Experienced executives to join casino project

Editor's note: One in a series of stories on the casino, a topic that The Gazette considers a content priority for 2013.

CEDAR RAPIDS - Three former top executives of a company that sold its two Iowa casinos will manage the development and operation of a proposed Cedar Rapids casino if investors secure a state gaming license.

Steve Gray, lead investor for Cedar Rapids Development Group LLC, said his group picked the three leaders of the former Peninsula Gaming LLC as partners in the Cedar Rapids casino project because of their track record as top casino operators in Iowa and operators of casinos that “have led the industry in growth.”

“But what really resonated with our local investors was the fact that they shared our vision for economic development and revitalization in downtown and on the west-side riverfront,” Gray said.

Gray, founder of Gray Venture Partners, and his group of more than 160 mostly local investors have picked a site on the west side of the Cedar River across from downtown to build a $110 million casino.

Dubuque-based Peninsula Gaming LLC owned the Diamond Jo Casino in Dubuque and the Diamond Jo Casino in Worth County along Interstate 35 near the Minnesota border before selling them to a larger casino company, Boyd Gaming Corp., in November for a reported $1.45 billion.

Peninsula Gaming LLC also sold its other three properties to Boyd: the Kansas Star Casino near Wichita, Kan., Evangeline Downs Racetrack & Casino in Opelousas, La., and the Amelia Belle Casino in Amelia, La.

The former Peninsula's three top executives - Brent Stevens, one of Peninsula's founders and the company's chief executive officer, Natalie Schramm, chief financial officer, and Jonathan Swain, chief operating officer - have formed the gaming management company JNB Gaming LLC, and will be partnering with the Cedar Rapids Development Group LLC.

Gray said an affiliate of JNB, Peninsula Pacific Cedar Rapids LLC, also is investing in the Cedar Rapids casino, but local investors will retain majority ownership. Peninsula Pacific Cedar Rapids' initial stake in the Cedar Rapids casino will be less than 30 percent, Gray said.

He said Stevens, Schramm and Swain are the principals in both JNB, the casino management firm, and the investor entity. Stevens also is involved in the new land-based casino that is to be built in Sioux City, Gray said. Schramm and Swain reside in the Dubuque area, he added.

Brent Oleson, a Linn County supervisor and one of five members of the non-profit Linn County Gaming Association, said he has met JNB gaming team and is impressed with them.

“The management team has significant Iowa and Midwest roots, have created and run the most unique and premier gaming facilities, and like our local investors, will become local stakeholders in our community in making this Linn County gaming facility a catalyst for economic growth and more entertainment options,” Oleson said.

Another member of the Linn County Gaming Association, Leah Rodenberg, agreed.

“By selecting a regarded and accomplished operator that also shares our commitment to community, we know that we're on the right track to achieve the best possible outcome for Linn County residents,” Rodenberg said.

Much of the site picked as the location for the Cedar Rapids casino was acquired in the city's flood-recovery buyout program and is vacant. City officials and Gray's group are in the final stages of inking a sale and development agreement on the land, a necessary step before the group submits an application for a state gaming license to the Iowa Racing and Gaming Commission by a Sept. 3 deadline.

The commission, which will conduct an analysis of the status of gaming in the state, is expected to decide on the Cedar Rapids proposal in the first part of 2014.

Gray said the local investor group had initial talks with more than a dozen casino operators early this year before three top picks were selected in March for further discussions. In June, the Cedar Rapids group entered into exclusive negotiations with the threesome from the former Peninsula Gaming.

From the start, he said the local investors had three primary criteria in picking a casino manager: previous financial and operating performance; relationship and record with the Iowa Racing and Commission; and the ability and willingness to invest.

According to figures provided by the Iowa Racing & Gaming Commission, Peninsula saw healthy revenue and attendance increases at both of its former Iowa casinos in the last four and six years, attributable in part to the fact that the Diamond Jo Worth opened in April 2006 in a new market and the Diamond Jo Dubuque moved to a new, larger land-based facility in 2008.

The Dubuque casino saw revenue increase 18 percent in the four-year period ending in 2012 and admissions increase 7 percent in that time. The Worth County venue saw revenue increase 15 percent in the last four years and admissions increase 16 percent, all while casino gaming statewide stayed relatively flat.

Brian Ohorilko, administrator with the Iowa Racing & Gaming Commission, said both of the former Peninsula-owned casinos “have demonstrated nice growth” and both have seen the casino company reinvest back into the facilities. The Worth County facility, he noted, expanded and increased amenities and devices more than once to meet market demand.

“In terms of compliance with the rules and regulations of gaming, we have not experienced any material issues with Peninsula,” Ohorilko added. “They have historically responded promptly and reacted accordingly to the IRGC in the event inquiries have come up.”

Gray said the three former Peninsula executives already have helped the Cedar Rapids group in its casino design plans.

Gray said the group and its new partners continue to study three possible options for a Cedar Rapids casino. The casino, if built, would be anywhere from 140,000 to 175,000 square feet in size, have 800 to 1,000 slot machines and 25 to 30 table games, he said.

By way of comparison, the Diamond Jo Dubuque has 996 slot machines and 19 table games; the Riverside Casino and Golf Resort, 1,144 slot machines and 46 table games; and the Isle Casino Hotel Waterloo, 950 slot machines and 27 table games.

Gray has said the Cedar Rapids casino would be three-stories tall, with a first floor for parking in case of flooding and the top two floors for gaming, restaurants and other casino amenities.

The casino would sit between First and Second Avenues SW and First and Third Streets SW with a parking ramp across First Avenue West and connected to the casino by a skywalk.

Gray noted that the City Council and local developers have named the neighborhood in and around the casino site Kingston Village as developers work to save some historic buildings and plan for new investment there.

The new casino will be “the anchor attraction” for Kingston Village, he said.