SugarHouse partners spar in court over expansion's scope

WILMINGTON - If Philadelphia has a second casino built, SugarHouse Casino could see its revenue drop by 24 percent, a gaming consultant testified in Chancery Court on Thursday.

Because of shifts in the competitive local market for gaming, the owners of SugarHouse would be prudent to scale back their expansion plans, said Steven Rittvo, president of Innovation Group, a casino advisory firm.

In 2009, when SugarHouse broke ground on Delaware Avenue in Fishtown, the goal was to have expanded the size and scope of the casino by now, including doubling the number of slots to 3,000 and adding a 10-story parking garage. The revised plan is to increase to only 2,000 slots and construct a six-story garage.

But everything is on hold as the casino's partners from Chicago face resistance to the plan from their Philadelphia counterparts, led by lawyer Richard Sprague and auto magnate Robert Potamkin.

The Philadelphia investors have sued here, arguing that the terms of their partnership should give them veto power by "supermajority" vote. They would rather proceed with a more ambitious expansion.

"There is no reason to have a facility as large as" what was envisioned in 2009, said Rittvo, testifying for the two key Chicago partners, billionaire developer Neil Bluhm and SugarHouse chief executive Gregory Carlin.

For two days in August, Chancery Judge Donald F. Parsons Jr. heard from Sprague, Potamkin, and Bluhm. In the final day of testimony Thursday, the fourth managing partner - Carlin - took the stand.

With the close in testimony, the sides now will have to file final briefs, with closing arguments before Parsons to follow in the weeks ahead. Parsons told the parties that it could take him from three to four months after that to decide the case.

Carlin said that changes in the competitive local gaming market, made worse by the economic downturn, have necessitated a different approach to the casino's next phase of development.

He said the proposed expansion will create a more spacious gaming environment.

In recounting the history of the project, Carlin disclosed that the partners had such a difficult time raising money in 2008 that they considered starting with a temporary tentlike structure.

Instead, it was decided to build in phases, starting with an interim casino.

After the end of testimony, Parsons said the defense's argument for scaling back the project "made sense." But Bluhm and Carlin, he added, were "careless" in losing track of the budgeted development cost.

And that, Parsons said, is critical to the case of the Philadelphia partners. Under the agreement, the supermajority votes kick in if the actual costs vary too much from the budgeted estimate.