Tropicana buys all Atlantic Club gaming equipment
The Atlantic Club Casino Hotel, the white gaming palace at the southwest end of the Atlantic City Boardwalk that began life in 1980 as the Golden Nugget Atlantic City, will close its doors permanently on January 13, after its sale to Caesars Entertainment at a bargain-basement price of $15 million.
The Atlantic Club incarnation of the property, which had been Bally’s Grand, The Grand, the Atlantic City Hilton and ACH over its long and troubled history before its last name change in 2012, had actually begun to turn its years of losses around through a value-based marketing program that featured good odds, cheap rooms and reasonably priced food.
But the improvements were too little and too late for a struggling property in a chronically struggling market, and its owner, real estate trust Colony Capital, filed for bankruptcy protection last year, putting the property up for sale.
There was a ray of hope when online gaming operator PokerStars signed an agreement to buy the property from Colony. However, that deal was contingent upon PokerStars securing a New Jersey gaming license. PokerStars was one of the operators whose sites were shut down with executives indicted in the so-called “Black Friday” federal indictments in 2011, for continuing to accept U.S. wagers after passage of the 2006 Unlawful Internet Gaming Enforcement Act.
After the New Jersey Division of Gaming Enforcement issued a preliminary opinion that PokerStars may be unsuitable for a New Jersey license because of that fact, Colony Capital exercised its option to back out of the purchase agreement when PokerStars was late with a payment.
Few other suitors appeared with any interest in buying the property at auction. Ultimately, Caesars agreed to buy the property and land for $15 million, and Tropicana Entertainment agreed to purchase the property’s 1,641 slot machines and 48 table games and customer database for $8.4 million, in what is the lowest price ever paid for an Atlantic City property. (The previous record was Resorts Casino, which was bought by Dennis Gomes and a partner for $31.5 million in 2010.)
One company is disputing the sale, however. Officials for Sobe Holdings LLC, a Florida-based firm, say they intend to ask for a rehearing of the bankruptcy sale of Atlantic City’s Atlantic Club casinos, which they feel they made the highest bid for, but were not awarded the property.
The Press of Atlantic City reports that the company intends to appeal the sale in court in the coming days. The paper reported that Sobe Holdings has ties to a company that sought to purchase Trump Plaza Hotel and Casino earlier this year made a slightly higher bid for the Atlantic Club property at more than $24 million.
The sale was awarded to Caesars Entertainment and the Tropicana Casino & Resort for $23.5 million. The two rival casinos plan to split up the property and its assets and close the casino.
Sobe had planned to operate the property as a counterpart of the Deauville Beach Resort in Miami. The bid was not selected after a bank involved in the auction raised questions about Sobe’s ability to close a sale, attorneys told the paper.
Sobe officials told the Press they do have funding in place.
Caesars officials have not revealed any plans for the property, other than the fact it will not continue operations as a casino-hotel. The operator revealed in a statement that it “does not intend to resume gaming or hotel operations at the facility, and is evaluating options for the use of the assets, some of which may be used in the company’s other Atlantic City properties.”
“First and foremost I would like to express my profound admiration and respect for the employees of this company,” said Atlantic Club COO Michael Frawley in a prepared statement. “The events of the last few months have evoked an array of emotions, and through it all, the employees of the Atlantic Club have remained consummate professionals. It is because of these outstanding individuals that we were able to build considerable momentum over the last year. Unfortunately, our pace was unsustainable in the extremely challenging Atlantic City gaming market.”
The closing will throw 1,600 employees out of work. Some of them have worked at the property since it opened as the Golden Nugget, sticking with the casino through all its ownership changes. Local 54 of UNITE-HERE, the union representing Atlantic Club employees, staged a protest in front of the Camden court where bankruptcy proceedings were held. The union is fighting for a payment of $1,500 to each of the employees that was included in the contract as a contingent should the property close.
“The workers at Atlantic Club have loyally served the company for three decades,” said Local 54 President Bob McDevitt in a statement. “While we can’t stop the Atlantic Club from closing, we are going to do everything we can to fight for the workers to get as much as possible in this tragic situation.”
Many employees lamented the fact that the current job market is much worse than at the time of the last time a casino closed. When the Sands was imploded in 2006, employees looked forward to securing jobs at the mega-resort which owner Pinnacle Entertainment planned on its site—a site that still sits vacant—or at the next new mega-resort, the Revel, which opened in 2012. (Revel filed for bankruptcy protection last year.)
“There’s not a plethora of jobs out there,” said state Senator Jim Whelan, a former Atlantic City mayor, in an interview with the Press of Atlantic City. “It’s not like when you had Sands closing and Revel opening.”
“The trickle down to the community is going to be devastating,” added state Assemblyman John Amodeo of Atlantic County. “To have a gray ghost on our horizon and an empty building is not good.”
The Atlantic Club is seen by many as the first victim of increased competition from Pennsylvania that began near the end of 2006. The closing brings the number of casinos in Atlantic City to 11. With a string of money-losing years dating to 2007, analysts expect further contraction in the Atlantic City market before any improvement.
Atlantic Club was one of five casinos on the list of casinos that could be the next to close in a recent online poll conducted by Global Gaming Business magazine. The others were Trump Plaza, Bally’s, Revel and Showboat.
“We know that Trump has been trying to sell the Plaza for some time, and that hasn’t quite happened,” industry expert Frank Fantini told the Associated Press. “I certainly think it’s possible that somebody like the Plaza could close. Resorts could close.”
“My sense is that the industry clearly needed (the Atlantic Club) out of inventory in the city,” said Israel Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at New Jersey’s Stockton College, in an interview with the Press. “The important thing is that the city is moving in the direction of aligning supply with demand.”
Meanwhile, one developer that had entered a bid in bankruptcy court to buy the Atlantic Club for $24.49 million—higher than the combined price paid by Caesars and Tropicana—is demanding a rehearing of its bid.
Sobe Holdings LLC’s bid was rejected by the court because of insufficient evidence that the company would be able to finance the purchase. Sobe President Belinda Meruelo is pointing to the fact that the accepted bid was from Caesars, a company carrying more than $20 billion in debt.
Sobe’s plan was to close the Atlantic Club’s casino but continue operating the property as a beach hotel carrying the theme of the Deauville Beach Resort in Miami Beach, Florida, possibly to be named the Deauville Hotel Atlantic City. Meruelo planned to offer displaced Atlantic Club employees jobs at the refurbished resort.
Should the rehearing be denied by the bankruptcy court judge, Sobe attorneys say they will sue in the Circuit Court of Appeals.
