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Casino Searches for Investors

Deidre Bello

Iowa City Press-Citizen

February 26, 2005

[Note: This material is copyright by the Press-Citizen, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of the Iowa City Press-Citizen.]

Backers of a proposed Riverside Casino and Golf Resort are advertising for no more than 500 local investors looking to buy into their $107 million project.

Washington County Casino Resort, LLC, which includes owners of the Fort Madison-based Catfish Bend Casinos and Dan Kehl, of Kehl Management, had two of seven prospective investor presentations and informational meetings Friday that will continue next week.

Julie Oriano of rural Riverside was one of about 40 Washington County residents who decided to attend after talking with friends in southeast Iowa, home of Catfish Bend Casinos in Burlington and Fort Madison.

"People that invested in Burlington said they've gotten a pretty good return back," Oriano said. "They still get dividend checks quite often."

The non-profit Washington Riverboat Foundation Inc. and operating company Washington County Casino Resort LLC are applying for a gaming license from the Iowa Racing and Gaming Commission. If state regulators approve a license in May, construction of the casino and golf resort could start this summer and the facility could open for business in 2007.

Washington County Casino Resort LLC is offering up to 5,833,333 shares at $3 a share. A minimum investment of 1,000 shares, or $3,000, is required. The maximum purchase is 525,000 shares, or 4.5 percent of the total $35 million in equity. The investors must be Iowa residents and must meet other criteria set by the Iowa Securities Insurance Commission, Kehl said.

"If there are any profits, hopefully people will take that money and reinvest that into the community," Kehl said.

In southeast Iowa, local investors own 500 shares of Catfish Bend Casino. Meanwhile, 51 percent of the Mississippi Bell II in Clinton is owned by employees.

The idea of local ownership for casinos is something unique that the Kehl family and its associates have supported for years, Kehl said.

In Washington County, Catfish Bend Casinos L.C. would own 43.75 percent of the operating company, Washington Casino Resort LLC. Kehl Management, which owns part of Catfish Bend Casinos, would own 6.25 percent, and local investors would own the remaining 50 percent.

Washington County residents would be first in line to buy stock in the project within the first 20 days after a license is approved, Kehl said. After that, the stock will be open for purchase by residents outside the county, he said.

Ken Bonnet, a financial officer for the Riverside project, said there are about 15 risk factors people should consider before investing. The risks include conflicts of interest, competition and licensing uncertainty. Potential investors likely will need to have the money to purchase stock in early June, he said.

The goal is to raise a maximum of $35 million in equity, Bonnet said. The casino company will loan about $77 million for the project, he said.

After the first year of operation, projections made by the casino company estimate the facility will bring in about $94 million in revenue from gaming, hotel use, golf course use, and food and beverage sales, Bonnet said. The company hopes to reduce debt to $12.5 million by the fifth year of operation. Still, casino officials estimate shareholders could see return in their investment after the first year, said Joe Massa, general manager for Catfish Bend Casinos.Ron Harland stopped into the Amoco BP near the Highway 22 and 218 interchange, not far from where the proposed casino might get built. Harland, who is retired and lives in Kalona, is neutral about the casino issue but said the state will have to use some of the revenue to counter problems that could arise from more gaming.

"I would not be opposed to the casinos; I see the good and the bad of it," Harland said. "But I probably wouldn't invest, for personal reasons."