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Dealing another blow to the struggling gaming market, Pinnacle Entertainment Inc. announced Friday it has abandoned its casino project and will sell its Boardwalk property.
“We put the property up for sale in Atlantic City,” John Giovenco, Pinnacle’s interim chief executive officer, told gaming analysts during a conference call. “We hope to sell as soon as a reasonable bid comes in. I can’t tell you when. Hopefully, sooner than later.”
Pinnacle owns 19 acres of oceanfront property between Indiana and Kentucky avenues in the heart of the Boardwalk. Pinnacle executives did not disclose how much the company will ask for the land. The company bought the Sands and its surrounding property for $270 million in 2006, but wrote down the land by $160 million in the fourth quarter of 2009 to reflect falling real estate values.
Pinnacle cited Atlantic City’s prolonged gaming slump, fierce competition from casinos in surrounding states and the fragile economy as reasons for killing a project that looked less and less likely after it was put on “indefinite hold” in late 2008.
“Atlantic City is no longer a good strategic fit for us, given the current economic outlook, the state of the financing markets and the major capital commitment that would be required,” Pinnacle spokeswoman Pauline Yoshihashi said. “It’s an attractive and well-located site, and may be a better strategic fit for another company.”
Atlantic City casino officials were not surprised by Pinnacle’s pullout because of earlier statements by the company that it would consider selling the land. They expressed confidence that another gaming company would swoop in to buy the property, although no names were mentioned.
“While we are disappointed that Pinnacle will not be building there, the site is a prime piece of real estate in Atlantic City and I am confident that when the economy turns around, that will be a very desirable location for a new developer,” said Daniel Heneghan, a spokesman for the New Jersey Casino Control Commission.
Harvey Perkins, senior vice president of Spectrum Gaming Group, a Linwood-based casino consulting firm, said despite its current economic troubles, Atlantic City will remain attractive to developers over the long run because of New Jersey’s low tax rate on gaming revenue.
“I think it’s an exciting opportunity for somebody else,” Perkins said of the Pinnacle property. “It’s a great oceanfront, center-Boardwalk location. Given the location and dimensions of the land, it has the power to fulfill an exciting vision.”
Exactly how the sale will proceed is not clear. Giovenco indicated that interest has been limited.
“We can’t tell you we’ve had an enormous number of bids at this point,” he said during the conference call.
Las Vegas-based Pinnacle initially made a splash in Atlantic City by imploding the old Sands casino in October 2007 during a lavish, fireworks-laden ceremony witnessed by a cheering crowd of 100,000 people. Pinnacle cleared out the Sands to create space for its proposed casino, but optimism about the project faded when the company announced delay after delay beginning in 2008.
Dan Lee, Pinnacle’s former chairman and the driving force behind the casino plans, later said he regretted that the company had bought the land. Lee resigned from Pinnacle in November after he allegedly threatened a St. Louis gaming official over a zoning change in favor of a rival casino operator. Pinnacle has declined to discuss the fate of Kim Townsend, the company executive who has been overseeing the Atlantic City project.
Pinnacle will leave town with little more than a gigantic empty dirt lot to show for its efforts. The barren site overlooking the Boardwalk has infuriated city officials and generated debate about possibly using the land for a parking lot or entertainment attractions.
“If you look at that area, it would be fair to compare it to Berlin after the war,” police Chief John J. Mooney III said in a December interview. “That whole neighborhood has been decimated by the demolition.”
Mayor Lorenzo Langford had hoped to swap city-owned land at the former Bader Field airport for the Pinnacle property. Langford once thought he could speed up casino development at Bader by having Pinnacle take a portion of the 140-acre site along the Route 40 corridor. He could not be reached Friday for comment about Pinnacle’s announcement.
Failed or delayed projects
Here is a list of other Altantic City casino projects that were proposed in a pre-recession building boom but later failed:
Feb. 5, 2009: Blaming Atlantic City’s withering casino market, Penn National Gaming Inc. decides not to build what it had boasted would be a “Borgata-like” resort along the Route 30 corridor.
Jan. 11, 2009: A development group headed by Cape May hotelier Curtis Bashaw delays plans for a $1.5 billion to $2 billion casino at the foot of Route 40 because of the weak economy. Bashaw had proposed moving the city’s historic World War I monument to create an entryway to the casino.
Oct. 29, 2008: Gaming giant MGM Mirage Inc. halts construction plans for a $4.5 billion to $5 billion megaresort in the Marina District. It represented the third time since the 1990s that MGM tantalized Atlantic City with a project that was never built.

DWittkowski@pressofac.com

Press of Atlantic City

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Pinnacle is likely to appeal the decision, which the commission said was justified given the President’s poor financial performance. But should Pinnacle lose, the gaming license would be the only one available under a state law that caps the number of Missouri casinos at 13.

North County Development LLC, the group behind the proposed Riverview Casino near Spanish Lake, has its eyes on that license. James Harris, a registered lobbyist and former Gov. Matt Blunt’s director of boards and commissions, is representing North County Development interests.

North County Development faces nearly 20 organizations, which have banded together as the Common Sense Coalition to oppose the Riverview Casino proposal. The coalition encompasses a number of community, environmental, conservation and church groups, including the Spanish Lake Community Association and the Audubon Society of Missouri.

The coalition does not appear to have hired a lobbyist but has drummed up significant grass roots opposition to the plan to develop 377 acres of farmland near the confluence of the Missouri and Mississippi rivers.

Meanwhile, Las Vegas-based Pinnacle, which also operates the Lumiere Place casino downtown and the soon-to-open River City Casino in south St. Louis County, has its own team of local lobbyists and promoters helping defend its at-risk gaming license and navigate the political waters here and in the Missouri Capitol.

“We have invested almost $1 billion in this area and have played by all the rules,” Pinnacle spokeswoman Pauline Yoshihashi said last week following the gaming commission’s vote. “We did not pick this fight. We are studying all our legal remedies.”

Pinnacle’s registered lobbyists include LeRoy Grant Jr. of Grant Communications LLC in St. Louis; former state representative Joseph Treadway of St. Louis County; Rodney Boyd, a partner with Sonnenschein Nath & Rosenthal LLP in St. Louis; John Bardgett Jr. and Kimberly Tuttle of Chesterfield-based John Bardgett & Associates Inc.; and Mark Levison of Lathrop & Gage LLP in St. Louis.

St. Louis Mayor Francis Slay is also a vocal opponent of the gaming commission’s move. On Jan. 26 he said closing the President would cost the city 241 jobs and $2 million in annual gaming-related taxes.

In a scathing Jan. 25 letter to the gaming commission, Slay asked, “Is this legally suspect recommendation (to revoke the President’s gaming license) an attempt to move the license somewhere else in the state? Or is this an attempt to throw 241 people out of work and cut needed tax revenues with no backup plan? A secret plan or no plan at all — either possibility is very troubling.”

In Jefferson City, state Rep. Tishaura Jones and Sen. Robin Wright-Jones, both St. Louis Democrats, have introduced bills that would prohibit the commission from revoking a casino’s license because of declining revenue.

The bills are likely to be Harris’ first order of business, and North County Development is counting on his connections in Jefferson City. Harris was a Republican operative who served as former Gov. Blunt’s political director during his 2004 campaign. Blunt then tapped Harris to be his director of boards and commissions. In that job, Harris oversaw more than 200 boards for which the governor had appointing authority, including the Missouri Gaming Commission.

Two of five current gaming commissioners were appointed by Blunt ahead of the commission’s 2006 election of former St. Louis County Executive Gene McNary, a Republican, as its executive director. Two other commissioners’ terms are set to expire April 29, which will give Gov. Jay Nixon, a Democrat, an opportunity to influence McNary’s future as executive director.

Under Blunt, Harris also made all recommendations for state judicial appointments and managed the administration’s initial hiring and job placement. Harris was criticized over several appointments that appeared to be made on the basis of campaign contributions and favorable political support more than job qualifications.

He resigned in 2006 to work on other Republican campaigns and start The J. Harris Co. LLC lobbying firm in Jefferson City.

Harris, who also serves as executive director of Better Courts for Missouri, stirred up fresh controversy Jan. 25 when he urged Republican state senators to intervene in a tort reform case pending before the Missouri Supreme Court.

Harris could not be reached for comment for this story.

North County Development also is represented by Ed Griesedieck III, a St. Louis lawyer with Herzog Crebs LLP. He has been the face of North County Development, which is backed by four principals: Wood River, Ill., attorney Brad Lakin of LakinChapman LLC, his wife, Hallie Lakin, executive Kenneth Goldstein of family owned Argo Products Co. in north St. Louis, and Wood River-based real estate investor Julie McDonald.

Gary Burton, a former Republican state representative from Joplin, also is listed as a lobbyist for North County Development. But Burton said he stopped working with the casino developers last year and forgot to remove them from his list of clients disclosed with the Missouri Ethics Commission.

By Christopher Tritto

Copyright © 2010 – St. Louis Business Journal

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