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Analyst Says Unusual Deal by Park Place and Indian Tribe in New York is a Smart Move

26 April 2000

Jason Ader, senior gaming analyst at Bear Stearns, praised the reported deal between Park Place Entertainment (NYSE: PPE) and the St. Regis Mohawk tribe as another example of Park Place's wise growth strategy.

In a report Tuesday, Ader commented on newspaper articles this weekend that said Park Place was working with the Mohawks to develop a tribal casino in the Catskills, and possibly elsewhere in New York.

"While a signed deal with the tribe has not been confirmed by the company," Ader said in his report, "we believe Park Place will pay $3 million for the exclusive option to develop and manage any Native American casino in the state with the Mohawk tribe."

The deal, if it exists, is unusual because of the project's tenuous status -- legislative approval is needed for any such casino -- and because it would draw business from Atlantic City, where Park Place is the dominant operator.

But Ader said a casino at Monticello raceway in the Catskills could open before any of the major new hotel-casinos open in Atlantic City, and cold discourage competitors in Atlantic City from building new projects.

"As such, we believe this is currently a win-win situation for PPE," Ader said, "given its nominal capital investment coupled with the potential sizeable returns that could occur. In our view, this is another example of Park Place's growth strategy of executing upon a low risk/high return project with substantial upside to the company's earnings."

A Catskills casino could generate $1-$1.5 billion in annual revenue, the analyst estimated, with Park Place getting $90-$120 million of that in management and development fees.

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