Vol. 3, No. 10, October 2006
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Sands of Time
Pinnacle Entertainment deal forces closure of Atlantic City’s smallest property
It was never one of the Atlantic City’s “great” casino properties in the strict sense of the word. The Sands never had much market share. Its gross gaming revenues were usually near the bottom of the pack, if not at the very bottom. The facility was always second-rate, even when it opened as the Brighton in 1980. And its off-the-Boardwalk location continues to be an issue to this day, despite the construction of a “people-mover” in the mid 1990s that offered a ride from the boards to the Claridge and Sands.
The end of an era was heralded last month when Pinnacle Entertainment announced it had agreed to purchase the Sands from Atlantic Coast Entertainment Holdings Inc., the property’s holding company, and owner Carl Icahn for $250 million, plus about $20 million more for tax considerations and other services. Pinnacle will close the Sands in November and later demolish the property.
Latest Actions
The Sands has changed hands many times over the years, most recently when Icahn won a bidding war with Park Place Entertainment’s Arthur Goldberg in 2000. But Icahn had no more insight than previous Sands owners into how the off-Boardwalk property could be made profitable.
He tried virtually everything to turn the property around, to no avail. His troops, headed by property president George Toth, made the most promising moves toward a turnaround over the past year, using capital freed up when the casino emerged from bankruptcy protection to do a complete upgrade, including room renovations, new mid-level suites, upgrades to the adjacent Madison House Hotel (a “boutique” hotel owned by the Sands), and the addition of a center-casino bar and new high-end table area.
Toth and company positioned the Sands as an icon of its own hip past—or at least the past of its namesake Las Vegas casino (no corporate relation), including images of Rat-Packers around the property and of the swinging ’60s casino era. The gambler-friendly table rules of the past also were featured, with the Sands positioning itself as the “Players Place.”
Unfortunately, none of the trappings of the past could save the Sands from its present, or compensate for the casino’s main, fatal shortcomings of physical size—600 rooms amid 2,000-room megaresorts—and location, as the only Boardwalk casino with no Boardwalk frontage. (The Claridge next door shared this weakness only until Caesars Entertainment purchased it and made it part of Bally’s.)
For years, Icahn had attempted to buy the adjacent lot that was the former site of the Traymore Hotel, which would have enabled solutions to both problems—and for years, the former Caesars Entertainment had refused to sell, for the sole reason of denying the parcel to its rival. After Harrah’s Entertainment acquired Caesars last year, its own market dominance made retaining the Traymore parcel less important. Icahn was able to purchase it earlier this year through a subsidiary.
The Complete Property
The seven-acre Traymore tract was the site of the pre-casino era hotel that was one of the largest in the nation in the early part of the 20th century. The Traymore was imploded back in the early 1970s.
The combined 18-acre tract gives Pinnacle a chance to create something magnificent stretching from the Boardwalk to Pacific Avenue, and perhaps beyond. It also gives the Las Vegas-based operator a chance and reason to enter a market that it has long coveted. Earlier this year, it lost a bid to buy Aztar Corporation and its Tropicana property, but continued to examine Boardwalk opportunities.
“Atlantic City is one of the top U.S. gaming destinations, and we’re looking forward to being a part of the world-famous Boardwalk,” says Daniel R. Lee, Pinnacle’s chairman and chief executive officer. “This major new resort will be a key component in our plan to build a national network of gaming properties. It will also help extend our development pipeline and our company’s growth through 2010 and beyond. In connection with our longstanding interest in Atlantic City, we submitted our initial license application in New Jersey several months ago. The regulatory investigation is ongoing.”
Other bricks also have to fall into place, as well. An agreement has been made with the New Jersey Casino Reinvestment Development Authority to use the site of the current U.S. Post Office, across the street from the Sands on Pacific Avenue, as a parking lot. In addition, three small businesses still occupy the southeastern corner of Martin Luther King Blvd. and Pacific, which are still privately owned. Pinnacle would have to acquire them if it wanted to use that land. And still uncertain is the status of the Madison House.
While some hoped that Pinnacle would operate the Sands casino while building a new property alongside, Lee says it would not be feasible since the Sands stands at the center of the 18 acres and building around it would only delay the opening of what he describes as a “world-class” facility.
Lee says that the final numbers are not yet in, but he would expect that it would cost nearly $1.5 billion to build something that would compete with the Borgata, the current measuring stick for quality in Atlantic City.
“The success of recent Atlantic City developments has proven that customers in the Northeast respond positively to state-of-the-art gaming resort design and amenities,” Lee says. “While we regret the necessity of closing the Sands to create an exciting new resort, we look forward to working with gaming regulators, and state and local authorities on this project to create more jobs, tax revenues and other lasting benefits for the region."
Employee-Driven
While the Sands had many negatives to overcome throughout the years, the one reason it was a successful casino was the employees. Sands President George Toth says the employees are the only reason it has survived for so long.
“The employees always totally supported the programs we put in place,” he says. “They are experts at customer service. They’ve forged relationships with our players that are deep and enduring. They really kept the property going.”
The Sands employees, meanwhile, were not surprised. Management had informed them during the summer that all programs and plans were on “hold” for the foreseeable future. And the rumor of Pinnacle’s interest in the Sands seems to have been the worst-kept secret in the city. Toth says last month’s announcement was “bittersweet.”
“They knew it was inevitable,” he says. “It was a day of mixed emotions. Employees are concerned about their friendships and the relationships they’ve built over the years.”
More than 2,000 workers will be unemployed when the hotel closes, but the state has set up “rapid-response teams” to come up with a job opportunity program.
“I’m going to be very aggressive about making sure these people are taken care of in the right way,” he says. “The state is in here now offering advice on resumes and re-training. Later this month, we’re bringing all the human resource directors in Atlantic City together to see if we can devise a way to get them jobs in other casinos. We’re going to do what’s right for our employees.”
In addition to assistance in finding new jobs, Pinnacle will give employees two weeks of severance pay for every year of service, and Atlantic Coast Entertainment Holdings will provide an additional week of severance pay for every year of service. Lee calls it “the most generous severance pay ever in the casino industry.”
Sands Salutations
Despite its less-than-lofty status in Atlantic City, the Sands will always hold a special place in the hearts of the industry and its employees. Two years after opening, new owners leased the famous gaming brand name and the Brighton became the Sands.
Several years later, the property was taken over by a young and aggressive management team that included Bill Weidner, Brad Stone and Rob Goldstein (who now operate Las Vegas Sands, one of the industry’s most powerful international gaming companies). The Sands blazed new trails in employee relations, becoming the first casino to offer on-site child care, an employee health club and more.
Perhaps because it was so locationally challenged, the Sands developed special events and entertainment options that led the city. A contract with Frank Sinatra, who appeared at the Sands three times each year, made the Copa Room the hottest spot in town.
Tom Cantone, a crafty entertainment director who later moved to the Trump Organization and now serves at Foxwoods, brought in all the top acts of the 1980s.
Casino operations focused largely on table games, catering to high rollers invited to see the superstar entertainment. The volatile segment, however, made for a rough ride, revenue-wise, at times.
As competitors expanded in the late 1990s and introduced new amenities, the Sands began to lose some its luster. A casino expansion punched through to the second floor, but still could not increase revenue to any great extent.
Attempts to revive the Sands’ fortunes under Icahn were spotty at best. At one point, dozens of table games were removed to make room for more slot machines. Icahn went through half a dozen presidents under his regime, with Toth lasting the longest.
For Pinnacle, the entry into Atlantic City is part of its plan to become one of the major players in the gaming industry. Pinnacle is a successful operator in the South and the Midwest, where it owns Indiana’s Belterra and Louisiana’s L’Auberge, among others.
Sands employees have always felt a connection to the property and some would like to work for Pinnacle when the new resort opens. But Toth says that’s far into the future.
“It will be more than four years before that property opens,” he says. “Our employees have more immediate needs but if they want to return with Pinnacle, I wish them well.” For Toth, the resolution of the Sands dilemma is “disappointing” for him personally. He was hoping to lead a renovation and construction of a new Sands, but that’s not to be.
“I’m not worried about myself,” he says. “I’ll be fine. I’m focused on making these last two months a celebration of the Sands history and ensuring that our employees all end up with jobs.”
SANDS EMPLOYEES: Immediate Resources
The Sands and new owner Pinnacle Entertainment are offering generous severance and consideration for future jobs, but Sands employees obviously have more immediate needs for employment. The Sands has reached out to every other Atlantic City resort, but the state of New Jersey also has set up a “rapid response” system for former Sands employees who need immediate services. State Assemblyman James Whelan of Atlantic County recently sent a public letter to Sands employees listing the following resources:
New Jersey Department of Labor Hotline: 1-800-343-3919 Call this hotline to get answers to any questions about unemployment insurance, job placement or retraining, and layoff procedures.
New Jersey FamilyCare:
NJ FamilyCare is a federal and state-funded health insurance program created to help New Jersey’s uninsured children and certain low-income parents and guardians to have affordable health coverage. For more information, contact 1-800-701-0710 or visit the website to complete an online application: www.njfamilycare.org
Prescription Drug Assistance: Partnership for Prescription Assistance
1-888-4PPA-NOW (1-888-477-2669) • www.pparx.org
Rx 4 NJ
1-888-Rx FOR NJ (1-888-793-6765) • www.rx4nj.org
New Jersey Department of Human Service: 609-292-371 Call for information regarding food stamps, home energy assistance, and housing resources.
