On one earnings call, no love for Atlantic City's casinos

Showboat and Trump Plaza owners have announced plans to close. Revel's owners have a bankruptcy auction next week.
Showboat and Trump Plaza owners have announced plans to close. Revel's owners have a bankruptcy auction next week. (Inquirer file)
Posted: July 31, 2014

At certain quarterly-earnings conference calls in the casino industry, the condition of Atlantic City inevitably comes up.

Here's how that went Tuesday when Gaming & Leisure Properties Inc., spun off last year to own Penn National Gaming Inc.'s real estate, discussed its second-quarter earnings.

An exchange with Joel Simkins, a Credit Suisse gambling analyst, showed just how far Atlantic City has fallen in the estimation of some gambling executives.

The plan for Gaming & Leisure Properties, of Wyomissing, Pa., was to buy additional casino real estate, while renting the properties to other companies that will run the gambling operations.

Simkins asked Gaming & Leisure executives if they had even a "remote interest" in Atlantic City properties at what appear to be "fire-sale prices."

Atlantic City, where six casinos had operating losses in the first quarter, is bracing for a potential tsunami of casino closings at the end of this summer, possibly throwing 6,250 employees out of work.

The owners of Showboat and Trump Plaza have announced plans to close. Revel's owners have said the city's newest and most expensive casino will close if no buyer emerges in a bankruptcy auction scheduled for next week.

Gaming & Leisure's chief financial officer, William J. Clifford, answered, almost tongue-in-cheek: "Relative to Atlantic City, our model relies on them on being able to pay rent. Properties that can't generate an EBITDA aren't going to have anything left to pay rent with, so the most obvious answer from our perspective is that I can't imagine we'd be interested in very many properties in Atlantic City."

EBITDA is a measure of how much money a business makes from basic operations, excluding interest, taxes, and certain accounting charges.

Without being specific, Clifford went on: "There are few that we think will be healthy for the long term. No discussions on those properties. For the bulk of the properties in Atlantic City, I think we'd stay very far, far way."

Meanwhile, politicians are attempting to shield workers there.

On the agenda for an Atlantic County Board of Freeholders meeting Tuesday was a proposed ordinance that would require any new owner of an Atlantic City casino to retain certain workers for three months after a deal.

The measure might be aimed at Revel. Many analysts expect that Revel will have to close for major renovations if it is sold, putting thousands out of work, at least temporarily.

Local 54 of Unite Here, a union that represents 12,000 casino workers in Atlantic City, had previously asked state pension investment officials - who have agreed to invest $300 million in one of Revel's hedge-fund owners - to push Revel to make it a condition of a sale that workers are retained.

A spokeswoman for Revel declined to comment on the proposed Atlantic County ordinance, which could complicate a sale.

"Revel is not issuing media comments during the sale process," Lisa Johnson said in an e-mail.




comments powered by Disqus