Atlantic City – The construction tsunami that was meant to bring a classy luster to this place has slowed to a trickle thanks to the credit crisis.
While a new USD 3.5 billion casino is starting to take shape next to Showboat on the Boardwalk, it is the only one of four huge projects moving forward.
Both MGM Mirage and Pinnacle Entertainment Inc. have stated publicly that their USD 5 billion and USD 2 billion casinos, respectively, were indefinitely on hold because of the difficulty in obtaining credit in the midst of the economic slump.
Now, the USD 1 billion development, tentatively called the Gateway Project, planned by former Casino Reinvestment Development Authority executive director Curtis Bashaw and former Caesars Entertainment Inc. chief executive officer Wally Barr has also moved to the sidelines.
„It’s an ongoing project whose timing is clearly impacted by the state of the credit markets,“ Bashaw said yesterday. „It’s a function of getting financing. None of these deals can be done on all equity. We have to get financing, and right now, there’s not the financing to do this type of project.“
Bashaw said construction had been postponed.
„This isn’t the time when people are going to be putting shovels in the ground or getting financing for multibillion-dollar projects,“ he said. „We’re going through an assessment, in terms of the size, scale and timing of the project as it relates to the credit markets … and seeing how this shakes out.“
The casino resorts by Pinnacle, MGM and the Bashaw-Barr group were part of this town’s big push to become an overnight resort destination like Las Vegas. All three were to include gleaming hotel towers, upscale retail, opulent spas, and convention meeting space, and all three were scheduled to open by 2012. That timetable is no longer attainable.
„Current economic conditions and the impact of the credit-market environment have caused the company to reassess timing for the project,“ MGM chairman and CEO Terry Lanni said last month.
In October 2007, MGM announced the development of the USD 5 billion MGM Grand Atlantic City Casino next to the Borgata on a 72-acre site in the city’s Marina District.
While the company has made extensive progress on design and other predevelopment activities, Lanni said, it has had to postpone additional development work.
„We intend to resume development at such time as economic conditions and capital markets are sufficiently improved to enable us to go forward on a reasonable basis,“ he said.
Watching all of this nervously is Jeffrey Vasser, executive director of the Atlantic City Convention and Visitors Authority, the resort’s chief marketing arm.
„For the future, as we are booking conventions for 2012 and 2013, we are certainly going to need more rooms by then,“ he said.
In February, Pinnacle, of Las Vegas, first announced its plans to delay its Boardwalk gambling palace where the former Sands Hotel Casino stood. A lack of financing was given as the reason. That wait-and-see attitude has not changed.
„We are just going to sit in Atlantic City,“ Pinnacle chairman and CEO Dan Lee said earlier this month during a third-quarter earnings conference call.
The only company that’s inching along on its casino is Revel Entertainment Group L.L.C., of Atlantic City.
But it is doing so unconventionally. For most of this year, Revel has squeezed by on interim loans and has staggered construction work, according to company CEO Kevin DeSanctis. The Revel casino is set to open in summer 2010.
Despite the credit problems, Bashaw said he remained bullish on Atlantic City, which this year added more than 2,500 hotel rooms with new towers at Harrah’s Resort, the Borgata and Trump Taj Mahal. Bashaw’s Chelsea Hotel accounted for an additional 330 rooms.
„This whole climate is actually underscoring the need for Atlantic City to do what it’s been doing,“ he said. „If they get finished with Revel, it’s going to be a second Borgata and make the others anxious to get going.“