A fifth casino may close this year, one closed casino may be sold and politicians and casino executives are trying to figure out how to stave off disaster—all just part of another week in the declining fortunes of Atlantic City.
But somehow, even as New Jersey Governor Chris Christie held a special summit of politicians and business leaders to begin devising a strategy to rebuild the resort, a glimmer of hope arrived as a flurry of interest by developers looking to acquire the city’s closing casinos emerged.
The $2.4 billion Revel casino hotel, which closed September 2, may be sold to a Florida-based developer—for $90 million. Then came news that the same buyer is also looking at the neighboring and also-closed Showboat casino hotel for a possible acquisition.
Glenn Straub, president of the bidding company Polo North Country Club Inc., has made the only qualified bid for Revel according to bankruptcy court documents and has deposited $10 million in cash into an escrow account under the name Polo APA.
Unless another bidder steps forward by September 23, Straub’s “stalking horse bid”—a bid made at the lowest qualifying price for the auction—would acquire the now-dark Revel tower.
Straub would not disclose his plans for the property, but did say he’s not interested in the property as a casino. However, he said he may look for a casino operator to partner with and run the site’s casino.
“The building will not be a casino,” he told Bloomberg News. “It might have a casino in it. We don’t need gambling to support what we’re doing.”
Straub told USA Today that he wants to see the city diversify its attractions and that he would be uncomfortable having himself and his family in the casino business. He also plans to rename the property and intends to pay cash if he wins the bid.
Straub also told USA Today that he has actually been looking at the Revel property before it went up for a bankruptcy auction.
“It’s just a coincidence that that building was something we were working on,” said Straub, president of Polo North Country Club, based near West Palm Beach, Fla. “We feel the city needs what we do. We are like doctors who turn around sick patients. We turn around big properties.”
Straub cautioned that the sale is not final and said other problems, such as union negotiations could pop up. But he also outlined a wide vision of the resort, which would include building high-speed rail links with New York City and Philadelphia, according to the paper.
A later report also had Straub interested in the Showboat property.
Straub told Bloomberg he wants more land in the city than just the Revel property to realize a broader vision for turning the resort town into a destination for athletics such as women’s basketball and skateboarding.
He said his model is the Palm Beach Polo and Country Club, a 2,200-acre resort in Wellington, Florida, which he owns and has expanded through corporate and international promotions, according to the news service.
“Polo was a dying industry and we made millions of dollars off of high-end advertisers and sponsorships,” he said.
Straub also said he doesn’t mind if Caesars wants a deed restriction on the Showboat property saying it can’t operate as a casino.
But Straub’s isn’t the only company interested in Showboat.
The casino, while still profitable, was closed by its parent Caesars Entertainment on Labor Day weekend in what the company said was an effort to reduce casino capacity in the city and protect its three remaining city casinos. However, Caesars has said it is interested in selling the property.
Towards that end, another Florida-based company that develops restaurant and entertainment complexes is looking at the property. But again, the company is not interested in operating it as a casino.
Latitude 360, a Jacksonville company, said the site is one of three locations in the resort it is considering for a $20 million project.
Company CEO Brent Brown told the Associated Press that has toured the property and has been in talks with Caesars.
“We feel Atlantic City is a perfect location for us,” he told the AP. “The food and beverage component there is very strong.”
Latitude 360 has locations in Jacksonville, Indianapolis, Pittsburgh and Albany, New York, and is planning one near Minneapolis according to the AP. Most of the companies projects consist of restaurants and includes a sports bar, movie theater, bowling alley and live performance stage.
Brown told the wire service that if the company acquires the Showboat property, they may also utilize its hotel as well.
Another group, Atlantic Properties Group of Vineland, N.J., has also expressed interest in buying the property for a smaller casino, the AP reported.
Donald Trump to the Rescue?
The city also received some potential good news when reports surfaced that Donald Trump may be thinking about getting back into the resort’s casino business by buying the company that already sports his name.
Trump Entertainment—of which Donald Trump has only a small interest—has filed for bankruptcy protection and is already planning to close Trump Plaza—one of its two Atlantic City casinos—September 16. The company has also issued “warn’ letters to employees of the Trump Taj Mahal casino resort saying that the property may close November 13 unless the company can seriously reduce its expenses.
Now comes a report that Trump himself is thinking of stepping in and buying back and operating his former properties, according to the New York Post. Citing unnamed sources, the paper says Trump is unhappy with the way his namesake casinos have been run.
Trump is suing to have his name removed from the properties, but may also seek to gain control of the properties—he currently owns less than 10 percent of Trump Entertainment—through the bankruptcy procedures, the paper said.
Trump spokespeople later confirmed that Trump is looking at a possible return to the city, but is taking a cautious approach, according to published reports.
Most of Trump Entertainment’s $285 million in debt is owned by billionaire Carl Icahn—who owns the Tropicana casino in Atlantic City—and there has been speculation he might repossess the company. But again the Post cites unnamed sources saying Icahn has lost faith in Atlantic City and not likely to move.
In the meantime, plans for the closing of Trump Plaza continue. Trump Entertainment has made its fourth filing for bankruptcy this month in U.S. Bankruptcy Court in Wilmington Delaware. The company says it has liabilities of between $100 million and $500 million, and assets of no more than $50,000.
The bankruptcy judge has allowed the company to continue operating using cash on hand gathered as collateral and owed to Icahn. The judge also allowed the company to continue paying vendors and employees as it works on a debt restructuring in hopes of avoiding the Taj Mahal closure.
However, lawyers for the company told the court that without concessions from Icahn —as its main lender—and its main union, there is a significant chance that the Taj closing will go ahead. Nearly 3,000 employees could lose their jobs.
According to reports, Trump Entertainment is trying to end pension and health benefits for workers, which has been rejected by the casino’s unions.
CEO Robert Griffin has said in bankruptcy filings that Trump Entertainment Resorts has been hurt by increased competition in the regional casino market; severe weather; a burdensome contract with its main union; and a general economic downturn in southern New Jersey.
The Taj Mahal has reported losing about $2 million in the first six months of 2014, after reporting an about $12.6 million in the same period in 2013.
But in another sign that not everyone is bailing on the Trump properties, the Rainforest Café at Trump Plaza is asking the bankruptcy court to permit it to keep operating after the casino shuts down.
The Cafe, whose parent company owns the Golden Nugget in Atlantic City, wants a judge to force Trump Entertainment to allow the restaurant to stay open for 90 days after the closing to give it time to connect its own utilities and operate independently of the casino. The restaurant’s entrance is on the Boardwalk and not through the casino.
Online Gambling Effect
The potential closings also put in doubt the fate of two online gambling providers in the state.
Betfair has been partnered with Trump Plaza, which is scheduled to close. The company has received a short reprieve from state regulators that will allow the company to continue to operate after the casino closes. But the company needs to find a new partner before it can renew its own license in a few months.
It had been expected the company would partner with the Taj Mahal, but now that casino may close. The Taj is already partnered with Ultimate gaming, which also offers online gambling in the state. While the casino can partner with multiple companies, if it closes, both online providers would need new partners.
Both sites have struggled to find a foothold in the state’s online poker play, but have fared better offering slots and casinos games. Both sites generated about $500,000 in revenue for casino games through the first six months of the year.
The problem is that most of Atlantic City’s remaining casinos are already partnered up with a live platform. All except Resorts casino hotel, which is partnered with PokerStars. The online giant isn’t operating in the state yet, however, that could change as soon as next month if the company is approved by state regulators.
PokerStars was originally blocked by the state, but since the sale of the site’s parent company the Rational Group to Canadian-based Amaya Gaming it is now expected the receive approval. The company has already begun seeking trademark approval in the U.S. for its various online platforms.
In the face of potential new competition from PokerStars, Caesars Entertainment announced it will launch a new marketing campaign for its online brands—including WSOP.com—in September. The company said its marketing slowed in the summer when customers have free time to travel to its brick and mortar casinos, but expect a bump in online play in the colder months.
Christie Holds Conference
While the fate of individual casinos in the resort seemed to change direction with each day, Governor Christie held a summit designed to address the city’s problems as a whole.
The meeting was closed to the public and involved a group of about 30 area politicians, casino executives and business and union representatives.
Christie did not disclose what was discussed at the summit, saying only that “everything is on the table” and that Atlantic City has begun the necessary transition” from a gambling hub to a “diverse, exciting tourism district.”
Christie’s comments seem to indicate that a wide range of ideas—such as opening up other parts of the state to casinos and a possible state takeover of Atlantic City government—would be discussed.
Christie said he has assigned about 30 tasks to the summit attendees and the group would meet again in 45 days.
“This was a city that was built on a gaming model when it was a monopoly east of the Mississippi,” Christie told reporters after the meeting. “Now over 40 states have it. This was an inevitable thing to occur. While there are lots of people out there declaring the demise of the city, that is far from true.”
Officials at the summit said the meeting had been primarily held to identify the most pressing problems facing the resort, assign some research and analysis and then have the attendees return to the next meeting with meaningful information on the problems for discussion.
Just outside the summit held at the offices of the state Casino Reinvestment Development Authority, a group of protestors gathered. The protestors were largely city residents that chanted “Save our city,” as attendees went into the conference.
Residents of the city have been facing a huge increase in municipal tax rates—29 percent for 2014—as the shrinking casino market has led to a spate of successful tax appeals by city casinos. The closing of four and possibly five casinos if the Taj Mahal closes should just continue the pain.
“Before the casinos came here, this was a thriving city,” Audrey L. Williams, 66, a lifelong city resident told Philly.com. “Casinos took all our mom-and-pop businesses away. Now they’re gone, little businesses are gone, and people are gone.”
Speaking at a community summit held in response to the governor’s summit—which drew criticism for not including community leaders—Atlantic City mayor Donald Guardian—who attended both—said the city must cut $65 million in spending to avoid another tax increases in 2015. He said a total rethinking of the city’s government was underway.
“Everything is on the table, including police, fire and beach patrol,” Guardian said. “We need to look at other cities in New Jersey and look at the way they provide services, or let others provide services, at less cost.”
Guardian said he was convinced that Christie wants to help Atlantic City and install a government model of success that will succeed. The city has also begun seeking bids for a total tax revaluation of the resort, which would be completed by 2016.
MGM Approved
And in another boost for the city, MGM resorts has regained its license in New Jersey, ending a regulatory dispute that caused the company to leave the resort in 2010.
MGM can now regain its half-ownership stake in the Borgata Hotel Casino & Spa—the city’s leading casino—that was placed in a trust amid a disagreement with New Jersey gaming regulators over its partnership in a Macau casino.
The state Division of Gaming Enforcement objected to the partnership of MGM and Pansy Ho—which they said has ties to organized crime in China through her father Stanley Ho—in Macau, but MGM officials said Ho’s stake in the company has been reduced, their China operations have gone public since the original dispute and Stanley Ho has become elderly and sick.
The state Casino Control Commission voted to restore the company’s license.
