Canadian Gaming Operator Gateway Casinos & Entertainment Seeks Lower Lease Payments

The British Columbia-based gambling operator Gateway Casinos & Entertainment Ltd. (“Gateway”) announced that the Western Fair District and London city hall should reduce the ground-lease rental rates or sell the land to the operator supposing that their priority is the modernization of the worn-out gambling venue at fairgrounds. Gateway projected that the casino expansion is to generate a solid revenue of $140 million, but the artificial boosting of the ground-lease rental rates may obstruct the operator’s plan to develop the slots-only gambling venue.
As it can be recalled, Ontario Lottery Gambling Corp. (OLG) announced Canada’s gambling operator Gateway as the preferred operator to assume the right to operate “the Southwest gaming bundle”, which includes a casino in Point Edward and slot-machine operations at Woodstock Raceway, Western Fair District, Clinton Raceway, Dresden Raceway and the Hanover Raceway.
Under the terms of the deal, OLG is to receive a guaranteed payment on an annual basis and the host municipality is to receive a share of the revenue. At present, Western Fair receives checks from OLG every year, buying the right to operate the slot-only casino. The arrangement between OLG and Western Fair is valid until 2020 and OLG is obliged to pay $6 million per year. But Gateway disapproved this arrangement, hoping that London city hall and western Fair district will either reduce lease payments or sell the land.
Gateway’s Objections to the Lease Payments
On Monday, Gateway spokesperson Rob Mitchell informed that the gambling operator keeps its eyes peeled for other opportunities in London. He added that Gateway prefers to invest in expanding the casino venue at Western Fair District, but it does not exclude any other options. Mr. Mitchell declined to provide any details regarding the “other options”, but he outlined that the excessive ground-lease rental rates might be a good reason for the operator to redirect its attention. According to Mr. Mitchell, it is not profitable at all for a private-sector company to ink such an agreement.
In response to Gateway’s demands, Councilor Phil Squire commented that the officials should not step back from the arrangement’s terms as it brings broad economic benefits to London. He implied that the casino is not in the position to dictate the rules and the ground-lease rental rates are negotiable supposing that the city collects more revenues from the casino.
It is interesting to note that some time ago, the OLG announced its plans to open a bidding process to trust its facilities in Southwestern Ontario in the hands of a private company. This move came as a part of OLG’s attempts to modernize its gambling venues and improve the total profit of its operations. As a result, OLG selected Gateway as the service provider for Southwest Gaming Bundles. The awarded company unveiled plans to invest more than $200 million in the region and create hundreds of new job opportunities.