Construction at a standstill, resorts at risk
Atlantic City is taking on the look of a junkyard for big dreams. There are no active gaming resort projects on anyone’s design boards.
For the moment.
Officials with their fingers on the pulse of the market’s vital signs ponder the possibility that most casinos there could be in some form of financial re-organization by the end of the year. Only the Borgata jointly owned by MGM and Boyd Gaming appears safe from the prospect of a financial collapse.
Penn National says it is abandoning plans to build or buy there, citing "too much uncertainty." A week or two earlier, Revel Entertainment said it will complete the outer shell of its proposed resort and then wait for a thaw in the credit markets that might allow it to negotiate the borrowing necessary to complete its 2,000-room hotel and casino at the Boardwalk’s north end.
Penn CEO Peter Carlino also cited the impact of Pennsylvania slot casinos that have either opened or will be opening in the next couple of years, before anything new can be ready in Atlantic City.
The group planning a resort on the old Dunes site had pulled the plug on its plans several weeks earlier as had Pinnacle and MGM which were planning big investments on the site of the former Sands and in the marina area, respectively.
Carlino continued, "It is going to be awhile, maybe a long while before the picture changes in Atlantic City. It is not a pretty picture," particularly for a company (like Penn) with a reputation as a bottom feeder, nosing here and there, looking for opportunity.
Of the companies that Penn showed an interest in acquiring either in Atlantic City or Las Vegas there has been no sign of a willingness to lower asking prices. "Maybe in another time," Carlino said, "banks would be much more vigorous in trying to get (troubled loans) off their books. But right now my sense is that nobody is in a hurry to do that."
Carlino sees "billions of dollars out there looking for strips of opportunities."
This was a reference to both Penn’s interests and the interests of other potential casino buyers, people who look at the unwillingness of companies such as MGM and Harrah’s to write-down the values of their most attractive properties.
MGM’s Treasure Island is being sold to former Frontier owner Phil Ruffin for a multiple that is 7-8 times its estimated 2008 earnings of about one-hundred million.
Unconfirmed but usually reliable sources say Penn made offers for Caesars Palace and Mirage based on multiples of less than half of that used to calculate the Treasure Island price. That’s because, these same sources say, lenders are currently not willing to lend more than two or three times the value of an asset and lenders are not valuing assets as they once did.
The Treasure Island deal is said to be mostly cash, a circumstance that is possible largely because of the roughly $1.2 billion or so Ruffin pocketed when he sold the Frontier.
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