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Howard Stutz

Atlantic City seeing signs of progress

18 July 2011

ATLANTIC CITY, New Jersey -- Only in Atlantic City would news of a 4 percent decline in gaming revenues be a cause for celebration.

The Press of Atlantic City found that if a gambler with a hot hand at craps had not taken the Tropicana Atlantic City Casino & Resort for more than $8 million last month, June's decline would have been just 2 percent.

After 34 straight months of putrid gaming numbers going back to September 2008, officials in the nation's No. 2 casino market have learned to grab onto any optimistic tidbit of information.

"We got beat up pretty bad in table games," Tropicana CEO Tony Rodino told the newspaper. "I think going forward, June is a positive sign of what's to come."

Gaming revenues aside, there are some encouraging events taking place in Atlantic City.

Last month, Landry's Restaurants returned the name Golden Nugget Atlantic City to the market, removing Trump Marina from the building that cost the company $38 million to purchase in February. Landry's is spending more than $100 million to refurbish and upgrade the 728-room hotel-casino.

Last year, longtime gaming executive Dennis Gomes headed a group that spent $31.5 million to buy the aging Resorts Casino Hotel. A renovation through a line of credit has allowed Gomes' management team to renovate portions of the 942-room hotel-casino in a Roaring '20s theme.

The work seems to have paid off. Through June, Resorts' gaming revenues are up 0.3 percent over the same six months of 2010.

Much of the city's anticipation surrounds the $2.5 billion Revel project, which resumed construction and is targeting a May 2012 opening.

On Thursday, a developer said he was proposing to build an $848 million family entertainment complex on the abandoned Bader Field adjacent to Atlantic City's oceanfront casino area. The site would feature an indoor water park, condominiums, restaurants, a 100,000-square-foot casino, a bingo hall and a monorail to whisk visitors to and from Bader Field.

"The announced capital expenditure investments and new projects are positive signs for Atlantic City and may drive incremental visitation," Union Gaming Group principal Bill Lerner said.

Even with the market's gaming revenues down 7 percent for the first six months of the year, and 9 percent over the past 12 months, there is still hope, even in the wake of expanding competition from casino growth in Pennsylvania and New York.

One of the best investment potentials, according to analysts, is a measure signed into law in January by Gov. Chris Christie that allows Atlantic City to add two casinos with less than 500 hotel rooms.

Last week, Pinnacle Entertainment jumped into the mix.

The Las Vegas-based regional casino operator filed a letter of interest with New Jersey gaming regulators for one of the boutique casino licenses.

"We simply filed the letter of interest to keep our options open and meet the deadline," Pinnacle spokeswoman Kerry Andersen told The Philadelphia Inquirer.

Pinnacle is expected to reveal more of its plans for Atlantic City by an Aug. 19 deadline. Lerner believes the company is easily one of the front-runners for the boutique licenses. Two local groups are interested in the licenses, including a company offering to place a Hard Rock Casino on the Boardwalk's southern end.

Pinnacle has access to available cash, a strong balance sheet and enough land for several projects.

In 2006, Pinnacle spent $270 million to acquire the aging Sands Casino and an adjacent land parcel. The Sands was closed and imploded in 2007 and the company announced plans for a $1.5 billion to $2 billion Boardwalk resort.

The economy, however, tanked and Atlantic City gaming revenues began their nosedive. Pinnacle canceled the project in late 2008. The company had only a few nibbles from real estate speculators for the 19-acre site since it went on the market 20 months ago. The boutique concept allows Pinnacle to make use of the site and gives the company, which has signature casinos in St. Louis, Louisiana and Indiana, new hope on the Boardwalk.

"Pinnacle's relatively new management team still has ample roadway to increase operating efficiencies and profitability, allocate capital prudently, and focus on core businesses and assets," JP Morgan gaming analyst Joe Greff told investors last week.

Several analysts thought it would take time for the boutique hotels to gain regulatory approvals and get built. But their emergence could spell doom for some older and weaker Atlantic City resorts.
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