Making the News

Philadelphia Daily News

Originally Published:Friday, April 25, 2008

"The slowdown in the capital markets has the potential to delay projects, but it doesn't alter the fundamentals, which are that Atlantic City, long-term, is an attractive market," said Michael Pollock, whose Spectrum Gaming Group consults for casino companies.

Casino execs look past Atlantic City's mini-slump

By Robert Strauss
Philadelphia Daily News

What was supposed to be the next, and glitziest, round of casino enhancement in Atlantic City started with a literal bang back in the fall. The folks at Pinnacle emulated the Vegas crowd and staged a firework-laden, soundtracked implosion of the old Sands casino

It was a heady time.

Pinnacle's somewhat sardonic billboards - "Until we open, you'll just have to play somewhere less fun," for example - were meant to presage grand goings-on.

Revel, backed by the investment banking firm Morgan Stanley, and the MGM folks were dueling over which would have the tallest casino-hotel tower. Three existing casinos were building new hotel towers, and it seemed the Pennsylvania slot parlor threat had barely bitten into casino profits. The Dow Jones Industrial Average was piercing 14,000 and boom times around the world seemed undeniable.

Oops.

In the last few months, things have seemed quite red in this bluest of states. Casino profits have withered - all the way into deficits at many casinos. New figures show that Atlantic City visitors are down for the second straight year.

Pinnacle went ahead on imploding the old Sands parking lot a couple weeks back but has said it will delay building because of the difficulty in finding funding in the current markets.

The troubled Tropicana is being run by the state, which is looking for a buyer. The Trump Organization has taken its casinos off the market, and other projects are moving forward in permits but not with groundbreaking.

"We are definitely disappointed by all of this," said Carol Fredericks, Atlantic City's business administrator. "We're worried that people are thinking too short-term. It takes visionary individuals, those who take risk, to dive into the casino arena. We can't lose that now just because of a downturn."

Pinnacle seemed to be one of those visionaries when it announced, after buying the Sands from Carl Icahn for $250 million, that it would build the most-expensive casino ever in Atlantic City, outdoing the Borgata Hotel Casino & Spa and the first of the $1 billion casinos here.

Now, though, it seems to be running in place.

"We are continuing to buy adjacent parcels contiguous to our site," said Kim Townsend, Pinnacle Atlantic City's chief executive. "It is a large project and it will take years, so we will continue on other fronts and are as excited about Atlantic City as we were before, when the economy was better."

Jeff Vasser, executive director of the Atlantic City Convention and Visitors Authority, was a bit more upbeat. He admitted that "when the markets seize up, things can't be what they were" but noted that no other casino project was off-schedule, and that the MGM project in the Marina district had hired a general manager in recent weeks, which he viewed as a confident sign.

"The slowdown in the capital markets has the potential to delay projects, but it doesn't alter the fundamentals, which are that Atlantic City, long-term, is an attractive market," said Michael Pollock, whose Spectrum Gaming Group consults for casino companies.

Curtis Bashaw, the former head of the Casino Reinvestment Development Authority, a state agency overseeing development in Atlantic City, is bullish about the resort's long term.

He is now co-chief executive of Cape Advisors, which is redeveloping two old Atlantic City hotels into the 330-room, high-end Chelsea. He's also getting preliminary approvals for a casino-hotel in the southern end of town.

"Two billion dollars is a lot of money to put together," he said, referring to estimated cost of Cape Advisors' casino project. "That said, we are big believers in Atlantic City, which has this storied history, but its gaming potential is still really unharvested."

Right now, though, the bright news is mostly from projects that started well before the economic slowdown.

Bashaw's Chelsea should be opening in a couple of months, and the hotel towers scheduled to open this year at the Borgata, Harrah's and the Trump Taj Mahal are either finished or nearly so.

The Borgata's will be a stand-alone, non-casino, 800-room hotel, The Water Club, with its own spa and other amenities. Borgata President Larry Mullin said recently that he hopes the current economic downslide doesn't turn builders off to Atlantic City.

"We hope all the projects get built out because a rising tide lifts all boats, as they say," Mullin said. "People have to look long term and see what Atlantic City will become, not just get caught up in slow times now."

For Harrah's, which owns four casino properties in Atlantic City, the downturn is merely a time to take stock.

"We're taking a better look at the Atlantic City master plan," said R. Scott Barber, general manager of Harrah's Atlantic City. "We'll probably be looking at our Caesars property in the center of the Boardwalk next to upgrade. This will give us time to see what's next, but what is next is really only around the corner in Atlantic City." *

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