The license denial forced a sale

More suitors eyeing Atlantic City's Tropicana

United States
Reading time 2:28 min

Retired state Supreme Court Justice Gary Stein, who is overseeing the Tropicana until it can be sold, said about 24 parties have contacted him, expressing varying degrees of interest in acquiring the Tropicana, which includes New Jersey’s largest hotel at 2,129 rooms.

"Every day when I come into the office, I have another one or two e-mails from people indicating they’re interested," he said Thursday. "We have very aggressive interest from some. The sense we get is that there are very vigorous discussions going on in the industry about how attractive a casino this is to acquire."

The state Casino Control Commission stripped the Tropicana’s former owner, Kentucky-based Columbia Sussex Corp., of its casino license last month, deciding that the company lacked the ability to run the type of first-class facility required under New Jersey law.

The Tropicana’s revenue fell 12.1 percent in 2007, according to figures released Thursday by the casino commission. The license denial forced a sale and the appointment of Stein to oversee the property in a dual capacity as trustee and conservator.

Stein said he will ask the commission next week to approve the hiring of a financial adviser to help prepare the property for a sale, and draw up an offering memorandum to submit to potential buyers within two to three weeks. "Our goal is to have a signed contract by the end of April," he said. "If we can do better than that, we’ll do it."

The most recent entrants into the Trop sweepstakes are Colony Capital LLC, which already owns the Atlantic City Hilton Casino Resort and Resorts Atlantic City, and a group headed by Cape May developer Curtis Bashaw and former Atlantic City casino executive Wallace Barr. "Our group is a big believer in the Atlantic City marketplace, and a development where an asset like the Tropicana becomes available turns our heads," Bashaw said.

His group is also moving forward with plans for a new casino on land it owns near the Atlantic City Hilton Casino Resort. Those plans will progress regardless of whether his group buys the Tropicana, he said. Bashaw also is building a hotel on land near the Tropicana.

Dan Heneghan, a spokesman for casino commission, said a copy of Colony Capital’s letter to Stein expressing interest in the Tropicana also was sent to the commission.

The offer was for us$ 850 million, slightly less than the us$ 1 billion or so that analysts expect the Trop to fetch in a sale. Company spokesman Owen Blicksilver declined comment.

That price is roughly half the us$ 2 billion cost of building a new casino in Atlantic City, which includes buying land, knocking buildings down, and constructing a state-of-the art facility to keep pace with deep-pocketed rivals. That’s what Revel Entertainment is doing next to the Showboat Casino Hotel and Pinnacle Entertainment is doing on the site of the former Sands Casino Hotel.

"The offer is in line with what we believe is fair value for the property, as the hotel product is in need of significant capital improvement to successfully compete in Atlantic City," wrote Dennis Farrell Jr., an analyst with Wachovia Capital Markets.

Among others that have expressed interest in the Tropicana is the Baltimore-based Cordish Co., which recently partnered with former Tropicana chief Dennis Gomes, and which built The Walk, a us$ 110 million retail-entertainment district in the heart of Atlantic City between the convention center and casinos. Analysts say other companies that could put in bids include Penn National Gaming and Pinnacle.

Harrah’s Entertainment won’t make a play for the Tropicana, fearing antitrust problems; it already owns four Atlantic City Casinos. And Trump Entertainment Resorts, which has three casinos here, also will take a pass, said Donald Trump, the real estate tycoon and majority stockholder in the company.

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