Today’s a hectic one: four bylines due and not much time for S&G. However, I am the beneficiary of some number-crunching conducted by a reader, who’s been following the decline and fall of Colony Capital‘s two Atlantic City casinos under the captaincy of Nicholas Ribis, a former casino underboss for Donald Trump. In a parable of America’s recent economic collapse, Resorts Atlantic City (left) was purchased by Colony and Ribis for $140 million in 2001. There was a brief uptick in profitability the next year and since then it’s been downhill almost without interruption.
Nine years later, encumbered with a $360 million mortgage (talk about being “upside down on your house”!), Resorts was forfeited to its creditors, although Ribis somehow managed to remain at the helm. Perhaps it’s because he’s a silver-tongued orator but more likely it’s due to the fact that creditors aren’t casino people, so anybody with experience — particularly in the Atlantic City market — is likely to get the benefit of their doubt. I think American_Gaming_Guru lurks here and as (s)he’s pointed out elsewhere, even if Resorts’ mortgage was extinguished and the casino is no longer living on borrowed money, with an $18 million loss last year and another -$7 million in the first quarter of 2010, it’s existing on borrowed time.
The Atlantic City Hilton, bought in 2005 for approximately $255 million and also placed under Ribis’ stewardship, isn’t faring much better. It’s delinquent on its mortgage and lost $8 million in 1Q10 alone. Colony is restructuring like mad and may even have to peddle the two Mississippi casinos it bought from Harrah’s Entertainment to pay off the note on the Hilton. (With A.C. cash flows in free fall, it’s pretty clear that what the Boardwalk needs is more attractions, not — as the proponents of small-hotel slot houses insist — more and more gaming positions.)
Anyway, my East Coast researcher has drawn up a chart showing the performance of Atlantic City 2006-09 versus the performance of Nick Ribis. Unfortunately, formatting issues prevent me from replicating it, so I’ll try to boil it down to the salient statistics.
In 2007, win at the Hilton went from $330 million to $305 million (-7.6%); in 2008, it was down to $249 million (-18%) and last year, it skidded to $180 million (-28%). Resorts A.C. didn’t have quite as far to fall but did so just even faster. Its 2007 win was $279 million (-1.5%), followed by $233 million (-16%) in ’08 and $189 million (-19%) in ’09. Percentage declines for the rest of the market (i.e., sans Ribis) for the same three years were 6%, 6% and 13%. Cumulatively, Atlantic City slid 23% across 2007-09, except for the two Ribis-run properties, with Resorts falling 33% and the Hilton bombing at -45%.
So the question, Resorts creditors, does that track record suggest that you’ve placed your casino in the hands of its eventual savior?
A reader asks if it isn’t the definition of “putting lipstick on a pig” for Harrah’s to try and spiff up the old Claridge Hotel, part of its massive Ballys agglomeration. I dunno. Harrah’s East Coast viceroy, Don Marrandino, inherited a grab-bag of properties out there and he’s been tinkering pretty vigorously to try and bring the laggards up to speed. It’s the kind of approach Harrah’s customers would like to see more of on the Strip, where the company seems constantly in need of new toys (Planet Hollywood, a Ferris wheel, a sports arena, maybe The Palms) to keep CEO Gary Loveman from getting bored.
Harrah’s Twin River? The company, meanwhile, has tipped its hand in an attempt to gain control of the Twin River racino. When it was reported earlier this week that an unknown entity was buying up Twin River’s debt, I was prepared to predict with 99.5% certainty that it was either Apollo Management or Texas Pacific Group. It’s their modus operandi, after all.
It just been a couple of weeks since Loveman fulminated against states with high gaming tax rates — and Rhode Island‘s is a staggering 61%. Presumably that’s where Apollo’s new lobbyists come in, to persuade lawmakers to relax that rate in favor of a large upfront fee. However, since Harrah’s would be getting Twin River on the cheap, legislators may be less inclined to shower additional favors upon it, Apollo and TPG.
