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Sands acquires old Traymore site Oceanfront property offers opportunities for casino expansion
By DONALD WITTKOWSKI Staff Writer, (609) 272-7258
Published: Wednesday, November 30, 2005
Updated: Wednesday, November 30, 2005
ATLANTIC CITY-The little guy in town finally has what it needs to become one of the big boys - an oceanfront site that is ripe for development.
Dissatisfied with its status as Atlantic City's smallest gaming hall, the Sands Casino Hotel is buying the former Traymore Hotel site for an expansion project that would completely remake the faded, 25-year-old property.
The 7.7-acre Traymore parcel was sold Tuesday by Harrah's Entertainment Inc. to American Real Estate Partners as part of a $170 million package deal that also included the Flamingo Laughlin Hotel and Casino in Laughlin, Nev. A breakdown was not given for the price of the Traymore land.
American Real Estate Partners is an investment arm of billionaire Carl C. Icahn, who rescued the Sands in 2000 while it was floundering in bankruptcy under previous owners.
Icahn made no secret over the years of his desire to buy the Traymore site, but Caesars Entertainment Inc. wasn't interested in selling the property when it was the owner. Harrah's Entertainment inherited the site when it acquired Caesars Entertainment in June and immediately began looking for buyers.
"We considered it a nonstrategic asset," Harrah's spokesman David Strow said of the Traymore property. "We have a great many other opportunities that we're pursuing in Atlantic City."
Just three weeks ago, Harrah's announced plans for a $550 million expansion project that will add a new hotel tower, spa and retail-entertainment attractions to its casino in the Marina District. Harrah's is also developing a master plan to rejuvenate the Caesars and Bally's Boardwalk casinos that it acquired from Caesars Entertainment.
Caesars and Bally's are among the larger neighboring casinos that have overshadowed the tiny Sands for decades. The cramped and aging Sands has been hampered by its budget-hotel architecture and odd location slightly off the beach and Boardwalk.
"I think the Sands, from a location standpoint, is challenged," said Richard P. Brown, the casino's chief executive officer. "I think from a bricks and mortar standpoint, the Sands has always been challenged."
The Traymore site, where the historic Traymore Hotel once stood, finally gives the Sands what it desperately needs - a prime oceanfront location in the heart of the Boardwalk casino strip.
Brown was coy about discussing expansion plans for the 600-room Sands after the Traymore deal was announced Tuesday. In the past, the company said it wanted to build two beachfront towers totaling 2,000 rooms and an array of retail and entertainment attractions that could rival The Quarter, the mall-like shopping complex at Tropicana Casino and Resort.
"We have nothing that is solid," Brown said of possible development plans. "We're just looking at a whole bunch of options at this time. We're in the process of working through them at this point."
The Traymore site includes a block of vacant land directly in front of the Sands between Indiana Avenue and Dr. Martin Luther King Jr. Boulevard. A smaller section of the property extends to Kentucky Avenue.
Now that it is acquiring the Traymore parcel, the Sands will concentrate on the ocean side of the casino instead of looking across the street for major expansion. Previously, the Sands had discussed the possibility of redeveloping what is now the city's post office when the 70-year-old building on Pacific Avenue is closed and a new mail facility is built downtown.
On the operating side, the Sands continues to recover from a disastrous decision three years ago to junk virtually all of its gaming tables in favor of a slots-only strategy. Since then, it has rebuilt its table games business, but is still largely regarded as a haven for low-rolling slot players.
The Sands stumbled in the third quarter, suffering a nearly 37 percent drop in gross operating profit. For the first nine months of the year, the casino's gross operating profit is down 39 percent and net revenue has slipped almost 5 percent.
In September, GB Holdings Inc., a minority shareholder of the Sands' parent company, filed for Chapter 11 bankruptcy protection after it failed to make a $43.7 million bond payment. GB Holdings was once the Sands' parent, but a $110 million debt refinancing last year eased the casino's financial burdens and changed the ownership structure.
Atlantic Coast Entertainment Holdings Inc. is now the Sands' parent. At the time of its bankruptcy filing, GB Holdings had a 28 percent stake in Atlantic Coast Entertainment.
Atlantic Coast Entertainment, in turn, falls under the umbrella of Icahn's multifaceted investment group, American Real Estate Partners. Another related entity, ACE Gaming LLC, operator of the Sands, will have the option of acquiring the Traymore site from American Real Estate Partners.
To e-mail Donald Wittkowski at The Press:
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