Not too long ago, the mere whisper that an Atlantic City casino was for sale would spark bidding wars by those eager to enter the nation’s second-biggest gambling market.
But competition from the launch of slot-machine gambling in Pennsylvania ate away at what had grown into a $5.2 billion industry in 2006. The steep recession that began in December 2007 cooled Atlantic City fever further by weakening the market fundamentals and leverage assumptions made by starry-eyed investors.
Oh, there are deals being done now. But what passes for action happens inside in bankruptcy courtrooms and loan-workout departments.
Perhaps this is what the bottom of a market looks like.
On Monday, a company started by longtime Atlantic City casino executive Dennis C. Gomes agreed to buy Resorts Casino Hotel from the lenders who won control of it in December.
I asked Gomes how much the purchase is costing his Gomes Gaming Inc., and he declined to say. But, rest assured, the amount is a lot less than the $144.8 million that Colony Capital L.L.C., of Los Angeles, paid for it in April 2001.
In Gomes’ opinion, he’s acquiring a property that was greatly improved over the eight years it was owned by Colony Capital and Nicholas Ribis. Resorts may have been the first casino to open in Atlantic City in May 1978, but its recent woes are of the financial, not physical, kind.
Business at Resorts had eroded so much that Colony Capital stopped making payments on its $360 million mortgage in October 2008. The New Jersey Casino Control Commission permitted Resorts’ lender to begin foreclosure in March 2009. On Dec. 16, the lenders took over.
Dennis Gomes, 65, has been trying to buy a casino in Atlantic City since 2005. He’d lost out in the bidding for the Tropicana to financier Carl Icahn, who’s jumped into and out of Atlantic City several times. In 2007, Gomes and a partner tried to buy the casino company that bears developer Donald J. Trump’s name.
This time, Gomes has landed on a Boardwalk property that has two hotel towers with a total of 942 rooms and about 100,000 square feet of space for gambling. As of Aug. 2, it had 2,153 employees.
Resorts’ financial woes didn’t deter Gomes. The casino had a net loss of $4.1 million on net revenue of $35.9 million for the quarter ended June 30, according to a report filed with the Casino Control Commission.
Gomes has earned a reputation as an executive who can turn around casinos, including the Tropicana Casino and Resort and Trump Taj Mahal. While he was president of the Taj Mahal from 1991 through 1995, operating profits rose from $84 million to $148 million, according to figures on the Gomes Gaming website.
“I believe I can do this again,” Gomes said. “I know I can do well with this property.”
But with Resorts being one of the smallest of Atlantic City’s 11 casinos, how does Gomes expect to compete with the bigger houses of the Borgata Hotel Casino & Spa or Harrah’s Resort? What about the spread of table games through Pennsylvania’s casinos?
The martial-arts practitioner said the key to improving profitability is all about energy and leadership. “The difference between a leader and an administrator is that a leader cares about his people and shows it,” Gomes said.
It’s not clear when the transaction will close. Gomes Gaming has not submitted its offer to buy Resorts to the Casino Control Commission, which would need to approve any transfer in ownership.
But Gomes is “in the system,” as they say. He got his start in law enforcement, first with the Nevada Gaming Control Board and later with the New Jersey Division of Gaming Enforcement. He was even involved in the 1978 investigation over the original licensing of Resorts.
Gomes remains a believer in the seaside city. At $3.9 billion in revenue for 2009, Atlantic City’s casino industry remains second only to the 30-casino Las Vegas Strip in the United States, Gomes said. When the economy improves, so will the gambling business in Atlantic City, he said. “I’ve seen it happen before.”
What we’ve also seen before is Carl Icahn selling his casino properties and Donald Trump on verge of having his name erased from Atlantic City.
Now, Icahn is back as owner of the Tropicana, which he picked up for a $282 million song in March. He’d chased the three Trump casinos through bankruptcy proceedings, too, but lost out to bondholders who’d backed Donald Trump, who has more business lives than a cat.
Gomes could be joining them.
It’ll be just like old times back in Atlantic City. But which times, and how old, and when will gamblers find their way back to the Boardwalk?