Independent Analysis Performed by Wells Gaming Research Reno, Nevada

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1 Independent Analysis Performed by Wells Gaming Research Reno, Nevada 1

2 Wells Gaming Research Service You Can Count On! WGR s President is Richard H. Wells. WGR is a privately held corpora:on. Wells Gaming Research (WGR) was established in In 1995, WGR was incorporated under the laws of the State of Nevada. Mr. Wells has over forty (40) years of experience in conduc:ng financial and market feasibility studies for the casino, hotel, banking, and oil and gas industries. 2

3 Wells Gaming Research Service You Can Count On! WGR has developed a custom casino gravity modeling system designed to forecast casino revenues while taking into account the impacts that new or expanded compe:ng casinos could have on the project. The model is customized to include the appropriate trade area and compe::ve casinos for each project. Wells Gaming Research provides Casino Player Count Service a market share tracking service to clients for 335 casinos in Nevada, Mississippi, Louisiana, New Mexico, California, and Asia. WGR market studies in Iowa have included: Spencer, OXumwa, Emmetsburg, Waterloo, Davenport, BeXendorf, and now Sioux City. 3

4 Specifications 16- acre development site under control that is located near the intersec:on of Water and 4 th Streets in downtown Sioux City Renova:on of the historic BaXery Building Large enough to provide ample surface parking and allow for future expansion if market demand exists Excellent access from Interstate 29, Wesley Parkway and US Highways 20 and 77 4

5 Specifications Sioux City 10 acres, bounded by Gordon Drive, Nebraska Street and South Jennings Street Located just one block from I- 29 Has high visibility from I- 29 Access from I- 29 would be via Gordon Drive and Nebraska Street Development plans call for the demoli:on of exi:ng site structures including a Ramada Inn, Holiday Inn, Shopping Center, Gas Sta:on, Speedy Lube, IHOP, and Coffee Shop Hotel and addi:onal covered parking could be built in a future Phase II if market demand warrants 5

6 Specifications Siouxland 37- acre development site bounded by Benton Avenue and 260 th Street at the I- 29 Port Neil Interchange 12 miles southeast of downtown Sioux City Largest of the four poten:al sites and offers the greatest opportunity for unrestricted development Excellent visibility and access from I- 29 I- 29 Interchange will be expanded CF Industries fer:lizer plant $1.7 billion expansion Truck traffic increase by 60,000 trucks per year Gelita USA Inc. manufacturing plant 6

7 Specifications 5.5 acres, smallest of the four Located seven blocks (an es:mated 1,000 yards) north of I- 29 in downtown Sioux City Bounded by 6 th Street, Pierce Street, 7 th Street, and Nebraska Street At :me applica:on was filed, did not control three parcels Restoring the historic Warrior Hotel and Davidson Buildings Across the street from the Orpheum Theater Could be connected by skywalk Visibility and access for the Warrior site is much less desirable than other sites Limited future expansion 7

8 Capacities Hard Rock Casino Sioux City Hollywood Casino Sioux City Hollywood Casino Siouxland Warrior Casino & Hotel Building Size 100,000 sq. i. 100,000 sq. i. 100,000 sq. i. 84,917 sq. i. Slot Machines Table Games poker tables poker tables Hotel Rooms Mee:ng & Conference Space 0 Space for up to 500 Dining Facili:es Entertainment Venues 5 restaurants (1,133 capacity) 2 venues (4,101 capacity) 3 restaurants (305 capacity) 1 Combina:on Entertainment & Events Room (500 capacity) Space for up to restaurants (305 capacity) 1 Combina:on Entertainment & Events Room (500 capacity) Space for up to restaurants (401 capacity) 1 venue (800 capacity) 8

9 Ownership & Management Hard Rock Casino Sioux City William Warner and Brent Stevens, co- owners of the Hard Rock Hotel & Casino, both have impressive track records and would make an excepdonally strong execudve management team Four- member board of managers to oversee management and operadons A general manager and suppordng management team would be recruited and hired Preference would be given to experienced Iowa casino managers and employees William Warner (owner of Warner Gaming in Las Vegas) and Brent Stevens (founder of Peninsula Gaming) would each own 50% of the proposed Hard Rock Hotel & Casino in Sioux City, Iowa Both Warner and Stevens are well qualified and experienced in successfully financing, developing, and operadng large high quality casinos Hollywood Casino Sioux City & Siouxland The exisdng management team at the Argosy Riverboat would be transferred to the new casino Penn NaDonal Gaming, Inc. is a large public gaming company with extensive casino development, management, and operadng experience, as well as financial resources Penn knows how to manage casinos and could do it well Penn NaDonal Gaming, Inc., one of the largest public gaming companies in the US, would own either of the proposed Hollywood casinos Penn NaDonal has owned and operated the Argosy Riverboat in Sioux City since 2006 They currently operate 29 gaming facilides in 19 states/provinces including 14 Hollywood Casinos located in 11 states Warrior Casino & Hotel A four- member board of directors would be appointed by the owners Ho- Chunk Development, LLC would appoint two members Lew Weinberg would appoint one member The equity investor pool would appoint one member A general manager and management team would be recruited Lance Morgan, President & CEO, Ho- Chunk Inc. and Brian Chamberlain, CEO Winnebago Gaming Development CorporaDon will be acdvely involved Gaming management experience is limited to two small low- end slot parlors in Nebraska and a small tribal casino near Sloan, Iowa The Winnebago Tribe of Nebraska, a federally recognized Indian Tribe would be the majority owner (95%) of the proposed Warrior Casino Hotel project Lew Weinberg, current owner of the old Warrior Hotel and Davidson buildings, would be a minority (5%) owner The majority owner would be the Winnebago sovereign nadon, headquartered in Nebraska 9

10 QSOs Hard Rock Casino Sioux City Missouri River Historical Development, Inc. Served as the QSO for the Argosy Riverboat for the past 20 years Hollywood Casino Sioux City & Siouxland Greater Siouxland Improvement AssociaDon Board includes some non- Iowa members Distribu:on would extend into Nebraska & South Dakota Warrior Casino & Hotel Siouxland Strong, Inc. Board includes members living in Nebraska & South Dakota Distribu:on would be limited to Woodbury County 10

11 Financing Hard Rock Casino Sioux City $32 - $37 million in equity from Brent Stevens, founder of Peninsula Gaming and a former execudve with Jefferies and Company $30 - $35 million of preferred conver:ble 8% $2 million line of credit Senior secured financing from Summit Partners Credit Advisors, L. P. $55 - $60 13% + 1% paid- in- kind for 5 years $22 million in TIF bonds issued by Sioux City $10 million in vendor financing Private equity offering $5 - $10 million or more Total financing of $123 - $133 million for a $119 million project Hollywood Casino Sioux City & Siouxland Penn has enough free cash flow to fund each of the two projects Penn generated $507.2 million in operadng cash flow in 2012 The esdmated project cost for Hollywood Sioux City is $140.6 million The esdmated project cost for Hollywood Siouxland is $147.7 million Warrior Casino & Hotel $10 million contribudon of equity from the Winnebago tribe of Nebraska $20 million in equity from the Shakopee Mdewakanton Sioux Community Business Council (SMSC) Own Mys:c Lake Casino in Prior Lake, MN SMSC Tribal Council had not approved this commitment as of the date of this report Debt financing from Dougherty Funding, LLC $50 million at prime % for 5 years $25 million in TIF bonds issued by Sioux City Subordinated debt financing from SMSC $9 6.5% for 15 years Loan would be repaid upon receipt of tax credit financing for the project As with the equity contribu:on, SMSC Tribal Council has not yet approved this loan Lease financing for hotel and gaming equipment from Dougherty Funding, LLC $20 million at prime % Up to $10 million in addidon equity from Ho- Chunk, Inc. if needed Private placement if SMSC does not approve financing Total financing in the range of $124 million to $152 million for a $118.3 million project 11

12 REVENUE Estimates Year 1 WGR Gaming Revenue ProjecDons Applicant Gaming Revenue Projec:ons Difference Hard Rock Casino Sioux City $82,312,422 $90,936,741 - $8,624,319 Warrior Casino & Hotel $75,818,351 $75,110,000 $708,351 Hollywood Casino Sioux City $69,622,416 $85,500,000 - $15,877,584 Current Argosy Casino Sioux City $61,018,797 $61,018,797 $0 Hollywood Casino Siouxland $60,414,215 $88,900,000 - $28,485,785 Year 5 WGR Gaming Revenue ProjecDons Applicant Gaming Revenue Projec:ons Difference Hard Rock Casino Sioux City $92,866,670 $106,363,454 - $13,496,784 Warrior Casino & Hotel $85,539,918 $85,680,000 - $140,082 Hollywood Casino Sioux City $78,549,528 $98,100,000 - $19,550,472 Current Argosy Casino Sioux City $68,842,739 $68,842,739 $0 Hollywood Casino Siouxland $68,160,636 $102,000,000 - $33,839,364 5 Year Total WGR Gaming Revenue ProjecDons Applicant Gaming Revenue Projec:ons Difference Hard Rock Casino Sioux City $435,859,051 $496,307,020 - $60,447,969 Warrior Casino & Hotel $401,471,780 $402,870,000 - $1,398,220 Hollywood Casino Sioux City $368,663,189 $463,900,000 - $95,236,811 Current Argosy Casino Sioux City $323,105,486 $323,105,486 $0 Hollywood Casino Siouxland $319,904,116 $482,400,000 - $162,495,884 Data Sources: U.S. Census Bureau, Wells Gaming Research March 2013 Projec:ons assume a fully mature and revenue- stabilized casino property, i.e. no ramping up period. Projected revenues have es:mated margin of error of +13% and - 14% at the 68% confidence interval. Revenue growth rates include U.S. Census es:mated average popula:on growth for the trade area, in addi:on to es:mated 2% annual infla:on in Years 1-2 and 3% annual infla:on in Years 3-5. For the Year 5 comparison, Argosy Sioux City gaming revenue has been inflated using the same assump:ons as the proposed casinos 12

13 TAX Estimates Summary of Total Gaming Taxes including City, County, and State (22.2% of AGR) Comparison of Applicant vs WGR Projec:ons Hard Rock Casino Sioux City Warrior Casino & Hotel Hollywood Casino Sioux City Hollywood Casino Siouxland Year WGR Applicant WGR Applicant WGR Applicant WGR Applicant Year 1 $18,273,358 $20,187,957 $16,831,674 $16,674,420 $15,456,176 $18,981,000 $13,411,956 $19,735,800 Year 2 $18,741,745 $21,197,354 $17,263,108 $17,342,640 $15,852,353 $19,935,600 $13,755,735 $20,734,800 Year 3 $19,222,139 $22,257,222 $17,705,600 $17,930,940 $16,258,685 $20,934,600 $14,108,325 $21,778,200 Year 4 $19,907,067 $22,924,939 $18,336,491 $18,468,180 $16,838,019 $21,356,400 $14,611,037 $22,200,000 Year 5 $20,616,401 $23,612,687 $18,989,862 $19,020,960 $17,437,995 $21,778,200 $15,131,661 $22,644,000 Five Yr. Total $96,760,709 $110,180,158 $89,126,735 $89,437,140 $81,843,228 $102,985,800 $71,018,714 $107,092,800 Source: IRGC License Applica:ons for Woodbury County Casinos & WGR s Es:mates 13

14 Contributions to QSO Estimates Summary of Payments to Qualified Sponsor Organiza:ons Comparison of Applicant vs. WGR Es:mates Hard Rock Casino Sioux City Warrior Casino & Hotel Hollywood Casino Sioux City Hollywood Casino Siouxland WGR Applicant WGR Applicant WGR Applicant WGR Applicant % of AGR 4.25% 4.25% 3% 1st 5 yrs 3% 1st 5 yrs 3.00% 3.1% to 3.4% 3.00% 3.5% to 3.9% Year 1 $3,498,278 $3,864,811 $2,274,551 $2,253,300 $2,088,672 $2,625,000 $1,812,426 $3,100,000 Year 2 $3,587,947 $4,058,052 $2,332,852 $2,343,600 $2,142,210 $2,875,000 $1,858,883 $3,375,000 Year 3 $3,679,914 $4,260,955 $2,392,649 $2,423,100 $2,197,120 $3,150,000 $1,906,530 $3,691,000 Year 4 $3,811,038 $4,388,783 $2,477,904 $2,495,700 $2,275,408 $3,250,000 $1,974,464 $3,823,000 Year 5 $3,946,833 $4,520,447 $2,566,198 $2,570,400 $2,356,486 $3,350,000 $2,044,819 $3,988,000 Five Yr. Total $18,524,010 $21,093,048 $12,044,153 $12,086,100 $11,059,896 $15,250,000 $9,597,123 $17,977,000 Source: IRGC License Applica:ons for Woodbury County Casinos and WGR Es:mates Wells Gaming Research, March

15 Existing Iowa Casinos Fair Market Share Analysis Slot Machines Statewide Fair Share Ranking A Comparison of Adjusted Gross Slot Revenue, Number of Slots and Win per Slot per Day For 18 Iowa Casinos FY2012 vs 1st Year EsDmates by Applicants (Green) and Wells Gaming Research (Yellow) ExisDng Iowa Casinos 2012FY Slot Revenue Slot % Win # Slot Machines Avg. Win per Slot per Day Fair Market Share Hollywood Casino Siouxland $80,992,763 n/a 750 $ % Hollywood Casino Sioux City $77,895,177 n/a 750 $ % Hard Rock Casino Sioux City $81,045,376 n/a 800 $ % 1 Ameristar II $157,199, % 1,567 $ % 2 Horseshoe Casino And Bluffs Run Greyhound Park $174,664, % 1,766 $ % 3 Prairie Meadows Racetrack & Casino $178,318, % 1,935 $ % Hard Rock Casino Sioux City $73,359,141 n/a 800 $ % Warrior Casino & Hotel $69,074,665 n/a 800 $ % Warrior Casino & Hotel $68,429,319 n/a 800 $ % 4 Diamond Jo - Worth $83,296, % 973 $ % Hollywood Casino Sioux City $63,429,829 n/a 750 $ % 5 Harrahs Council Bluffs Casino & Hotel $63,045, % 797 $ % 6 Argosy - Sioux City $55,552, % 717 $ % 7 The Isle Casino & Hotel At Waterloo $76,292, % 1,013 $ % Hollywood Casino Siouxland $55,040,655 n/a 750 $201 99% 8 Isle Of Capri - BeXendorf $71,110, % 992 $196 97% 9 Riverside Casino And Golf Resort Llc $81,040, % 1,153 $192 95% 10 Diamond Jo $64,962, % 988 $180 89% 11 Wild Rose - Clinton $37,150, % 573 $177 88% 12 Wild Rose - Emmetsburg $29,563, % 523 $154 76% 13 Mys:que Casino $54,610, % 975 $153 76% 14 Cavish Bend Casino $35,620, % 639 $152 75% 15 Grand Falls Casino Resort $48,844, % 899 $148 73% 16 Rhythm City Casino $48,660, % 932 $143 71% 17 Isle Of Capri - MarqueXe $28,683, % 589 $133 66% 18 Terrible's Lakeside Casino $46,957, % 1,010 $127 63% FY 2012 Total Slot Revenue Current Casinos $1,335,573, % 18,041 $ % Median win per posi:on per day $186 Slot revenue as a percent of total gaming revenue 91.11% Source: IR&GC Revenue Reports, IRGC License Applica:ons for a Woodbury County Casino, and Wells Gaming Research Wells Gaming Research March