Pennsylvania could be getting a new casino, this one close to State College.

Ira M. Lubert, the Philadelphia investor who opened the Valley Forge Casino Resort in 2012 and sold it six years later for $280.5 million, was declared the winner of an auction for a new mini-casino license, which would allow him to build a scaled-down gambling facility with as many as 750 slot machines.

In a sealed bid opened by the Pennsylvania Gaming Control Board, Lubert’s bid of $10,000,101 was declared the winner of the one available license for a Category 4 casino, a so-called mini-casino. A second, runner-up bidder was not identified. The minimum bid was $7.5 million.

Lubert named Unionville Borough in Centre County as the center of a 30-mile diameter circle in which he will later identify a specific location for the casino. Within that territory, he could locate a casino in any municipality that did not previously prohibit a Category 4 casino from locating there.

A leading candidate for the site is the Nittany Mall in College Township, near the Penn State University campus. Lubert, a former Penn State board chairman and current board member, was identified in 2018 as a member of Nittany Gaming LLC, which had obtained an option to lease a former department store in the Nittany Mall. The mall is about three miles northeast of State College borough, which opted out as a casino location.

Lubert must pay the full $10 million fee by 4 p.m. Friday, and submit a formal license application in six months identifying the location.

The auction does not mean that Lubert is guaranteed to get a license. He still must provide detailed plans and information concerning the proposed building site, amenities, and job projections of the project before the commission issues a license.

Wednesday’s auction for a single satellite casino license was made possible when a previous auction winner, Mount Airy Casino Resort, was formally denied a license for a site in Beaver County after failing to obtain financing for the project. The General Assembly passed legislation in May that required the gaming board to conduct the auction.

The legislation spelled out new auction rules that were designed to dramatically expand the universe of potential bidders for the mini-casino license. The new rules allowed any principal investor in one of the state’s casinos to bid on the new license, not just the 13 current casino licensees. Dozens of individuals, already vetted by the state as casino investors, were eligible to bid.

Lubert was eligible to bid because he is a principal of Rivers Casino Pittsburgh, where he holds a 3% interest. He previously was a shareholder in the Valley Forge Casino Resort in King of Prussia, which he and his partners sold for $280.5 million in 2018 to Boyd Gaming Corp. of Nevada.

The losing bidder in Wednesday’s auction was not identified, and because its bid came in second, a sealed envelop that contained the location it had identified was not opened.

Cordish Cos., the Baltimore-based entertainment and real estate firm that is building a full-scale casino-hotel on Packer Avenue next to Philadelphia’s sports stadiums, told PlayPennsylvania.com that it intended to bid for the new mini-casino license.

Ira M. Lubert and his partners appears at the 2012 opening of the Valley Forge Casino Resort in King of Prussia. Lubert, who sold the Valley Forge property in 2018, on Wednesday was declared the winner for a new mini-casino license and identified an area around State College where it will be located.
Clem Murray
Ira M. Lubert and his partners appears at the 2012 opening of the Valley Forge Casino Resort in King of Prussia. Lubert, who sold the Valley Forge property in 2018, on Wednesday was declared the winner for a new mini-casino license and identified an area around State College where it will be located.

The Category 4 casino licenses are unique to Pennsylvania and were part of a 2017 gaming law that dramatically expanded gambling options, including sports betting, online gaming, and video gaming terminals. The mini-casinos can contain up to 750 slot machines, and for an additional fee, up to 40 table games. A full-sized casino is much larger: Parx Casino in Bensalem, the state’s biggest gaming property, has 3,200 slot machines, 198 table games, and a sports-betting room.

The gaming board previously awarded license rights to five mini-casino bidders in 2018 after two rounds of auctions that generated more than $100 million in fees to the state. The Mount Airy license was later denied, leaving four mini-casino projects. There were no bidders at last year’s auction.

Three mini-casinos are under construction, but none has begun operations. One project, the Live! Casino Pittsburgh property owned by Cordish, is on track to open later this year in the Westmoreland Mall near Greensburg. Cordish’s flagship property, the Live! Casino and Hotel Philadelphia, is set to open early next year.

The law specifies that a new Category 4 casino can be built no closer than 40 miles from an existing casino or satellite casino. More than 1,000 of the state’s 2,500 municipalities also opted out of hosting mini-casinos. That left few areas of the state near population centers that would generate sufficient traffic to support a casino.

If Lubert does not locate his casino at the Nittany Mall, he could choose any other location within the 30-mile diameter area that is also in a municipality that has not banned casinos. Operators of the mini-casinos have tended to locate them near major highway interchanges, and, in two instances, in former anchor stores in shopping malls.

The Category 4 casinos were originally envisioned as satellite operations of flagship casinos, but if Lubert succeeds in his application, his would be the first independent mini-casino.

That means Lubert’s casino would not get some of the benefits that go to the other mini-casinos that operate as satellites, such as opening a sportsbook by piggybacking on the sports-betting licenses of the flagship casino. Lubert as an independent operator would need to apply for a separate $10 million sports-betting license if he wanted to open a sportsbook near the Penn State community.

But Lubert, who is chairman and cofounder of Independence Capital Partners and Lubert Adler Partners, has demonstrated that he knows how to extract value out of a casino license.

Lubert and his partners paid $5 million for the Category 3 license for the smaller Valley Forge Casino Resort, which opened in 2012 after withstanding legal challenges from rivals that paid $50 million for their licenses for full-sized casinos.

Valley Forge initially was open only to guests at the hotel and visitors who obtained a membership. But after the 2017 gaming law changed the rules, Valley Forge was allowed to pay the state $1 million to opt out of the requirement limiting entry to members only, broadening the casino’s potential audience.

A few months later, Valley Forge was sold to Boyd Gaming Inc. for $280.5 million.