Capital for development drying up quickly

Mar 18, 2008 6:00 PM

Gaming Insider by Phil Hevener | The plan from JPMorgan Chase to buy the very troubled Bear Stearns investment bank has proponents of speeding the sale of Atlantic City’s Tropicana thinking, oh-oh.

Other casino developers everywhere are reacting much the same way, just as they were telling themselves the search for development money could not be any tougher.

Bear Stearns is the state-approved advisor to efforts aimed at getting the Tropicana sold as quickly as possible, per the Casino Commission’s December order.

What this means may be discussed during Wednesday’s meeting of the New Jersey Casino Control Commission when the CCC’s man at the Trop, former state supreme court justice Gary Stein, drops by for a discussion of Trop-related matters.

Credit markets have been unraveling faster than a cheap suit for a number of months. Yes, the "crisis of confidence" rocking the banking business makes it easy to wonder how many legitimate buyers there might still be on the once lengthy list of possible Tropicana purchasers.

Another thought: One of the tasks assigned to Bear Stearns early this year was to assess the reliability of a potential buyer’s financing … no small task in today’s world. Do you suppose there was a time when the Stearns people were considering financing the deal themselves?

There’s no longer enough BS to go around

Potential purchasers with access to a billions dollars or so may be more reluctant than ever to make the purchase considering they would be buying the opportunity to spend hundreds of millions more updating the Trop.

Attitude and confidence are everything in the world where these big money deals are designed and built and there is not much of either for the moment.

But there are always exceptions to the gloom and doom approach.

Steve Wynn says he continues to "very closely follow" the course of events affecting Atlantic City casino business.

Hmm … Not sounding at all like a guy who has watched the credit market turmoil sweep big companies off their feet and decided to beat a retreat for higher ground.

There’s a good deal of speculation here, but the record is clear: Wynn sees a lot of opportunity in Atlantic City and he has much more flexibility than some of the companies struggling to find capital. Wynn won instant respect more than a quarter century ago with the success of his Golden Nugget, now the Atlantic City Hilton.

Wynn did not say he has his eye on anything specific, but he has always displayed a remarkable ability for pouncing on opportunities. Which brings us to the fact that two of his former executives are currently fronting Atlantic City proposals that need financing.

There’s Pinnacle CEO Dan Lee who may back way from his multibillion-dollar project as he waits for the credit markets to get a bit more rational.

There’s also Kevin DeSanctis who is carefully "pacing" his multibillion-dollar Revel project, working with interim financing as he waits for the chance to get permanent financing, perhaps early next year.

It was DeSanctis who was recently telling me, "There are some people out there who have not been badly affected by this (turmoil). For them, the things have happened are creating good buying opportunities."

One of those singled out for mention by DeSanctis is PBL’s James Packer who is busy in the Far East with joint ventures that include Melco. Separately, Packer has lined up investments in Las Vegas and can be considered part of Atlantic City’s supporting cast by virtue of his decision to buy a small stake in Harrah’s.

Florida expands slots

The Florida Senate easily passed two measures last week that could open a big door to increased gaming opportunities, approving (27-11) the placement of Class II games at the roughly 20 tracks and jai alai frontons outside Broward and Miami-Dade counties where the games are already legal. The second measure approved (25-12) by senators would reduce the ridiculous 50 percent tax levied against Broward slots to 35 percent.

Now we get to see how both proposals fare with House Speaker Marco Rubio, R-West Miami, who has said he has no interest in any kind of expanded gaming.

But Florida is a changing place.

We will also get a chance to assess the impact of Gov. Crist’s compact with the Seminoles which – assuming it survives legal challenges – will open the door to the imaginative Seminole leadership creating a couple of "little Las Vegas" developments around their Hard Rock casinos near Tampa and Hollywood.

Which leaves other big thinkers across the big landscape of Florida tourism wondering what they might do to attract some of this action.