Update: Mid-Hudson Economy Suffers Severe Major Setbacks: Troubled Casino to be Acquired, Stewart Loses Major Airline

John Jordan | August 2019

NEW WINDSOR—Talk about a double gut-punch to the Mid-Hudson economy. Empire Resorts, Inc, after suffering continued losses at its Resorts World Catskills Casino in Sullivan County, revealed recently that it may have to file for Chapter 11 bankruptcy and has agreed to be taken private by its majority shareholder.

In Orange County, the success story of low-cost carrier Norwegian Airlines, which has been an unbridled success since it began service at New York Stewart International Airport in New Windsor, has come to a close. The airline announced on Aug. 13 that due in large part to the grounding of the Boeing 737 Max, it will be ending transatlantic flights to Ireland and other European destinations from the airport on Sept. 15.

Empire Resorts, after earlier threating possibly filing for bankruptcy, announced on Aug. 19 that it had reached a definitive agreement where affiliates of Kien Huat Realty III Limited and Genting Malaysia Berhad will acquire all of the outstanding equity of the company not currently owned by Kien Huat or its affiliates for $9.74 in cash per share of common stock, and with each share of the Company’s Series B preferred stock receiving the same consideration on an as-converted to common stock basis. Kien Huat is currently the holder of approximately 86% of Empire Resorts’ outstanding shares of common stock, including common stock issuable upon conversion of the Company’s Series F convertible preferred stock.

Among Genting Malaysia’s holdings include Resorts World New York City in the Jamica section of Queens.

The purchase price represents a premium of approximately 15% over the closing share price of Empire Resorts’ common stock on August 16, 2019, the last trading day prior to today’s announcement, the company announced. The Board of Directors of Empire Resorts has approved the transaction on the unanimous recommendation of the previously formed special committee of independent directors.

“We are pleased to reach this agreement and provide immediate certain cash value to our stockholders,” said Keith Horn, independent director of Empire Resorts and chair of the special committee. “Kien Huat has been a true partner for Empire Resorts, and we look forward to welcoming Genting Malaysia into our ongoing relationship. With Kien Huat and Genting Malaysia, we will be part of an extensive and attractive organization with enhanced scale and global reach. Importantly, Kien Huat has agreed to provide incremental credit support to Empire Resorts, which will enable the Company to meet its debt obligations as we continue to execute on our business strategy.”

Ryan Eller, president and CEO of Empire Resorts, said, “With the resources and support of Kien Huat and Genting Malaysia, Empire Resorts will be better positioned financially and operationally, which will help us advance our mission of delivering a winning combination of luxury facilities, quality entertainment and exceptional customer service. This transaction is a win-win for all our stakeholders, including our stockholders, customers, employees, creditors and the communities in which we operate. Importantly, we expect our employees will benefit from new opportunities for career development as part of a larger organization. I look forward to working closely with Kien Huat and Genting Malaysia to seamlessly complete the transaction.”

Empire Resorts, the parent company of Resorts World Catskills and other operations at the gaming and entertainment property in the Town of Thompson, in an Aug. 9 filing with the Securities and Exchange Commission, announced that in the second quarter it posted a net loss of more than $36 million and total net losses so far for the first six months of this year of approximately $73.7 million.

In the filing, Empire Resorts stated that it has suffered losses at the casino since its opening in February 2018.

“Given our continuing negative cash flows from operations, and in order to meet our expected cash needs for the next 12 months and over the longer term, we will be required to obtain additional liquidity sources or possibly restructure our existing debt and other obligations. If acceptable terms of a restructuring cannot be accomplished, we may not have enough cash and working capital to fund the operations, and satisfy the obligations of, Montreign Operating beyond the near term, which raises substantial doubt about our ability to continue as a going concern,” Empire Resorts stated. As a result, we may be required to seek to implement an in-court proceeding under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) with respect to Montreign Operating and its subsidiaries, which own and operate the Casino, The Alder and the Golf Course Project,” Empire Resorts stated.

On July 25, majority shareholder Kien Huat, the family trust controlled by Genting Chairman KT Lim, made an offer to acquire the remaining unaffiliated shares of Empire Resorts in order to take the company private.

Lim, who currently owns 86% of Empire Resorts, said at the time he planned to immediately start discussions with potential financing sources to acquire all of the outstanding shares of the company.

Resorts World Catskills Casino in Sullivan County

“Today’s announcement reaffirms Mr. Lim’s strong commitment to Resorts World Catskills. We strongly believe that taking the company private will result in greater efficiencies and a bright future for Resorts World Catskills, and Sullivan and Orange Counties,” said Stefan Friedman, Spokesperson for Genting Chairman KT Lim.

In addition to protecting the 1,600 jobs currently at Resorts World Catskills, Sullivan County’s largest employer, KT Lim and Kien Huat plan to potentially expand operations into Orange County, creating an additional 300 jobs. Empire Resorts has proposed to build a $100-million gaming facility in Orange County, perhaps at the former Nepera Chemical property in Harriman.

Friedman continued, “This is a natural next step for Mr. Lim to take on a larger role in leading Resorts World Catskills as it enters this next chapter. Mr. Lim strongly believes in the long-term potential of Resorts Word Casino Catskills.”

Resorts World Catskills includes an 18-story all-suite hotel and a casino and entertainment complex featuring 100,000 square feet of gaming action including 150 live Las-Vegas style table games, 2,150 state-of-the art slot machines, a poker room and private gaming salons.

The casino resort destination also offers more than 10 varied bar and restaurant experiences, which includes an Italian steakhouse created by celebrity chef Scott Conant, and year-round live entertainment at the 2,500-seat RW Epicenter, casino bars and lounges. The hotel features 332 luxury suites, including 27 premium accommodations consisting of garden suites, penthouse suites and two-story villas. Additional hotel amenities include the Crystal Life Spa, two indoor pools, and two fitness centers.

The destination resort in which Resorts World Catskills is located also includes an entertainment project providing additional entertainment, food and accommodations. A Rees Jones-redesigned golf course will also be added, and The Kartrite Hotel and Indoor Waterpark opened to the public in April.

Meanwhile in Orange County, the loss of Norwegian Airlines comes at a time when the carrier was the primary cause for a significant increase in air passenger traffic at New York Stewart International Airport.

In its April 13 announcement, Norwegian Airlines stated that it was halting all flights between Ireland and North America, thus affecting airports in Providence, RI and Hamilton, Canada, in addition to Stewart.

“As the airline moves from growth to profitability, we have conducted a comprehensive review of our transatlantic operations between Ireland and North America and considering the grounding of the Boeing 737 MAX aircraft, we have concluded that these routes are no longer commercially viable,” said Matthew Wood, SVP Long-Haul Commercial at Norwegian.”

He added, “We take a strict approach to route management and constantly evaluate route performance to ensure we meet customer demand. Compounded by the global grounding of the 737 MAX and the continued uncertainty of its return to service, this has led us to make the difficult decision to discontinue all six routes from Dublin, Cork and Shannon to the US and Canada from 15 September 2019.”

Orange County Executive Steven M. Neuhaus released the following statement on Tuesday after Norwegian Air announced that it would discontinue service at Stewart International Airport in Newburgh in mid-September.

“Norwegian Air’s arrival to Stewart Airport two years ago was received with excitement and the carrier performed well in Orange County,” Neuhaus said. “Unfortunately, the safety issues experienced this year with the Boeing 737 Max, which had a worldwide impact, played a prominent role in this decision. Norwegian proved that Stewart Airport is a viable option for International flights and the airport will continue the construction of a new customs facility. With attractions in Orange County such as LEGOLAND and Woodbury Common, having an International carrier here is a natural fit. I will continue to work with the Port Authority to attract respected carriers to Stewart Airport.”

John Jordan
Editor, Real Estate In-Depth