We may be sitting there for a very long period of time," Dan Lee, Pinnacle’s chairman and CEO, said of the company’s vacant property overlooking the Boardwalk.
Pinnacle has assembled about 8 hectares, including the old Sands Casino Hotel site. Among its options, the company will consider selling the property. "Obviously, if somebody made us a decent offer for the land we’d consider it," Lee said.
Citing the global credit crisis, Pinnacle previously said it would delay construction at least until 2009 or 2010. But the project’s fate seems even more uncertain following the announcement Thursday that things "are on indefinite hold due to credit market conditions and an evolving competitive environment."
Lee noted that Atlantic City is facing intense competition from Pennsylvania’s existing slot parlors, with two more on the way in Philadelphia. In addition, a new slots parlor at New York’s Aqueduct racetrack and Maryland’s approval this week of 15,000 slot machines at five locations will increase the competition for customers in Atlantic City’s feeder markets.
In Atlantic City itself, Pinnacle objects to the city’s decision to seek development proposals for possible casino construction at the former Bader Field airport, a 140-acre site on the Route 40 entryway. Lee expressed concern that Bader’s redevelopment, not expected for years, could devastate the Boardwalk casinos, including the Pinnacle project.
"Over a year ago, we indicated that if they do that it would be a problem for us. They did it, so it’s a problem for us," he said of the city’s request for development proposals for Bader.
City Councilman Dennis Mason, though, said he "never heard a whisper of that," regarding Pinnacle’s complaints about Bader Field’s redevelopment. "Everything they’ve asked us to do, we’ve done," said Mason, the chairman of the city’s Planning and Development Committee. "But they have to realize, we’re in big trouble right now with this (property) revaluation."
The revaluation is the city’s first in decades and has spiked residential property taxes dramatically. Proceeds from Bader Field’s redevelopment are expected to be used as tax relief for struggling residents.
Mason threatened Pinnacle with construction deadlines in September, complaining that its stagnant development was cutting into the city’s economy after eliminating the business of the Sands casino. However, he said the city is now unable to impose any deadlines.
Lee warned that Pinnacle could delay the Atlantic City project "for years and years and years" if conditions continue to be unfavorable. Pinnacle first wants to see how its existing casinos fare in the tough economy before starting construction in Atlantic City.
"It’s pretty clear that the country’s in a recession," Lee said.
Even if the tight credit markets begin to loosen, the company y would proceed with caution, he added. "I think even if we could get the money today, we would put it on hold, watching what’s going on in the environment," Lee said.
Pinnacle hopes to develop its project on the former site of the Sands casino. The company imploded the Sands in October 2007 to clear the land, with construction originally expected to begin this year. However, months later Pinnacle announced one delay after another as the credit markets flatlined and the economy slipped.
Lee said the company is content to wait for now to see how the economy turns out and what happens to Atlantic City as competition grows in neighboring states. "With Atlantic City, we recognize that this isn’t an environment to dream big," he said. "We are going to sit in Atlantic City. ... If that means we have to put off the Atlantic City project for years and years and years in order to make sure that what we’re doing is bulletproof and strong, then so be it. It’s the right thing to do."
Just last week, gaming giant MGM Mirage Inc. announced it was halting plans for its proposed us$ 5 billion gaming complex in the city’s Marina District until the economy picks up. The company did not specify how long it would delay construction, saying only that it will "reassess the timing for the project."
Analysts say longer-term prospects for Atlantic City appear strong because of the scheduled 2010 completion of Revel Entertainment’s $2 billion casino hotel. Revel’s project is under construction, but the company still must venture into the shaky credit markets to secure full financing for what will be the city’s 12th casino.