Indian Casino Bets Pay Off for Och-Ziff

After struggling for more than a decade to secure land and financing, the Jena Band of Choctaw Indians was finally able to build its $30 million Pines Casino in Dry Prong, La., thanks to a high-priced loan from Och-Ziff Capital Management. More than half of the casino’s profits go to Och-Ziff, the $46 billion hedge fund company run by ex-Goldman Sachs trader Daniel Och. After other creditors get their portion, the tribe is left with less than 10 percent of the take. Cheryl Smith, who has been chief of the Jena Band for 11 years, isn’t complaining about the terms of the deal. “They came to our tribe when nobody else would and took a chance on us,” she says. “With the little money we have gotten so far, we have done good things.”

Over the past eight years, Och-Ziff has become one of the largest nonbank financiers to tribes, backing casinos and hotels in Oklahoma, Ohio, and California, as well as Louisiana. It also owns thousands of slot machines it leases to casino operators. Casino investments have helped one of the company’s real estate funds produce returns of almost 23 percent annually from 2011 through June 2015, according to regulatory filings. About $250 million, a fifth of its invested real estate capital, is in tribal gaming. “We looked around at commercial real estate in 2006 and 2007 and saw it was overvalued,” says Steve Orbuch, head of Och-Ziff’s real estate group. “What we liked about tribal gaming was that it was a large marketplace with $25 billion a year in revenue, and yet it wasn’t open for lending from traditional sources.”