Real Estate Prices Still in Decline – Some Places

Resorts Casino Hotel, Atlantic City.

Dennis Gomes announced his partners in the Resort venture, Morris Bailey and Joseph L. Jerome, they are real estate investors from New York City.  They see a big upside and think Atlantic City has bottomed out; one quotes says the properties that have kept up the maintenance and have a product that appeals to a younger demographic will be best positioned to succeed in the future where Atlantic City is seen as a true destination resort; not the good old days of glory, but a very solid future. The price is only $35 million about half what the casino spent on capital expenditures in 2007.   JEMB Realty Corp, a partnership of two men who started with Burger Kings, has $4 billion in assets, so maybe $35 million is not much than a throw-away bet on the pass-line for them.

In other news Trump Entertainment gave walking papers to 6 executives as the new company, fresh from the bankruptcy court and no longer run by the Donald or his designates, is trying to restructure for the new Atlantic City; that city is not the resort city that Gomes’ partners see, instead it is one that recognizes the pressures from Pennsylvania are part of the reality of 2010 and beyond. The future Trump appears to be anticipating is highly competitive and only the lean and mean have a chance to survive.

Meetings are being held this week in Pennsylvania to grant one more casino license; regardless of where that license goes, Atlantic City will feel it.  The only good news from Pennsylvania for Atlantic City is in Philadelphia; one casino will open this month in Philadelphia and that will have a major impact on AC casino. But the second casino in that city seems to be years away from bringing further pain to AC.

And finally, a New York strip club operator “Scores” (what in the world do you suppose is implied in that word?) also wants to come to Atlantic City – unlike the real estate company they don’t want their own casino, instead Scores wants to rent some space in Trump Taj Mahal; may be there will be some empty offices after those executives clear them out. There is a trend going on here, just last week White House Sub Shop announced it would be opening its second location in Atlantic City at the Taj.  I wonder if the Burger King guys are going to open a Burger King in Resorts; if that is the strategy they may have overpaid for the opportunity.

If Resorts is only worth $35 million before the impact of table games in Pennsylvania or a casino in New York City – the New York Times today speculated it would open within a year – have been felt, I wonder what the price of a casino will be next year?  Real estate prices have stabilized in some jurisdictions, in others Nevada and New Jersey or example, they are still very unstable and the majority of sales are bank-owned properties. A report last week said about 60 percent of the housing sales in Reno were bank-owned, distressed sales; Resorts certainly fits in that category.


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September 2010
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