Suffolk OTB to buy Jake’s 58 casino, hotel from operator Delaware North in $120M deal

Suffolk OTB plans to buy out the Buffalo company that owns and manages Jake’s 58, the highly successful Islandia video-lottery casino that helped OTB escape bankruptcy last year, officials said Wednesday.

Hauppauge-based OTB is in talks to buy the property, including the 228-room hotel that houses the casino, from Delaware North in a deal estimated at $120 million, including the purchase price and costs to buy out Delaware North’s annual management fee, officials said.

The deal was confirmed to Newsday by spokesmen for both Suffolk OTB and Delaware North.

What to know

  • The OTB is in talks to buy Jake’s 58 and the 228-room hotel that houses the casino, from Delaware North in a deal estimated at $120 million
  • The purchase will save Suffolk County Regional Off-Track Betting Corp. about $13 million a year in rental and management fees paid to Delaware North
  • The deal will free the OTB of the last 46 years of its contract Delaware North 
  • Since opening in February 2017, Jake’s 58 has consistently ranked among the highest earning video-lottery betting parlors in New York State

Buying the property on the Long Island Expressway North Service Road will save Suffolk County Regional Off-Track Betting Corp. about $13 million a year in rental and management fees paid to Delaware North, get OTB out of the last 46 years of its contract with the company and put OTB into the hotel business.

Suffolk County officials plan to hire gaming industry consultant GGH Morowitz — which has offices in Manhattan, Las Vegas and Atlantic City — to conduct a yearlong study of the plan.

In a statement, Suffolk OTB said taking over the casino will benefit OTB and Suffolk taxpayers by cutting costs and contributing more to county coffers.

“As part of the management agreement between Suffolk OTB and Delaware North, Suffolk OTB has an option to purchase the Jake’s 58 property and buy out the remaining term of Delaware North’s management agreement for the gaming operation,” spokesman Jon Schneider said in the statement. “Simply put, ownership of the Jake’s 58 property and management of the casino hotel will put Suffolk OTB in a position to contribute more money to Suffolk County than it otherwise would, a benefit that will only grow in time.”

Brian Hansberry, Delaware North’s president of gaming operations, said the company will continue to run the hotel and casino until the sale is completed.

“We thank our management team and associates who have played a vital role in Jake’s 58 achieving incredible success since opening, and we look forward to working with SROTB on a smooth transition and wish them success,” Hansberry said in a statement.

Jake’s 58 has been phenomenally successful since it opened in February 2017, consistently ranking among the highest earning video-lottery betting parlors in the state. Since reopening in September, the casino has raked in $1.748 billion in bets, or about $250 million per month, according to state Gaming Commission records. About 93% of those earnings were paid to bettors; the rest was paid to Delaware North, casino vendors and the state public school system.

But Suffolk OTB and Delaware North have squabbled over sharing the casino’s revenues. OTB sued the company in October 2019, alleging that Delaware North used the casino as a “piggy bank” to cover the company’s construction costs, rent and other expenses.

Delaware North countersued, and the two sides announced a settlement months later.

Casino revenues helped Suffolk OTB escape bankruptcy last year by paying millions of dollars it owed to vendors.

Suffolk OTB chief executive Jim LaCarrubba, who took over the agency in December, has said he plans to expand Jake’s 58 by doubling its 1,000 video lottery terminals. OTB also has proposed building a 160,000-square-foot casino with restaurants, bars and an underground garage on property it owns in Medford.

Both plans face hurdles: Adding terminals requires approval from state authorities, and opening a Medford facility would face opposition from residents there and Brookhaven Town officials.

The deal to add the video lottery casino to the hotel was approved in August 2016 by the Islandia Village Board. As part of the deal, Delaware North agreed to pay the village a total of $47 million over 20 years. OTB will make the remaining payments owed to the village, officials said.

Some Islandia residents and Ronkonkoma civic groups sued Islandia, alleging that the village board erred in approving the casino. The case has been stalled in U.S. Bankruptcy Court in Brooklyn because of the coronavirus pandemic.

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