Skepticism in Atlantic City; Hope in Schenectady

Hard Rock International has decided to stop being coy about its interest in Revel Resort. It wants it … if the price is right. “We certainly looked at it. We participated in the process,” said Hard Rock CEO James Allen. “The question is not whether Revel will be operating. The question is what will you have to put into a property that’s negative” on the balance sheet. He’s not overawed by the $2.4 billion megaresort, saying it needs considerable work: “There are issues with the design.” (Revel tucked its casino away upstairs, for instance.) There are issues with the finances, too: It’s estimated to be losing as much as $80 million a year. Considering that Hard Rock pulled out of a $465 million casino in 2012, that should give you some idea of its appetite for risk on the Boardwalk.

Joel Simkins, analyst for Credit Suisse had some cautionary words for Allen: “My advice to someone who’s thinking about taking on one of these properties, that thinks they can build a better mousetrap is: Don’t do it. It’s very, very difficult.”

“All indicators point to Showboat being closed or sold,” UBS Fixed Income Research Director Srihari Rajagopalan told an East Coast Gaming Congress audience, part of a panel discussion in which it was agreed that Atlantic City needed to downsize before it could get healthier. (Trump Plaza was also on the death watch.) Assemblyman Ralph Caputo (D, left) minced even fewer words, accusing Caesars Entertainment of hypocrisy in “the highest sense of the word” for seeking an Orange County, New York casino despite having fought against a Meadowlands one for years. (Gov. Andrew Cuomo looks askance at Orange County, period.) “I’m not talking about closing down Atlantic City. I’m talking about assisting Atlantic City,” Caputo added, somewhat implausibly.

Former regulator Michael Epps put the crux of the issue into one sentence: “The question is do we go to the Meadowlands to save New Jersey, or do we we save the region?” Needless to say, for every voice that says “save the region” there seems to be another that looks to the Meadowlands as a magic font of wealth.

Now we know why Pinnacle Entertainment pulled the plug on New York State. Its application was contingent upon being chosen to operate David Flaum‘s E23 project near Albany. When Pinnacle lost to Chickasaw Nation-owned Global Gaming, out it went. This is consistent with Pinnacle CEO Anthony Sanfilippo‘s current strategy of paying down debt and integrating the former Ameristar Casinos into Pinnacle. Pursuing a management contract was a low-risk/high-reward play.

But considering the success Pinnacle has had at L’Auberge Lake Charles and L’Auberge Baton Rouge, it must have been something of a slap in the face to hear Flaum Management Co. declare, “At the end of the day, we felt very strongly that Global Gaming’s experience in operating successful casino resorts gave us the best chance to submit a winning application and making E23 a reality.”

As one proposal goes down, another arises in the Capital Region. Neil Bluhm‘s Rush Street Gaming, in tandem with Galesi Group, is pitching Rivers Casino at Mohawk Harbor, part of a Galesi-led residential and retail development. Bluhm hasn’t put a price tag on the Schenectady development but, with 3,000 slots and 86 tables, it should easily clear the $182.5 million minimum threshold of investment. The partners are banking on the success of Rivers Casino in Pittsburgh to make the case for a Schenectady version of same. At bare minimum, it’s an improvement on the old American Locomotive Co. plant, a heap of rubble.

“As a real estate developer, we build something that fits into the community. We’re not just a casino developer and operator, and I feel very strongly that the Rivers casino will be something Schenectady will be very proud of,” Bluhm told spectators, as he sought to allay fears of street crime and gambling addiction. Already his plan has the endorsements of Mayor Gary McCarthy, Schenectady County Chamber of Commerce President Chuck Steiner and County Legislature Chairman Tony Jasenski, who pointed up the possibilities for synergy with the casino-management program at Schenectady County Community College.

Bluhm and Galesi’s David Buicko (who chose Rush Street because he felt an implicit trust in Bluhm) hold a trump card in the form of completed Environmental Quality Review Act studies, something that few of their competitors are likely to have. They’re even going to rehabilitate a decomissioned nuclear reactor into a decorative element of the project. If approved, the casino could open no sooner than 2016.