and California, but none have reached the stage of the New York project.
Expenditures on the Long Island effort have been significant.
Through Gateway, Ilitch and Malik paid Arlington, Va.-based lobbying firm Wheat Government Relationsmore than $1 million since 2003 to push for federal recognition for the Shinnecock, records show.
The casino project still needs the approval of New York's governor and Legislature.
Gateway hired Washington D.C.-based Mercury Public Affairs to lobby state government on behalf of the casino. The firm reportedly has met with New York Gov. David Paterson and state legislative leaders to discuss the gambling plan.
A comprehensive anonymous website, TheVerifiableTruth.com, for several years has tracked news and public records linked to Ilitch and Malik's casino ventures, and it shows that they have donated money to political candidates in positions to influence the tribal recognition or other casino-related issues.
The tribe's federal recognition suggests it was money well spent and eventually might result in new cash flow for the Ilitch empire.
In the meantime, the Ilitches will be conscious of the dangers of over-leveraging themselves, sports insiders say.
"All sports properties are acutely aware of not burdening themselves with debt," said Maury Brown, president of Portland, Ore.-based Business of Sports Network, which includes websites devoted to the business side of pro sports.
Bill Shea: (313) 446-1626, bshea@crain.com
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