City Puts Brakes on Philadelphia Casinos

The developer of a $550 million casino on the Philadelphia waterfront is preparing its next move after yesterday’s decision by Mayor Michael Nutter to revoke a key city license for the controversial project, one of the city’s largest planned developments. Nutter, who took office Jan. 7, reversed an eleventh-hour decision by his predecessor, John Street, to grant the developers of the SugarHouse Casino a permit to build part of the project on submerged city-owned land. The decision appears to be a significant setback for the project, which will now require additional study before construction can begin.  In a statement, SugarHouse’s developer, HSP Gaming L.P., contended that the city’s move is “contrary to law” because of pending litigation. “We fully expect the City, regardless of a change in its administration, to honor all of its contractual obligations … We are disappointed by these actions and will seek the appropriate relief immediately.” HSP Gaming is a limited partnership led by Neil Bluhm, president of JMB Realty Corp. and a principal at Walton Street Capital, and Greg Carlin, a managing director of LAMB Partners.  It is unclear how much Nutter’s decision to withdraw the license will delay construction of the 3.3 million-square-foot project, which is scheduled to open its first phase next year. Located on the former site of the Jack Frost Refinery, a 23-acre site on the Delaware River, the complex would join other major projects planned for the city, such as the $755 million second phase of the Cira Center and the $700 million expansion of the Pennsylvania Convention Center. At full buildout, the SugarHouse project would include 5,000 slot machines in a 220,000-square-foot gaming area, a 750-key hotel and a 500-key hotel, plus restaurants and a 2,600-car parking structure.  Despite support from Pennsylvania Gov. Ed Rendell, the SugarHouse casino has gathered strong opposition from local residents and state legislators who are worried about the casino’s impact on the community. In November, a coalition of local community groups and residents filed a federal lawsuit seeking revocation of the casinos’ licenses. The plaintiffs charge that the projects will foster crime, pollution and traffic congestion and allege that conflict of interest marred the approval process. The city’s other state-licensed casino, a $560 million Foxwoods Casino, also received a blow on Thursday. In a separate move, the city council proposed a measure stipulating studies of the project’s environmental and economic impact before zoning issues come to a vote, according to a report by Marcia Gelbart in today’s Philadelphia Inquirer. The Mayor said he would back that legislation.