Thursday, January 31, 2019

Hedge Fund to Buy Ocean Resort Casino in Atlantic City

by Linda Moss
Ocean Resort Casino -- one of two Atlantic City, New Jersey, gaming venues to reopen last June -- is being sold to one of its lenders, which will invest $70 million for improvements to its gambling floor, for additional rooms and suites, and "a world-class buffet" to try to lure more visitors.

Manhattan-based hedge fund Luxor Capital Group, which isn't affiliated with the similarly named Las Vegas casino property, is providing the infusion of strategic capital and gaining a controlling interest in the Ocean Resort, formerly known as the Revel at 500 Boardwalk , the casino announced earlier this week.

One gaming expert lauded the proposed improvements, but said that the resort city really needs to draw more visitors to really help struggling, independent casinos like the Ocean Resort to succeed.

“All of that is great, and I’m happy to hear that they are looking to invest more funds and expand the property, because a great deal of that (Ocean Resort) footprint has been empty space ... There’s a caveat there, though," said Robert Ambrose, a gaming and hospitality consultant and adjunct professor at Fairleigh Dickinson University. "I feel that until Atlantic City can grow its market base properties are going to continue to have seasonal issues, or issues as a whole."

Luxor Capital didn't respond to an email and phone call for comment.

Earlier this month Denver developer Bruce Deifik confirmed that he was going to sell the Ocean Resort just one year after buying it for $200 million and six months after reopening it. But he didn't disclose the buyer, but said it would finance improvements in the site. The 2 million-square-foot property, once known as Revel, had a grand re-opening in June along with the Hard Rock Cafe Hotel & Casino, which took over the former space of the Trump Taj Mahal.

In the aftermath of Atlantic City seeing five of its casinos close from 2014 to 2016, the seaside town has been trying to mount a comeback. The Garden State city is America's second-largest commercial casino market, behind Las Vegas. The shuttering of the $2.4 billion Revel, Ocean Resort's predecessor, was Atlantic City's biggest casino failures, talking place in 2014. In 2015 the 1,400-room property was acquired by Straub Capital Corp. and developer Glenn Straub of West Palm Beach, Florida, for $82 million. But he never reopened it. Then last January Deifik bought the 46-story casino from Straub.

In its announcement this week Ocean Resort said that Luxor Capital, one of its stakeholders, would be acquiring Deifik's share in the property and gaining a controlling interest. Luxor Capital's strategic investment is expected to close in early February, pending regulatory approvals and final documentation.

This year Ocean Resort's budget includes capital investment "in a world-class buffet, additional suite and room product, incremental investments on the casino floor and other exciting projects" as well as "a substantial increase in its entertainment programming and player events throughout the year," the casino said in its statement.

As an independent casino that isn't part of a chain, Ocean Resort faced difficult obstacles, including the fact that it had no database of customers, according to Ambrose.

"If you compare it to the Hard Rock, they opened the same day, the Hard Rock had an international data base, and that means a lot when you’re trying to develop and grow a property,” Ambrose said.

The key to where Ocean Resort goes next whether it and Atlantic City attract new clientele to the gambling mecca, according to Ambrose. That effort is hampered, in part, by the poor transportation options -- including air flights -- to get to the city, he said.

And casinos like Ocean Resort should provide more general shopping and restaurant options for visitors, like the Tropicana Atlantic City's "The Quarter" section, Ambrose said.

Until Luxor Capital receives interim licensing approvals from state gaming officials, expected within 90 to 120 days, a trust will be formed to hold shares of Ocean Resort's parent company, AC Ocean Walk. A trustee, who will be appointed once the $70 million investment closes, will oversee the trust until Luxor Capital receives its interim authorization. Then the trustee will be removed.

Ocean Resort's gambling revenue has lagged behind competing casinos in Atlantic. For example, last year the casino took in $90 million in revenue, compared to $161.6 million for the Hard Rock and $710.8 million for the Borgata Hotel Casino, according to figures the state released earlier this month.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.