Thursday, January 24, 2008

NY Developer Ups the Ante For A.C.'s Tropicana Casino

By Ken Davison

Note: The Tribe's diversification efforts, if anything, expands tribal members' knowledge as it forces us to understand other markets, other players, other deals. This article focuses on bids submitted for Atlantic City's Tropicana casino. Keep in mind that the tribe paid its partners $130 million largely for the right to keep the name "Mohegan Sun" and $280 million for the Pocono Downs racetrack, not including construction costs for expanding that facility. Nick Ribis' comments below about the amount Wynn needs to charge his hotel guests could be easily applied to Mohegan, considering the immense construction cost of the 1,200-room hotel on the reservation.

A group of investors led by New York developer Joseph Palladino submitted the highest bid to date last week for the Atlantic City Tropicana casino and hotel. Palladino’s group submitted a bid of $950 million with a guarantee of $150 million in additional capital improvements.

Many groups, including the Mohegan Tribe, have expressed interest in the property although only two groups have submitted formal bids. Colony Capital Acquisitions, owner of the Atlantic City Hilton and Resorts casino on the Boardwalk through its subsidiary Resorts International Holdings, LLC, submitted an $850 million bid in early January.

The Tropicana was denied its casino license in December 2007 for a variety of reasons, including employee relations problems and failure to maintain the property to the satisfaction of casino regulators. Columbia Sussex acquired the Tropicana when it bought the gaming company Aztar in 2005. The Tropicana must be sold before mid-April.

About The High Bidder (Palladino)

Palladino, 47, is principal director of acquisitions for a private capital group that serves the business affairs of about 70 very wealthy families throughout the world. Palladino is also a developer of hotels in New York and New Jersey. Palladino said he has assembled a team of licensed operators that are well-known in New Jersey and will be represented by former New Jersey secretary of state Joan Haberlee.

About The Other Bidder (Colony-Resorts)

The president of Colony is Nick Ribis, a former executive to Donald Trump. The company was created in order to buy up casinos at cheap prices and increase profits by operating them efficiently. The company's first major transaction was in 2000, when it purchased the Resorts casino in Atlantic City for $126 million in cash and another $17.5 million in debt from Sol Kerzner's Sun International.

The company then purchased in 2001 the Las Vegas Hilton for $280 million and four more gaming properties for $1.24 billion in 2005 (Bally's Tunica, Resorts Tunica, Resorts East Chicago and the Atlantic City Hilton). The company sold one of them, Resorts East Chicago, at a substantial profit a year later for $675 million.

Ribis once said, "I paid $90,000 per hotel room, and Wynn's rooms cost $1 million. If I charge $130 a night, I make tons of money! Wynn has to get over $300!"

About the Atlantic City Tropicana

Ramada Inns bought the Ambassador Hotel in Atlantic City for $20 million in the early 80's with the intention of renovating the property. New Jersey's Casino Control Commission denied those plans, saying it wanted new properties. Ramada then spent about $400 million on the Ambassador Hotel and later changed its name to Tropicana Atlantic City. Ramada sold the property to Aztar in 1989, which later built two more hotel towers, bringing the total rooms to 2,129 and making it the largest hotel in New Jersey. The property also has 140,000 square feet of gaming space, which includes 3,900 slot machines and 197 table games. Aztar was acquired by Columbia Sussex in 2005. In 2003, a portion of the Tropicana’s parking garage collapsed and killed four people.