Tribal leaders whose casinos acquired commercial operations in other states sounded bullish for other tribes to follow suit in the future and they offered advice on how to do it.
The “Tribal Gaming 2: Acquisitions in the Commercial Gaming Market” panel discussion at the Global Gaming Expo featured Latisha Casas, chair of the San Manuel Gaming and Hospitality Board that acquired and reopened the Palms Casino Resort in Las Vegas in April. Also participating was Adele Jacobs-Madden, CFO for EBCI Holdings, an entity formed in 2021 by the Eastern Band of Cherokee Indians to focus on commercial gaming beyond their North Carolina casinos. Her tribe acquired Caesars Southern Indiana in September 2021 and is part of other deals.
“We started it as a diversification mechanism,” Jacobs-Madden said. “In the South, we’ve been without competition for many years. But the Catawbas recently opened a casino in Charlotte and there’s a Bristol casino in Virginia.”
The Cherokee tribe’s second venture is a partnership with Caesars in a casino that broke ground in September in Danville, Virginia. It will be called Caesars Virginia. The tribe also has a third venture in the works that it will announce soon.
“Get ready for all of the opportunities out there,” Jacobs-Madden said. “As soon as individuals know you’re out there pursuing commercial gaming, you’ll be shocked at how many calls you get. Since we established ECBI Holdings, we’ve been looking at 19 deals in commercial and acting on three. You can spend a lot of time on diligence, but you have to prioritize what you want, develop your strategic goals, whether it’s geographical or a dollar amount, and don’t chase your tail on everything.”
When looking at assets to acquire, Jacobs-Madden said the first point is whether it’s making money. Second, does the tribe have the equity to invest? Most deals require 20% to 25% equity up front. Tribes also need banking relationships to obtain the difference. Third, does the property have the cash flow to borrow against what you need?
“Since we were new, the bank required the tribe to guarantee the money,” Jacobs-Madden said. “When diversifying, you should have the capital to commit to that and if you don’t, find a partner and bank that will help you obtain that asset.”
The San Manuel Band of Mission Indians paid $650 million to Red Rock Resorts for the Palms, the first of its commercial ventures outside of southern California. Like other tribes, Casas said it was done for reasons of diversification.
“We started preparing for diversification in 2019, so it took us a couple of years to get the structure right and ready for an anticipated acquisition.”
Jacobs-Madden said getting licensed as a commercial entity was quite different than the tribal process. She went on to describe how setting up structures to create a division between commercial and tribal politics changes from state to state.
“That was an important topic. As you venture out into commercial gaming, you need to know it’s different with every state. ECBI Holdings is an acquisition company between ECBI and the property at the operating level. That was key to establishing an organization.”
Casas said her tribe had to do the same thing to ensure that elected leaders weren’t part of the commercial-gaming process and keep separation between off-reservation and on-reservation gaming.
Tribal gaming attorney Sarah Murray, who previously worked for the National Indian Gaming Commission, underscored the importance of each jurisdiction and emphasized regulatory differences that might dictate the organizational structures. And, she warned, those can always change.
“EBCI is in multiple jurisdictions now. There are different regulators and rules in each jurisdiction, plus a lot of discretion in each jurisdiction in terms of licensing requirements, who needs to be part of that licensing experience, and how far regulators want to pierce into the organization,” Murray said. “It’s really important to do that evaluation at the beginning when you’re thinking about entering a new jurisdiction, because the regulators might have a very different idea about what’s acceptable.”
Casas said if her tribe hadn’t started laying the groundwork for evaluating the structure prior to going through the acquisition, they would have missed the due-diligence timing and wouldn’t have been able to acquire the Palms.
“It’s important to set realistic expectations for evaluating and starting down that journey,” Casas said. “For us, the structure took about two years and the licensing was one-and-a-half to two years.”
