Diamondhead Casino still in the game

by Wally Northway

Published: November 13,2009

Tags: casinos, gaming, hospitality, travel and leisure

DIAMONDHEAD — Deborah Vitale says jokingly that one day she will write a book, then a musical, on the saga of her professional struggles over the last decade-plus to get a gaming venue built on the Mississippi Gulf Coast. President of Diamondhead Casino Corporation (OTBB: DHCC), she can only chock up her company’s survival to divine intervention.

“It is almost as if God likes to gamble,” said Vitale with a laugh. “Every time it looked as if we were at the end of our rope, a miracle would happen and kept us alive.”

It has been a steep climb ever since Florida-based DHCC purchased approximately 400 acres of land on the Bay of St. Louis near the community of Diamondhead in 1993. The property seemed ideal for a casino — two miles of waterfront property along bustling I-10. What could go wrong?

The first issue that arose seemed a deal-killer. Pre-Hurricane Katrina state law required casinos on the Coast to draft a minimum of six feet of water. The Bay of St. Louis is relatively shallow. To meet state law, the venue would have to be sited approximately 1,000 feet in the bay. Not surprisingly, environmentalists opposed this option and took their concerns to court. But, their concerns were a moot point. Building a bridge that long was not financially feasible, and potential investors/partners took one look and walked.

In the mean time, DHCC almost lost the property. The company owned four underperforming casino ships in Florida. All were in debt, and all were cross-collateralized with the Diamondhead property. If any one of those boats “went under,” the company would lose its Mississippi property.

That is why Vitale was brought on board in 1998. A lawyer by trade, she was charged with divesting the company of what she called four “leaky, rusty boats.” It proved a monumental task as the boat operations owed millions to the IRS, the State of Florida, vendors “and just about every other entity you can think of,” Vitale said.

It took eight years, but DHCC emerged owning the Mississippi property debt- and obligation-free.

That still left the site problem. However, Katrina in 2005 remedied this issue. Post-storm, Mississippi law was amended to allow casino construction on the land. No longer required to build out in the bay, the project looked to be back on track.

Money, however, remained an issue. DHCC wanted to go it alone, which would be much more lucrative for the company’s approximately 3,000 shareholders. But, the company lacked the funding, so it began searching worldwide for a partner. Over time, DHCC entertained a number of prospects, such as Casinos Austria International Holding, GMBH, which signed a letter of intent. Unfortunately, that deal did not materialize, though DHCC says the company remains interested. The search for a partner is ongoing, and in a statement, the company told its shareholders that there remains “significant interest in our gaming site, both domestically and internationally…”

But, it looked recently as if time might have finally run out on the project. The Diamondhead property is zoned as a Special Use District-Waterfront Gaming District, which permits the casino’s development. On Oct. 15, 2009, the Hancock County Planning Commission voted to approve the special use exception through Dec. 31, 2010 — with a caveat. DHCC had to submit a master plan for review before an additional extension would be granted.

Vitale said she learned of this not from the commission, but rather from a journalist. In another example of a “miracle,” Vitale had already hired a company, EDSA, to execute a master plan. She said had talked to the firm for months, and had signed a deal with EDSA in September.

Vitale is adamant that she had no inkling of the master plan requirement that the commission set forth in October when she hired EDSA the prior month. Instead, she signed EDSA because every prospect DHCC entertained wanted to execute its own master plan, which cost time. So, she decided to have a plan drawn up to forego this hurdle. That it met the commission’s requirement was a major plus.

“It was another miracle,” she said.

Vitale and DHCC are soldering on. The master plan is still incomplete, but Vitale envisions a complex built in phases. Phase one would consist of a casino, hotel, entertainment center, business conference center and European health spa. Phase two could consist of condominiums and apartments while the third phase would bring a boardwalk.

After all of this time, it would seem DHCC would be driving even harder to consummate a deal. But, Vitale said the firm is not in a rush. It would get the master plan in hand, submit it to the commission and continue to market the property.

“The people of Diamondhead have been very supportive,” she said. “I have promised them that we are going to build something nice. We are not going to do anything until everybody is happy with the master plan.”

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