|By Suzette Parmley, The Philadelphia
Knight Ridder/Tribune Business News
Mar. 31, 2006 - --Hard Rock International Inc. plans to develop a $1 billion casino hotel in Atlantic City, the 13th in the resort town, according to developers familiar with the deal.
The Orlando, Fla., company is buying a 20-acre parcel in the city's South Inlet section next to the Showboat casino for $74 million, and it intends to develop a gambling hall with slot machines and table games, the developers said.
The casino would also be next to Bella Condominiums, a luxury condo high-rise at 526 Pacific Ave., and would be bordered by Metropolitan Avenue, the Boardwalk and the Showboat.
No company has applied for a casino license for the site, according to the New Jersey Casino Control Commission.
A Hard Rock spokeswoman declined to comment yesterday beyond a company statement: "Hard Rock Hotels, Resorts & Casinos is currently looking at a number of development opportunities throughout the world. As a rule, we never comment on pending deals."
The prospect of a new casino on the Boardwalk has been the talk of many developers who are building stores, condos and entertainment venues in Atlantic City.
"It will definitely be a casino hotel," Tom Scannapieco, one of the partners for North Beach Holdings L.L.C., which is assembling the 20-acre parcel to sell to Hard Rock, said yesterday. Scannapieco is also the owner and developer of the Bella. "It came together very quickly."
Scannapieco declined to give details of the project's scope, citing a confidentiality agreement he signed. But others familiar with the plans said it would cost more than $1 billion. Morgan Stanley has been retained to underwrite the financing, Scannapieco said.
Besides a casino hotel, it would include luxury stores, restaurants and other attractions. They say the earliest it could open would be 2009.
Brian McGill, gambling analyst with Susquehanna Financial Group L.L.P., said a new casino would expand the Atlantic City gambling market in much the same fashion that Borgata Hotel Casino & Spa has since it debuted in July 2003.
"But, at the same time, it's also going to take share from some of the existing operators, especially some of the older casinos that are undercapitalized," McGill said.
Atlantic City's 12 casinos topped $5 billion in revenue last year for the first time. Casino gambling in New Jersey began in 1978.
Hard Rock, which is part of the London-based Rank Group P.L.C. gambling and entertainment business, operates 121 cafes worldwide and three U.S. casinos in Las Vegas; Hollywood, Fla.; and Tampa.
And Hard Rock executives have announced plans to develop more casino hotels in the United States. The opening of a Hard Rock casino in Biloxi, Miss., was delayed after it was damaged by Hurricane Katrina. But the company said that property would open late this year.
In Atlantic City, the site near the Showboat has been the subject of casino speculation for many years. MGM Mirage once had plans for it, but dropped them after partnering with Boyd Gaming Corp. to develop the Borgata in the city's Marina District.
MGM Mirage sold its 12.5-acre parcel to North Beach Holdings L.L.C. in April 2004 for $14.5 million. North Beach reached an agreement to buy an additional 4.7 acres from the Atlantic City Housing Authority for $7.2 million in late 2004. That sale has not been completed.
Last month, the housing authority authorized a two-month extension for North Beach to provide satisfactory proof of financing for a 38-story residential condominium project that would be built on the same site near the casino hotel.
"Their attorney has advised us that they are looking to court a casino partner for some time now," Ira Fonorow, urban-renewal supervisor at the housing authority, said. "That's nothing new to us."
Industry experts say Hard Rock could be a formidable competitor to the Borgata, the city's top-grossing casino, which has been credited with bringing younger, more affluent customers to the resort. Hard Rock casinos also rely heavily on contemporary music acts, such as Nine Inch Nails, to attract a younger crowd.
The president and chief operating officer of the Borgata welcomed the news of a possible new competitor. "I think a new casino would be terrific for the market," Larry Mullin said yesterday. "We are so underserved in this market with new product."
Mullin was referring to the city's lack of hotel rooms. Atlantic City has slightly more than 15,000 casino hotel rooms; Las Vegas has more than 120,000.
New Jersey requires casinos to be in a hotel, and the hotel must have a minimum of 500 rooms to qualify for a gambling license.
But Hard Rock would have one advantage over the Borgata: being on the beach. The Borgata casino is landlocked in the Marina District.
Hard Rock is best-known for its restaurants. Hard Rock's total revenue last year was $452.6 million, up from $426.1 million in 2004. Operating profit increased 23 percent, to $63 million from $51.2 million the previous year. The increases were attributed largely to its expanding casino business.
Developers who are behind major high-rise condominium projects in the Inlet attest to that.
"Atlantic City is the hottest place right now after Las Vegas because the state of Pennsylvania can't get their act together," said Frank Barbera, a real estate broker who does extensive business in the Inlet. "You can get into this market today as opposed to waiting for two years to get into Philadelphia."
Besides Hard Rock, Isle of Capri Casinos Inc., Station Casinos Inc., Ameristar Casinos Inc., and Penn National Gaming Inc. have been scouting Atlantic City.
"Everyone realizes when you compare the value of owning property in Atlantic City to New York or Philly, Atlantic City still remains very cheap," developer Jim Maggs said. "But factor in the Boardwalk; it represents a tremendous value for those who want to invest and be a part of it."
Contact staff writer Suzette Parmley at 215-854-2594 or firstname.lastname@example.org.
Copyright (c) 2006, The Philadelphia Inquirer
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