Making the News

Press of Atlantic City

Originally Published:Sunday, March 7, 2010

For billionaire investor Carl Icahn, the job now is to turn a bargain buy of the Tropicana into a profit

By Donald Wittkowski
Press of Atlantic City

ATLANTIC CITY - Perhaps they should rename it the Trop-Icahn-a.

Billionaire investor Carl Icahn, who once owned the old Sands Casino Hotel, is returning to Atlantic City after a four-year absence as the new boss of Tropicana Casino and Resort.

In his first public comments about his new prize, the corporate takeover specialist said Tropicana's new ownership structure leaves the gaming hall with only minimal debt and in a strong position to compete against other casinos in Atlantic City and surrounding states.

"There will undoubtedly be tough sledding ahead for Atlantic City, especially in light of the increasing competition from neighboring states. However, I believe that Atlantic City, with its beautiful beaches, can again become a premier destination resort," he said in a statement.

Icahn's remarks represent a rare dose of optimism in a market mired in a three-year slump. The fractured economy, weak consumer spending and competition from Pennsylvania slot parlors have driven down Atlantic City gaming revenue from a high of $5.2 billion in 2006 to $3.9 billion last year.

"I'm sick and tired of hearing that Atlantic City is dead and buried or is in a death spiral," Tropicana President Mark Giannantonio said. "I'm extraordinarily bullish on Atlantic City."

Atlantic City's downturn allowed Icahn to buy Tropicana for the bargain price of $200 million - an 80 percent discount from its pre-recession estimate of $1 billion. Tropicana may represent one of Icahn's shrewdest deals yet. He gets a Boardwalk casino, a hotel complex totaling more than 2,000 rooms and an upscale retail, dining and nightclub hub called The Quarter. The Quarter alone cost $285 million to build in 2004.

Michael Pollock, managing director of the Linwood-based casino consulting firm Spectrum Gaming Group, said The Quarter should be a centerpiece of Tropicana's recovery plan under Icahn's new ownership.

"A property like the Tropicana needs to do a couple of things," Pollock said. "It clearly needs to leverage and differentiate its assets. The biggest asset is The Quarter. The restaurant product in The Quarter is among the best in the region."

The Quarter features a mall-like 200,000 square feet of space. No other Atlantic City casino has such a large retail and entertainment complex within the same building. When it opened in late 2004, The Quarter was at the forefront of a new trend for more nongaming attractions in the city. Not one slot machine or table game was in it.

However, Giannantonio disclosed that Tropicana is planning to place slot machines in The Quarter to complement the shopping and entertainment. Regulatory approval will be needed for the slots plan.

Other proposed changes under Icahn's ownership include more entertainment in Tropicana's 2,000-seat showroom and a bigger push for convention business. Tropicana has 100,000 square feet of meeting and convention space, among the biggest in town.

"We are one of the leading casinos in the convention business," Giannantonio said. "We will be up 40 percent this year."

Tropicana originally opened in 1981. Analysts say the Icahn-controlled Tropicana Entertainment Inc. will have to freshen up the casino floor and refurbish the older hotel towers. No projects or funding commitments have been announced yet, but Icahn's statement suggests he will be willing to invest in the aging property.

"Casino hotels must invest capital not only in their own resorts, but also in 'major events' that will draw gamblers away from competing states," Icahn said of ways to rejuvenate Atlantic City.

But billionaire rival Donald Trump has portrayed Icahn as a cheapskate corporate raider who refuses to invest in the companies he buys. Looking to expand his gaming empire, Icahn is currently locked in a bankruptcy battle with Trump for control of the three Trump Entertainment Resorts Inc. casinos.

"He doesn't spend any money. If Carl spends 10 cents, it's a major event," Trump told reporters after a bankruptcy hearing two weeks ago.

Icahn's ownership of Tropicana ends the casino's more than two-year search for a buyer. Tropicana was put up for sale in December 2007 after the New Jersey Casino Control Commission stripped the troubled former owner of its license and placed the property under the control of a conservator.

"We have a fresh start," Giannantonio said. "Carl is very excited. He sees a tremendous upside for Atlantic City. He's bullish on Atlantic City. This is why he has made the investment."

Rich Andrews and Edward Bescript, two long-time Tropicana dealers, said the casino had languished without an owner. They expressed hope Icahn's arrival will erase any doubts about the casino's future.

"We're hoping to get some sense of the direction we're heading in," said Andrews, of Galloway Township. "We want to have a goal set instead of being in disarray."

Bescript, of Egg Harbor Township, said the lack of ownership left Tropicana drifting like "a ship without a captain."

"We didn't know whether we were a five-star hotel or simply going through the motions," he said. "But we have a great work force and a good business model. We just need a captain."

Two of Tropicana's regular customers, David and Wendy Loss, a married couple from Piscataway, Middlesex County, said Tropicana ranks among their favorite casinos and urged Icahn to keep the place the same.

"If he continues to follow the business plan, I think everything should be all right," David Loss said. "For us, our hotel room was comped and our meals were comped. We'll certainly keep coming back if it stays that way."

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