|By Suzette Parmley, The Philadelphia
InquirerMcClatchy-Tribune Regional News
Feb. 14, 2010--ATLANTIC CITY -- Frank Consoli nursed his vodka martini and shook his head over the recent spate of bad news in this gambling town that can't seem to catch a break -- or keep investors interested.
"It's bad for people like me who enjoy new casinos," Consoli, 54, of Long Beach Island, said last week as he sat next to his son, Frank Jr., 31, at the Spirit Bar at Showboat.
The sense of abandonment is palpable here. First, Pinnacle Entertainment Inc. announced Feb. 5 that it was selling the land it bought to build a $1.5 billion megacasino.
Then, three days later, MGM Mirage declared it was putting up for sale its 50 percent stake in the Borgata Hotel Casino & Spa. The company had already shelved plans for a $5 billion casino resort next door.
And still haunting the scene is the partially built $2 billion Revel Casino next to Showboat on the Boardwalk, its glass-and-steel exterior is all that has been completed since the operator ran out of money a year ago.
Ask any major U.S. gambling company executives, and they express the same sentiment these days: Atlantic City isn't where it's at.
"Atlantic City is not a market in which we're currently exploring opportunities. We see the market there continuing to contract over the next couple of years," said Eric Schippers, a spokesman for Penn National Gaming Inc.
"We're definitely not interested," said Ron Reese of Las Vegas Sands Corp., which owns the Sands Casino Resort in Bethlehem, which opened in May, and two casino hotels on the Vegas Strip.
It's a reversal of fortunes from just four years ago, when virtually every gambling company was looking to establish a presence in Atlantic City, when a land grab was in full tilt.
In the spring of 2006, in a move to expand its casino holdings, Wall Street power Morgan Stanley spent $74 million for 20 acres to build what is now the unfinished Revel at the Boardwalk's northern tip.
Pinnacle followed suit in November of that year, buying from financier Carl Icahn for $275 million 19 acres where Atlantic City's Sands once stood and some adjacent beachfront property. That same week, Pennsylvania's first slots parlor opened.
On Oct. 10, 2007, MGM announced it would build the biggest casino here yet: the $5 billion MGM Grand Atlantic City on a 78-acre parcel next to the Borgata in the Marina District.
Two months later, former casino executive Wally Barr and Jersey Shore real estate developer Curtis Bashaw, with an investor group, announced that they had bought 10 acres next to the Atlantic City Hilton for roughly "$8 million an acre," according to Bashaw. The group closed on the land in October 2008 with plans to build a $1.8 billion casino, tentatively called the Gateway Project.
The Revel and the Bashaw-Barr casino were being touted as glitzy new bookends for the Boardwalk. But by late 2008, the double whammy hit: the tanking economy, which was souring plans for casinos even in Las Vegas, and competition from Pennsylvania, which by then had seven casinos of its own.
Pinnacle began the retrenchment by announcing in early 2008 that its Boardwalk casino was on hold. MGM followed in the fall with news that MGM Grand Atlantic City was on ice.
Revel Entertainment Group L.L.C., the entity created by Morgan Stanley to operate the Revel casino, began running out of money in 2008 and was forced to build the project in phases. It is still trying to raise the $1 billion it needs to finish the project.
And all the while, Atlantic City's gambling revenue tumbled month after month. In January, the 11 casinos made $294.2 million, compared with $406.2 million in January 2006 -- a 27.5 percent drop, according to figures released last week by the New Jersey Casino Control Commission.
"I think they were too slow to react" to Pennsylvania competition, Jason Ford, 45, a lawyer from Galloway Township, said of Atlantic City's casino operators. "The buzz is now in Pennsylvania, and people are wondering, 'Why would I drive here?' "
Ford said he could sense the effect of dwindling revenue and layoffs on the quality of service.
"If you walked into a casino here a few years ago, staff was tripping over themselves to help you," he said after having dinner last week with his mother, Gloria Ford, 75, at the Borgata. "You don't see that anymore."
But Jacob Oberman, a Las Vegas-based gaming analyst for CB Richard Ellis Group Inc., said that neither Pinnacle nor MGM Mirage made its decisions based on the current challenges in Atlantic City.
Instead, Oberman said, "each company had strategic reasons for their announcements. In the short run, the gaming industry looks at Atlantic City as a market that is subject to new competition, and this creates some uncertainty."
And uncertainty dampens investment.
Pinnacle said it wanted to focus on its more profitable riverboat casinos in places such as St. Louis and Lake Charles, La., while MGM expressed its desire to focus on the world's fastest-growing gambling market, Macau in South China, where it owns the MGM Grand Macau casino.
"The fact that Pinnacle and MGM Mirage are abandoning their previously shelved Atlantic City plans may be seen by some as another handful of sand in the city's face, but neither company was anywhere close to putting a shovel in the ground anyway," said Joseph Weinert, senior vice president of Spectrum Gaming Group L.L.C., of Linwood, N.J.
Weinert tried to put a positive spin on the situation. "While these announcements will no doubt feed the 'Atlantic City is in trouble' frenzy, they do remove two big distractions," he said. "The casino industry and city and state leaders now need to focus on what is achievable."
For developer Bashaw, that means substantially downsizing his group's planned billion-dollar-plus casino -- a precursor, perhaps, for what lies ahead in Atlantic City.
The investor group said it was now closer to building something in the $200 million to $300 million range. Bashaw said he believed that Atlantic City needed to embrace "new gaming paradigms." For instance, at last spring's East Coast gaming conference, N.J. State Sen. Jim Whelan (D., Atlantic) floated the idea of modifying state regulations requiring investors to build casinos with at least 500 hotel rooms.
"The investors in the [Gateway] project have not said they've given up," Bashaw said Thursday. "There is no financing for any big project right now. Smaller casinos can get done with equity without relying on the debt markets.
"Our guys are looking at that as a way to still do something on our site without it being an intractable situation," he said. "Bigger is not necessarily better, given the financing climate."
Contact staff writer Suzette Parmley at 215-854-2594 or firstname.lastname@example.org.
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